The United States State of Montana has recognized utility tokens and exempted them from state securities by passing a new bill this month. House bill 584, titled “Generally revise laws relating to cryptocurrency,” was signed by the Governor of Montana Steve Bullock on May 8.

Initiated by State Representative Shane Morigeau, the bill had its first reading in February 2019. The Bill has now passed with 33-15, and will come into force on July 1.

The new law defines a utility token as a digital unit that is created, recorded on blockchain, capable of being exchanged without a third party, and issued to enable owners to access a good or service delivered by the issuer “without vesting the holder with any ownership interest or equity interest in the issuer.”

According to the bill, a utility token transaction has to meet a number of requirements, with the purpose of a token being “primarily consumptive,” while using such tokens for speculative or investment purposes is prohibited. In this regard, the legislators explained that utility tokens should be used to provide or receive goods, services or content.

While utility tokens are exempt from state securities law, the issuers of such tokens still have to interact with the securities commissioner, and must file a notice of intent to sell such tokens.

By passing its utility token law, the State of Montana has joined other crypto-friendly states, including Wyoming and Colorado. In January 2019, the State of Wyoming passed a bill recognizing cryptocurrencies as money. Subsequently, the State of Colorado passed cryptocurrency exemptions to its digital token act, enabling licensing requirements for entities operating with digital tokens.