According to a report by Bloomberg, the US Securities and Exchange Commission (SEC) is investigating NFT preparers and markets for violating securities laws.
Anonymous sources in the report allege that the SEC is investigating whether “some NFTs are being used to raise money like traditional securities.”
In recent months, attorneys for the SEC’s enforcement unit have filed subpoenas requesting information about certain NFTs and other token offerings.
While crypto lending products have been the subject of intense regulatory scrutiny over the past year, this report marks a major turning point in the scrutiny of the NFT sector. This shows that the SEC pays particular attention to how fragmented NFTs — a more valuable NFT that is broken down into smaller pieces and offered for sale — are used.
In March 2021, Hester Peirce, aka Crypto Mom, stated that selling fragmented NFTs could be against the law.
“You’d better make sure you’re not creating an investment product — a security.”
This is the latest investigation in a wave of crackdowns aimed at dominating the crypto market with greater certainty. Recently, the SEC ordered New Jersey-based crypto lender BlockFi to pay a record $100 million fine for “failing to list high-yield lending products as securities.”
While Bitcoin and Ethereum may have escaped scrutiny because they are considered securities by the SEC (not yet), other digital assets have not been so lucky. Notably, Ripple Labs, the parent company of XRP, has been embroiled in a lawsuit over the alleged sale of “unregistered securities” since late 2020.
NFT sales have continued to grow addressing the current market downturn – with two leading NFT trading platforms, LookRare and OpenSea, posting $10.7 billion in trading volume over the last 30 days.
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