🤯 SEC Says NFTs Aren’t… Securities?!

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Right, so Hester Peirce from the SEC – yes, *that* SEC – has popped up to say that NFTs, those digital things we’re all pretending to understand, aren’t securities. Apparently, even the ones that give artists a cheeky cut every time they’re resold. I mean, who knew? 🤷‍♀️

She reckons it’s like streaming platforms paying artists. You know, the ones that pay them approximately 0.00003 pence per play? Charming. But hey, at least it’s *something*, right? Sort of.

“Just as streaming platforms pay royalties to the creator of a song or video each time a user plays it, an NFT can enable artists to benefit from the appreciation in the value of their work after its initial sale,” Peirce said. Blah, blah, blah. It’s all just a bit of smoke and mirrors, isn’t it? ✨

Apparently, owning an NFT doesn’t give you any real rights or interest in anything remotely resembling a business. So, no secret boardroom meetings for us NFT owners, then? Pity. I was looking forward to wearing my power suit. 💼

SEC never prohibited NFT royalties

Oscar Franklin Tan (what a name!), chief legal officer at Enjin core contributor Atlas Development Services (try saying that after a bottle of wine 🍷), says everyone’s misunderstood Peirce’s remarks. Quelle surprise!

Apparently, Peirce was just clarifying that NFTs that pay royalties aren’t necessarily securities. Groundbreaking stuff. Tan says it’s “legally sound” but mischaracterized in some media reports. You don’t say! 🙄

“So Hester Peirce said that an NFT that sends royalties back to the creator after a sale is not a security. This is correct, but the way some media reported this is completely out of context,” Tan told CryptoMoon. “The actual context is that this is not controversial, and it was never considered a security.” Oh, so it’s all just a massive overreaction? Colour me shocked. 😐

The lawyer says US securities law is all about regulating investments, not paying artists. Which is fair enough, I suppose. Unless you’re an artist trying to make a living, in which case, tough luck, darling. 💔

“The artist or creator is not an investor, not a passive third party in the NFT,” he said, noting that royalty payments are not considered investment income. So, basically, artists are just… workers? Doing work? How very *ordinary*. 😒

Instead, Tan told CryptoMoon that this type of earning is “analogous to business income,” which the SEC doesn’t regulate. He added:

“The SEC never prohibited contracts where artists and creators get royalties from secondary sales of their work, not royalties from paper contracts or blockchain protocols.”

Tan explained that it gets a bit dicey when NFTs promise shared profits to multiple holders. Because, you know, nothing’s ever simple, is it? 😩

Tan also urged regulators to use good ol’ common sense. “Ask yourself, if this were done by pen and paper instead of blockchain, would there still be a regulatory issue?” he said. “If none, slow down.” Basically, don’t be a knob. Got it. 👍

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OpenSea calls on the SEC to exempt NFT marketplaces from oversight

While NFT royalties might not be a big deal, NFT marketplaces are a whole different kettle of fish. In August 2024, OpenSea got a “Wells notice” from the SEC, which sounds about as pleasant as a root canal. 😬

But fear not! On Feb. 22, OpenSea CEO Devin Finzer announced that the SEC has officially closed its investigation into the platform. A win for the industry! Or, you know, just a minor inconvenience that’s now over. 🤷‍♀️

Following the conclusion of the SEC’s investigation, OpenSea’s lawyers wrote a strongly worded letter to Peirce, who leads the SEC’s Crypto Task Force. OpenSea general counsel Adele Faure and deputy general counsel Laura Brookover said in an April 9 letter that NFT marketplaces don’t qualify as brokers under US securities laws. Right. Because lawyers never exaggerate, do they? 😉

The lawyers said the marketplaces don’t execute transactions or act as intermediaries. They’re just… there? Like a particularly trendy lamppost? 🤔 The lawyers urged the SEC to “clearly state that NFT marketplaces like OpenSea do not qualify as exchanges under federal securities laws.” Good luck with that, darlings. You’ll need it. 🍀

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2025-05-21 11:46