The SEC Crypto Task Force lead, Hester Peirce, stated that crypto projects such as Stoner Cats, which utilized NFTs as a fundraising mechanism, should be exempt from securities regulations. This clarity may soon come from the SEC.
During the SEC’s first-ever crypto roundtable, Peirce, alongside Acting SEC Chair Mark Uyeda, emphasized positive reactions to a recent statement declaring proof-of-work crypto mining not to fall under securities definitions. Peirce suggested that NFTs could be the next asset category addressed with an exemptive statement.
“We could do it on NFTs as well,” Peirce mentioned. “If we could provide some kind of framework or markers for [NFT issuers] to look to, I think it could be pretty helpful.”
NFTs are digital tokens on blockchain networks like Ethereum and Solana, often linked to digital art and traded on secondary markets. The NFT market peaked in late 2021, reaching up to $25 billion, with entrepreneurs using these tokens to raise billions for ventures.
Peirce elaborated that a statement regarding the non-security status of certain NFTs could exempt art NFTs and those resembling Flyfish Club and Stoner Cats, projects previously sued by the SEC under former chair Gary Gensler.
Stoner Cats, an animated series by Mila Kunis, raised $8 million via NFT sales, offering perks like access to the series and tradable NFTs with a 2.5% royalty for each secondary market transaction. Similarly, Flyfish Club raised over $14 million through NFT sales for a members-only restaurant, with resellable NFTs and a royalty structure.
If the SEC issues a statement about such NFTs, akin to recent statements on proof-of-work mining and meme coins, it would signal open season for projects using tradable NFTs with perks for fundraising. However, Peirce stressed that not all projects featuring NFTs would be exempt from securities regulations.
“You could have an NFT that’s a tokenized security, and it could be structured as an NFT,” she said. “Obviously that’s not going to be carved out.”
— news from Decrypt