SEC Investigating NFT Market Over Potential Securities Violations
The SEC is targeting NFT creators and marketplaces for engaging in illegal activities under a new regulatory action against unregistered securities.
According to a report from Bloomberg, the United States Securities and Exchange Commission (SEC), headed by crypto-cryptocurrency chairman Gary Gensler, is examining nonfungible tokens (reporting creators and marketing sites) for security breaches.
Various anonymous sources have mentioned in the report that the SEC was investigating whether “some funky tokens, such as traditional securities, are being used to raise money”.
Over the past few months, attorneys in the SEC’s enforcement unit have reportedly sent out subpoena calls asking for information about specific NFTs and other token offers.
Although crypto-lending products underwent major regulatory testing last year, this report represents an important step in investigating the NFT sector. Research shows that the SEC has a special interest in how to use partial NFTs. This is where the most valuable NFT is sold in small pieces.
There have been warnings for some time that Hester Pierce, also known as Cryptomom, will outlaw the sale of fractalized NFTs in March 2021.
“You better be careful that you’re not creating something that’s an investment product — that is a security.”
It is the latest in a series of clamps trying to dominate the cryptocurrency market. Recently, New Jersey-based crypto-lending company BlockFi was ordered by the SEC to pay a record $100 million fine for failing to list “high-yielding” store products as securities.
Bitcoin (BTC) and Ether (ETH) were not considered SEC securities – at least, so far – and were able to avoid scrutiny because they did not receive the same relief as other digital assets. Ripple Labs’ parent company, not Ripple Labs (XRP), has been embroiled in a lawsuit for selling “unregistered securities” since the end of 2020.
As NFT sales continue to grow, with the first two NFT exchanges, LooksRare and OpenSea, surpassing the current market downturn of $10.7 billion in trading volume over the past 30 days.