Are NFTs Securities?

  • SEC is probing NFT creators for regulatory violations.
  • This was revealed in a report released by Bloomberg.
  • SEC is checking if NFTs are being used to raise money like traditional securities.

After its unsuccessful hounding of Ripple, the U.S. Securities and Exchange Commission (SEC) focuses on a new target — NFTs. According to a report by Bloomberg, The U.S. Securities and Exchange Commission (SEC) is scrutinizing creators of NFTs and the crypto exchanges where NFT trade is carried out. This is to determine if some of the assets are working in conflict with the commission’s rules.

The focus of SEC’s investigations is to assess whether NFTs are being utilized to raise money like traditional securities. The investigation seems to be aggressive because, for the past couple of months, attorneys in the SEC have been sending subpoenas demanding information about these tokens. Security is a financial asset that can be traded. And everything related to securities comes under the purview of the SEC. 

Are NFTs Securities?

An unnamed source stated to Bloomberg that as part of the SEC review, it was looking for information on fractional NFTs. These are the NFTs that can be broken down into units that are easily sold or bought. However, the government organization has not commented on this statement yet.

Ever since Gary Gensler joined SEC as Chairperson, it has been exercising strict measures to ensure that the crypto market adheres to its regulations. One such action in this direction was the lawsuit SEC filed against Ripple Labs Inc.

In 2020, SEC sued Ripple Labs for issuing and selling unlicensed securities — XRP tokens. Since then, the SEC vs. Ripple lawsuit has been in the public eye. Moreso, the latest updates in the case seem to be favorable to Ripple.

NFTs are the current rage with major investors pouring hundreds of thousands into new projects and ventures. And even though the market size of NFTs is relatively small compared with that of the Bitcoin market, NFTs are expected to radically transform the blockchain industry in the near future.