Short answers, pulled from the story.
A security token offering (STO) is a public offering of tokenized digital securities, sold on security token exchanges and recorded on a blockchain virtual ledger. Security tokens can represent real financial assets such as equities and fixed income, and they are tied to actual companies rather than speculative value. STOs are subject to the same securities regulations as traditional stocks and bonds.
Security tokens are classified as securities, like stocks or bonds, and are regulated under securities law. ICO tokens are classified as utilities, their value is almost entirely speculative, and new ICO currencies can be generated without limit. Both types can be sold on cryptocurrency exchanges such as Binance, Kraken, and Binaryx, but they carry fundamentally different legal obligations.
The SEC sued Kik for over $100 million for selling a token the company described as a utility but that regulators classified as a security. Under securities law, if a passive financial return is expected from an investment, it is classified as a security regardless of how the issuing company labels it. Telegram faced similar prosecution and delayed its offering plans as a result.
China has banned both STOs and ICOs entirely, classifying them as illegal financial activity. Most other jurisdictions have either regulated the offerings under existing securities laws or are developing frameworks for them.
A tokenized IPO is a security token offering conducted on a regulated stock exchange, making it the closest digital equivalent to a traditional initial public offering. It has the potential to deliver significant efficiencies and cost savings compared to conventional IPOs, though meeting full securities regulatory requirements is necessary.
By the end of 2019, STOs had been used to trade stocks listed on the Nasdaq and to fund the pre-IPO of World Chess, FIDE's official broadcasting platform. Singapore Exchange also launched its own STO market, backed by Japan's Tokai Tokyo Financial Holdings.