Most of us often have a hard time deciding if a token is a utility or security. Most of the time it is because many ICO tries to present their Tokens as Utility token when they are in fact Security tokens and the most obvious reason is that they want to avoid the SEC(Security and Exchange commision). In this post, I am going to point out the key differences between the two token categories.
⭐️Security Tokens:
ICO Tokens that
- pay dividends
- share profits
- pay interest or invest in other tokens or assets to generate profits for the token holders.
When we buy security tokens we are sort of buying a share of the company with the expectation of gaining profits by means of dividends, interest and growth of the company conducting the ICO.
ICOs issuing security tokens are more commonly know as STO(security token offering)
Eg. Polymath, tzero etc
Note: For security token the laws are strict.Also, ICO token sale is mainly for Accredited Investor or Institutional Investors.
⭐️Utility Tokens(aka app coins or app tokens)
ICO token having any Utility or usage in the decentralized application or platform.
When we buy utility tokens, we are actually pre-paying(paying in advance just like we use prepaid sim card) for a future service we may use in the decentralized application.
Eg. BNB(Binance token, the utility is paying fee on the platform), SC(Sia token, the utility is using decentralized storage ) 
Note: For utility token there are no such laws or laws are very lenient.Unlike Security token, normally anyone can participate in the ICO if allowed if allowed in your jurisdiction.
⚙️ Market Share
As of now, Utility tokens rules the cryptocurrency market acquiring most of the market share as compared to Security Tokens, therefore there is a lot of room for security tokens to grow.
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