SEC Warns Fractionalized NFTs Could be Unlawful Amidst the Hype

Sahaj  |  Mar 26, 2021

SEC has recently warned that fractionalized NFTs could be contemplated as investment settlements or unlawful under the securities law of the country. There has been a significant increment in the investments in the non-fungible token industry which is followed by the massive popularity this year as the costs of cryptocurrencies like BTC and ETH have climbed significantly.

SEC Warns Fractionalized NFTs Could be Illegal Amidst the NFT Mania

Hester Pierce, the Commissioner of the Securities and Exchange Commission has recently warned that providing fractionalized NFTs could be considered investment contracts under the securities law of the country. In addition to this, she highlighted that:

“People are being very creative in the type of NFTs they are putting out there.”

This gives rise to the allowance for the retail investors to acquire exposure to many NFTs that are highly-priced, ultimately providing the buyers with partial ownership rights.

Extending the warning further, Hester Pierce asked the issuers to move ahead with caution while selling partial interests on NFTs. In addition to that, Pierce also urged the sellers to ensure that it isn’t an investment product that is being created.

Investors have poured around $90 million into the non-fungible tokens, and digital collectable firms this year, while the NFT mania is constantly taking on the mainstream media.

The general partner at Accel, Andrei Brasoveanu, released a statement addressing the most fascinating developments in the industry that read:

“It’s one of those developments that has mass-market appeal and could potentially impact a world outside the crypto niche.”

Is NFT Just a Bubble?

Although the industry has witnessed huge growth recently, analysts have doubts about the non-fungible tokes being an asset class. The CEO of L’Atelier BNP Paribas, John Egan, recently revealed in an interview that NFT is among the most fluctuating and riskiest categories of assets in the market.

Mike Winkelmann, a Digital Artist, despite the success he received with selling his NFTs, admitted that NFT is a bubble, and said that:

“I absolutely think it’s a bubble, to be quite honest. I go back to the analogy of the beginning of the internet. There was a bubble. And the bubble burst.”

Related News