SEC’s Hester Peirce Drops Bombshell: Most NFTs Escape Securities Tag—Even Creator Royalty Tokens

In a move that’ll make crypto lawyers pop champagne (and traditional finance suits clutch their pearls), SEC Commissioner Hester Peirce just drew a line in the sand. Her take? The majority of NFTs—including those compensating creators—don’t meet securities criteria.

Finally, some regulatory clarity—or just another loophole for Wall Street to exploit while Main Street figures out the rules. The irony’s thicker than a Bitcoin maximalist’s tinfoil hat.

Hester Peirce Clarifies That Many NFTs, Including Creator Royalties, Are Not Securities

Peirce, known as “Crypto Mom” for her vocal dissents on SEC enforcement actions against crypto firms, further clarified her position. She stated that many NFTs do not offer the economic rights typical of securities. These include those designed to compensate creators with royalties over time.

These NFTs are powered by smart contracts. They allow artists to earn a portion of the resale price every time the NFT is sold. This works similarly to how streaming platforms pay royalties to creators. Peirce argued that these “creator royalties” do not involve ownership rights in a business. Additionally, they do not promise profits typically associated with securities.

While Peirce has classified many NFTs as non-securities, the SEC itself has not yet provided its own official clarification on the matter, leaving ambiguity in how these digital assets should be regulated.

This distinction shows her position as an advocate for clearer and more specific guidance from the agency.

Peirce Champions for Understanding the ‘Economic Realities’ of Crypto to Shape Future Regulations

Since her appointment to lead the SEC’s Crypto Task Force, Peirce has made significant progress in engaging with the industry. The task force has hosted multiple roundtables and received numerous public submissions. Additionally, it has worked closely with lawmakers to develop potential legislation for crypto’s complex regulatory landscape.

Her leadership marks a shift from the approach of former chairman Gary Gensler, who was known for his skepticism of crypto.

Peirce’s comments on NFTs focus on those that do not involve security-like rights. However, she also acknowledged the challenges posed by other digital assets. These assets might blur the lines between securities and non-securities, she noted.

Further, she pointed to the importance of understanding the “economic realities” of these assets, rather than simply their form, to determine their regulatory classification.

Looking ahead, Peirce stressed the need for clearer rules to facilitate the growth of the crypto market while ensuring investor protection.