Sec scrutinizes nft over illegal

Related:Seven Industries Rife With NFT Investing Opportunities

Now, all those Bored Apes, hopeful artists and profit-minded speculators clamoring aboard the Crypto Express are facing larger legal questions on how they promote their involvement in NFTs and whether they need to disclose paid endorsement deals.

“Celebrities and social media influencers have a lot of brand power,” said Bob Seeman, a tech and legal adviser and author of the book “Bitcoin: Unlicensed Gambling.” “But this is a whole new area with NFTs so the regulatory interpretation of it and how the regulators will treat it is unknown.”

Related:What the Rise of NFTs Means for Advisors

Read More: SEC Scrutinizes NFT Market Over Illegal Crypto Token Offerings

A key legal question is whether digital assets including NFTs are securities, and therefore subject to the same rules as stocks.

Sec scrutinizes nft market over illegal crypto token offerings

Instead, he contended that most crypto tokens are in fact securities under the federal securities laws from the 1930s, which have been amended many times with Congress painting with “an even wider brush.” Gensler highlighted SEC v. W.J. Howey Co., 328 U.S. 293 (1946), in which the Supreme Court established what is now known as the “Howey Test.” Under the Howey Test, an investment contract exists where there is the investment of money in a common enterprise with the reasonable expectation of profits to be derived from the efforts of others.
Gensler believes the Howey Test applies to many crypto tokens because entrepreneurs are raising money from the public by selling crypto tokens, with the expectation that managers will build ecosystems where the tokens are useful, thereby drawing more users to the projects.

Below is a summary of some of his comments in each of these areas.

Crypto Trading and Lending Platforms

Gensler has instructed SEC staff to work on a number of projects related to trading platforms. The first project Gensler mentioned is getting these platforms registered and regulated, just like stock exchanges.

In Gensler’s view, these platforms play roles similar to traditional regulated exchanges and investors should be protected in the same way. Gensler added that platforms that meet the “gold standard” of SEC regulations will promote investor confidence and help crypto markets function.

Second, Gensler has also directed the SEC to consider how best to register and regulate platforms that trade both crypto commodity tokens and crypto security tokens.

NFT’ler son dönemde kripto para piyasasında en çok ilgi gören ürünler arasında yer alıyor. Bu pazarın hızla büyümesi, düzenleyici firmaların odağının buraya çevrilmesine neden oluyor.

ABD Menkul Kıymetler ve Borsa Komisyonu (SEC), Bloomberg tarafından hazırlanan bir rapora göre, belirli NFT’lerin menkul kıymet olarak nitelendirilip nitelendirilmediğini ve bu nedenle düzenleme ihtiyacı olup olmadığını araştırmaya başladı.

Rapora göre, son birkaç ay içinde avukatlar, NFT yaratıcılarına ve bazı kripto para borsalarına mahkeme celbi gönderdi.
Soruşturma, SEC Başkanı Gary Gensler’in kripto piyasasının düzenlemelere uymasını sağlamak için yaptığı son girişimin bir parçası oldu.

SEC, varlıkları kolayca alınıp satılabilen birimlere ayırmayı içeren NFT’ler hakkında bilgi araştırmalar yapıyor.

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The U.S.

Securities and Exchange Commission is adding 20 more officials to a team dedicated to policing crypto markets, the latest move by Wall Street’s main regulator to crack down on digital tokens that may run afoul of its rules.

The additions will bring the SEC’s Crypto Assets and Cyber Unit to 50 people, the agency said Tuesday in a statement.

As the market has boomed, some NFT marketplaces have taken steps to remove projects that might put them in regulators’ crosshairs, such as those that offer royalties or that involve raising funds for a business.

A key legal question is whether digital assets including NFTs are securities, and therefore subject to the same rules as stocks. Although the SEC has said that many tokens fall under its purview, some crypto enthusiasts argue regulations meant to police the equity markets shouldn’t also apply to virtual currencies.

The SEC applies the so-called Howey test, which comes from a 1946 U.S.
Supreme Court decision, to decide whether something is a security.

NFT exchanges that list these tokens are also selling securities and must register with the SEC.

Other NFT platforms arrangements may face a similar fate. A number of NFT platforms permit users to take out loans using their NFTs as collateral.
This arrangement is quite similar to the arrangement BlockFi had with its users, which led to BlockFi’s recent settlement with the SEC for offering unregistered securities. In addition, one of the largest NFT markets recently delisted an NFT that entitled holders to share in the casino profits generated by the NFT’s developers, following cease and desist orders from the states of Texas and Alabama against the developers for offering unregistered securities.5 From these reports, it appears that NFT platforms are already selling securities, which will likely attract attention from the SEC.

Footnotes

1.

The U.S. Securities and Exchange Commission is scrutinizing creators of nonfungible tokens and the crypto exchanges where they trade to determine whether some of the assets run afoul of the agency’s rules, according to people familiar with the matter.

A focus of the inquiry is on whether certain NFTs, digital assets that can be used to denote ownership of things such as paintings or sports memorabilia, are being utilized to raise money like traditional securities, the people said. Over the last several months, attorneys in the SEC’s enforcement unit have sent subpoenas demanding information about the token offerings.

The inquiry is the latest attempt by the SEC under Chair Gary Gensler to ensure the crypto market adheres to its regulations.

In February, the commission and state regulators levied a record $100-million fine against BlockFi, a popular virtual-currency exchange, for failing to register products that pay customers high interest rates to lend out their digital tokens.

As part of its review, the SEC is seeking information on so-called fractional NFTs, which involve breaking down the assets into units that can be easily bought and sold, said the people, who asked not to be named as the investigation hasn’t been disclosed publicly.

The SEC declined to comment. Information requests from the regulator don’t always lead to enforcement actions.

The NFT market exploded last year, drawing attention for multimillion-dollar sales and buy-ins from celebrities, whom some of the assets depict.

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