The multi-billion dollar NFT business may be the target of a crackdown by the Securities and Exchange Commission, but one of its own doesn’t think the SEC should act with such haste.
The $4 billion firm that owns the Bored Ape Yacht Club, Yuga Labs, is reportedly the subject of an SEC investigation for securities breaches. However, the Commission has made no remarks about its position on NFTs explicitly up to this point, leaving creators puzzled and unhappy about how to navigate what they view as a murky regulatory climate.
Hester Peirce is an SEC commissioner who is lovingly referred to as “Crypto Mom” in the sector. She is one of the five presidentially appointed SEC commissioners and has long been critical of the agency’s approach to crypto regulation in general and the regulation of NFTs in particular.
Pierce told a news publishing house that a healthy government policy is to clearly define the law. After that, the agencies should take enforcement action against those who violate it. Enforcement activities shouldn’t be used by agencies to inform the public about the law. She added that the SEC has adopted the stance that securities regulations should only be applied in this context and not be amended.
“I think the SEC has provided very little clarity (on NFTs). There’s a lot of ambiguity. And in situations where there is this much ambiguity, I think people need to be very careful. This is not the ideal state (of regulation).”
Peirce thinks that the SEC could easily offer creators of NFTs a significant amount of assistance as they approach widespread acceptance, but for some unknown reason, the federal agency has opted not to do so.
“We could do that anytime we wanted. We have mechanisms for doing that. We could work on some kind of group exemption order that could say, ‘If you meet these parameters, then you’ll be fine under the securities laws.’ We could set out parameters within which people could operate. We could draft some kind of a class no-action letter which says, ‘If you do these things, we’re not likely to recommend an enforcement action against you,’” she said.
She asserted that projects like creative NFT collections with profile pictures and others of a similar nature have generated billions of dollars in aftermarket sales, but they assert to be works of art that provide owners with societal benefits and social utility rather than being investment items. According to Peirce, the “facts and circumstances” of each case would have to be considered in determining the securities status of those collections.
The recent introduction of NFT support by major firms like Meta and Twitter for their social networking platforms shows a recognition among the biggest tech companies in the world that revolutionary technology is here to stay.
Coming off a record $25 billion in revenues in 2021, the NFT industry experienced $5.36 billion in organic trading activity in just January of this year. These enormous sums have fallen off to about $1 billion in monthly NFT trading volume since the crypto crisis in May.