SEC’s Peirce Clarifies NFTs With Creator Royalties Are Not Securities

2 mins mins

Key Points:

Hester Peirce clarifies NFTs with royalties aren’t securities, impacting NFT market regulations.
“NFT royalties don’t equate to corporate profit sharing,” says Peirce.
Peirce’s statement aims to provide clarity, avoiding securities regulation’s burdens.

SEC Commissioner Hester Peirce clarified on May 19, 2025, that NFTs with creator royalties should not be classified as securities.

This distinction could greatly impact NFT regulations, directly influencing marketplaces and projects dependent on ongoing royalties.

Peirce’s NFT Clarification: Key Details and Sector Impact

During a speech at the SEC Speaks event, Peirce addressed the regulatory ambiguity surrounding NFTs. Her remarks specified that NFTs featuring creator royalties do not meet the traditional criteria of securities. Peirce emphasized the mechanism where artists receive royalties via smart contracts does not constitute profit-sharing rights.

The clarification removes a potential compliance burden from NFT-focused platforms and creators. Without securities classification, these entities avoid the heavy regulation typically associated with securities, thereby fostering innovation and expansion in the sector.

“These NFTs are powered by smart contracts, which can be programmed to transmit automatically a portion of the sale price of an NFT to the creator of the artwork as a royalty each time that it is resold.” – Hester M. Peirce, Commissioner, U.S. Securities and Exchange Commission

Oscar Franklin Tan, a legal expert, acknowledged Peirce’s statement as a reinforcement of existing legal interpretations. Community feedback has been predominantly positive, with industry leaders appreciating Peirce’s commitment to reasonable regulations in the evolving digital assets space.

Market Data and Adoption: Expert Analysis and Historical Context

Did you know? The SEC’s regulatory clarity on NFTs parallels historical moves in tech, such as internet regulatory shifts in the early 2000s, driving innovation by minimizing legal uncertainties for emerging platforms.

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enjin-coin-daily-chart — Enjin Coin(ENJ), daily chart, screenshot on CoinMarketCap at 09:22 UTC on May 21, 2025. *Source: CoinMarketCap*

Coincu’s Research Team suggests Peirce’s announcement encourages artist-focused royalty models, transforming NFT market structures. It aligns with trends towards more decentralized economic models, encouraging platforms to innovate without securities law restrictions. This scenario could lead to increased adoption and integration across creative industries.