Is your NFT illegal?


Short story? Probably not.

If you are selling art, then you are probably perfectly fine.

When you try to raise funds, and using NFT's to skirt ICO regulations, then you may be looking at an unregistered security or even an illegal ICO.

SEC commissioner Hester Pierce made a recent statement they will be looking into NFTs created to skirt ICO regulations.

“The whole concept of an NFT is [it’s] supposed to be non-fungible, so it’s supposed to be unlike anything else,”

“Which means that it’s, I think, in general, less likely to be a security, but people are being very creative in the types of NFTs they’re putting out there. It’s a wonder what some people will pay for. And so I think, given that creativity, as with anything else, you should be asking questions.”

“If you’re doing something where you are saying, ‘I’m going to sell you this thing and I’m going to put a lot of effort into building something so that this thing that you’re buying has a lot of value,"
SEC commissioner Hester Peirce

What does this mean?

Most people using NFTs as a vehicle to sell art and unique items will have nothing to worry about. This is a perfectly valid and legal use of NFTs.

Where things get sketchy is when you use NFTs as a promise of a future return down the line or to raise funds. Say for example you were to make a game using NFTs as a way to raise money. This would put you in very dangerous territory of being an unlicensed ICO. Another example is selling fractional "shares" of an NFT with the promise of some return in the future. This would result in an unregistered security. Because you use an NFT instead of a token doesn't protect you from these regulations.

SEC commissioner Hester Peirce spoke in a recent Security Token Summit webinar to express her concerns where NFTs are being used to side step regulations and that it will not be tolerated.

People tend to have a difficult time understanding illegal securities and unlicensed ICOs. Even in courts the definition isn't black and white and requires interpretation.

Securely chat with me on Keybase

Why you should vote me as witness

3 columns
2 columns
1 column