- Hester Peirce has asserted that many non-fungible tokens (NFTs), including those with creator royalties, are not securities
- She has emphasized the need for clear regulatory guidance rather than enforcement actions
- The U.S. Securities and Exchange Crypto Task Force, under her leadership, has been working on establishing a coherent framework for NFTs
U.S. Securities and Exchange (SEC) commissioner and Crypto Task Force leader Hester Peirce last night clarified her stance on the regulatory status of non-fungible tokens (NFTs). At an SEC Speaks event, Pierce stated that many NFTs, particularly those designed to compensate creators through royalties, do not qualify as securities, a decision that will send waves of relief through the beleaguered sector. At the event, Peirce also highlighted the importance of providing clear guidelines to foster innovation while ensuring investor protection, something the industry has been crying out for.
Most NFTs Are Not Securities
Commissioner Peirce, often referred to as “Crypto Mom,” addressed the complexities surrounding NFTs and their classification under securities law, noting that NFTs powered by smart contracts, which automatically distribute a portion of resale proceeds to creators, resemble royalty systems in traditional media and do not confer ownership rights or profit interests typical of securities:
These NFTs are powered by smart contracts, which can be programmed to transmit automatically a portion of the sale price of an NFT to the creator of the artwork as a royalty each time that it is resold.
Peirce emphasized the necessity for the SEC to move away from an enforcement-centric approach and instead provide clear regulatory frameworks, arguing that the lack of guidance creates uncertainty, hindering innovation in the rapidly evolving digital asset space. She has been vocal about the need for the SEC to offer more precise definitions and rules, particularly concerning emerging technologies like NFTs.
Crypto Task Force Lends a Hand
Under Peirce’s leadership, the SEC’s newly established Crypto Task Force has been actively engaging with industry stakeholders to develop coherent regulatory policies, aiming to address the unique challenges posed by digital assets and provide clarity on their classification and regulation.
Peirce’s efforts signify a shift towards a more collaborative and transparent regulatory process, seeking to balance innovation with investor protection and marking a significant step in the ongoing discourse about the regulation of digital assets. By distinguishing certain NFTs from securities, she opens the door for more nuanced and tailored regulatory approaches. As the SEC continues to navigate the complexities of the digital asset landscape, Peirce’s advocacy for clear guidelines may pave the way for more informed and effective regulation.
