Fractional Non-Fungible Tokens (NFTs) Deemed As Securities By The Security And Exchange Commission (SEC)?

NFT Non fungible token

The Security and Exchange Commission is investigating the non-fungible token market — after having killed the initial coin offering craze in 2017 by deeming most tokens unregistered securities.

What Happened: The SEC issued summons to NFT creators and crypto exchanges to obtain additional information about the projects and find out whether the market does comply with financial regulations, according to a Thursday Bitcoinist report.

The SEC’s main goal is to understand whether NFTs are being used as means to raise funding in a way resembling traditional securities. The focus of the investigation is fractional NFTs that split the ownership of a single unique asset (or collection) among multiple token holders, sources familiar with the matter told Bitcoinist. 

A Dilendorf Law Firm representative told Bitcoinist that fractional NFTs may end up being considered securities and that United States law may end up viewing some non-fungible tokens as securities, but perhaps not all.

The law firm also reportedly said NFTs that are unique pieces of art or other objects and serve as blockchain-enabled certificates of authenticity are unlikely to be deemed as securities.

On the other hand, NFTs that are distributed among the general public with a promise of liquidity and continuous services from the issuer — that increase the token’s value — may be found by the SEC to indeed be securities, the report said. 

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