The U.S. Securities and Exchange Commission (SEC), led by cryptosceptic chairman Gary Gensler, is reportedly investigating the creators of NFT and securities markets, according to a Bloomberg report.
Anonymous sources in the report claim that the SEC is investigating whether: “certain irreplaceable tokens … are used to raise money as traditional securities.”
In the last few months, lawyers from the SEC’s law enforcement unit have reportedly sent summonses requesting information on specific NFTs and other symbol proposals.
While crypto loan products have been subject to serious regulatory scrutiny over the past year, this report marks an important milestone in the NFT sector investigation. The inquiry shows that the SEC is particularly interested in how fractional NFTs are used. This is where the more valuable NFT is tokenized into smaller pieces and sold.
The warning signs have been clear for some time, as Hester Peirce, also known as Crypto Mom, said back in March 2021 that selling fractionated NFT could break the law.
“You better be careful not to create something that is an investment product – it’s security
This investigation is the latest in a wave of crackdown that seeks to tighten the cryptocurrency market. Most recently, the SEC ordered New Jersey-based cryptocurrency company BlockFi to pay a record $ 100 million in fines for failing to name “high-yield: credit products as securities.”
While Bitcoin and Ethereum have managed to evade control due to the fact that they are not considered SEC securities (at least not yet), other digital assets have not enjoyed the same deferral, most notably Ripple Labs, the parent company of XRP, which has been involved in a lawsuit for the sale of “unregistered securities” since the end of 2020.
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NFT’s sales continue to grow, ignoring the current market downturn, with NFT’s two best exchanges, LooksRare and OpenSea, sharing $ 10.7 billion in trading over the past 30 days.