Document Type
Article
Publication Date
2025
Abstract
DeFi tokens perform distinct economic roles. These include governance, collateral, stability, and utility access. Existing securities doctrine often misclassifies non-investment tokens as securities. This error deters development of utility tokens that power decentralized applications.
This Article develops a function-based framework. As a first application, it proposes a narrow statutory safe harbor for utility tokens. Eligibility depends on three safeguards. First, technical resilience, supported by independent security audits and incident-response protocols. Second, accountable control, with defined upgrade authority and defined obligations for keyholders. Third, calibrated oversight, with consumer protection and operational requirements for access tokens, not investor protection regimes for capital raising.
The safe harbor preserves core principles of United States securities law for bona fide investment instruments. At the same time, it offers a predictable compliance path for pay-for-use services. A durable, uniform rule is needed to distinguish true utilities from investment contracts. Only Congress can enact such a rule. Agency guidance or case-by-case settlements cannot. The same function-first method can guide future tailored rules for other DeFi token functions.
Recommended Citation
Seth C. Oranburg, Function Over Form: Toward a Safe Harbor Framework for DeFi Regulation of Utility Tokens, 86 La. L. Rev. 81 (2025).
