The SEC is looking into the NFT market for possible securities violations

In a new wave of regulatory action against unregistered securities, the SEC has targeted NFT inventors and marketplaces for illicit activity.


In a new wave of regulatory action against unregistered securities, the SEC has targeted NFT inventors and marketplaces for illicit activity.
SEC

According to a Bloomberg article, the US Securities and Exchange Commission (SEC), led by crypto-skeptical Chairman Gary Gensler, is apparently investigating NFT developers and markets for securities breaches.


Furthermore, reports from anonymous sources noted that the SEC is looking into whether "some non-fungible tokens... are being used to generate money in the same way traditional securities do."


Attorneys from the SEC's enforcement division have reportedly issued subpoenas for information on certain NFTs and other token offerings during the last few months.


While crypto lending products have been the target of intense regulatory scrutiny in recent months, this study represents a significant step forward in the investigation of the NFT sector.


The investigation demonstrates that the SEC is particularly interested in how fractional NFTs are employed. A more valued NFT is tokenized into smaller chunks and resold in this way.


In addition, the warning flags have been around for a while, with Hester Peirce, aka Crypto Mom, indicating in March 2021 that selling fractionalized NFTs may be illegal.


“You better be careful that you’re not creating something that’s an investment product — that is a security.”

This is the latest in a series of crackdowns aimed at tightening the grip on the cryptocurrency sector.


Moreover, the SEC has ordered BlockFi, a crypto lending company based in New Jersey, to pay a record punishment of $100 million for failing to identify "high-yield" loan products as securities.


Despite the current market slump, NFT sales have continued to rise, with the top two NFT exchanges, LooksRare and OpenSea, sharing $10.7 billion in trade volume over the last 30 days.