The U.S. Securities and Exchange Commission (SEC) is thinking about exempting NFTs used for fundraising from securities laws, which would be a historic step for the cryptocurrency sector. Commissioner Hester Peirce’s declaration represents a possible change in regulatory approach and might give blockchain startups a big boost.
A New Direction for NFT Regulation
Hester Peirce, recently appointed head of the SEC’s crypto working group following the resignation of former chairman Gary Gensler, made the announcement during the SEC’s inaugural crypto roundtable. Speaking to Decrypt, Peirce indicated that NFTs employed as a financing tool might soon be granted regulatory exemptions.
This development comes on the heels of an SEC statement clarifying that proof-of-work cryptocurrency mining does not fall within the definition of securities. Now, Peirce, working alongside acting chairman Mark Uyeda, suggests that NFTs could be next in line for a similar regulatory relief.
“If we could provide a framework or benchmarks for NFT issuers, I think that could be very helpful,” Peirce noted, signaling the SEC’s willingness to explore clear guidelines for NFT-based fundraising mechanisms.
NFT Market and Its Fundraising Potential
The NFT market soared to unprecedented heights in 2021, reaching a valuation of nearly $25 billion. Many entrepreneurs have since leveraged NFTs as an innovative alternative to traditional fundraising methods, tapping into a global network of investors and enthusiasts.
The prospect of regulatory exemptions could reinvigorate the sector, making it easier for projects to secure funding without the constraints typically associated with securities laws.
Defining the Limits of Exemption
However, Peirce cautioned that not all NFTs would automatically qualify for exemption. She clarified that certain NFTs structured as tokenized securities would still fall under regulatory oversight.
“We could have an NFT that would be a tokenized security, and it could be structured like an NFT. Obviously, that would not be excluded,” she emphasized, reinforcing the need for a clear distinction between art NFTs and those that function as investment vehicles.
The proposed exemption is expected to focus primarily on art-based NFTs and those offering benefits such as memberships, exclusive content, or merchandise, rather than financial instruments posing securities risks.
Legislative Support for NFT Legalization
Beyond the SEC, a parallel effort is underway in Congress, where some lawmakers are pushing for legislative provisions to legalize the sale of NFTs for profit. These discussions are part of broader cryptocurrency regulatory bills currently under consideration in both the House of Representatives and the Senate.
Should the SEC follow through with a formal exemption, as it recently did with proof-of-work mining and meme coins, it could usher in a new era for NFT-based fundraising, further solidifying their role in the blockchain economy.
