New legislation has been passed in the state of Montana making utility tokens exempt from being considered as securities under local laws.
Montana governor Steve Bullock put his signature on House Bill 584, sponsored by state representative Shane Morigeau (Democrat) and titled “Generally revise laws relating to cryptocurrency,” earlier this month.
The bill states that utility token transactions are permissible under local rules as long as the purpose of the token is “primarily consumptive.”
The token’s issuer must not market the utility token as an investment or for speculation. The issuer must also file a notice of intent to sell tokens with Montana’s securities commissioner.
A few caveats
A utility token is issued in order to raise funds for the development of a cryptocurrency and can later be used to purchase a product or service from the issuer of the token, the latter of which is what the “consumptive” part of the bill refers to.
House Bill 584 further specifies that the token’s consumptive purpose must be made available within 10 days after the token’s sale or transfer.
The bill also prohibits the initial token buyer from reselling or transferring the token until its consumptive purpose has become available.
No impact on federal laws
While the new Montana bill is a step in the right direction for crypto developers, enthusiasts, and startups in the state, it should be noted that federal rules supersede state-level laws.
The bill’s real-world impact will likely be restricted to crypto token issuances within Montana and among its residents, and as such will have no impact on the federal regulation of cryptocurrencies.
House Bill 584 will be in effect beginning July 1.