Many NFTs that pay creators over time are not securities: SEC’s Hester Peirce
SEC Commissioner Hester Peirce stated that many NFTs, including those with creator royalty mechanisms, likely do not fall under federal securities laws. NFTs enabling artists to earn resale revenues are not automatically classified as securities, as they function differently from stocks. Peirce compared NFT royalties to streaming platforms compensating creators. Oscar Franklin Tan clarified that NFTs sending royalties to creators are not considered securities, emphasizing that U.S. securities law focuses on investments, not creator compensation. He noted that royalty payments are akin to business income. The SEC has not prohibited contracts allowing artist royalties from secondary sales. OpenSea received a Wells notice regarding potential unregistered securities but announced the closure of the SEC investigation, asserting that NFT marketplaces do not act as brokers or exchanges under U.S. securities laws.
