SEC Commissioner Hester Peirce stated that most non-fungible tokens, including those that automatically pay royalties to creators, do not fall under federal securities laws. In her recent speech, Peirce emphasized that the mere ability to earn income from resale does not make an NFT an investment instrument.
NFTs Do Not Grant Business or Profit Rights
According to Peirce, NFTs do not provide holders with any stake in a business or guarantee profits, unlike securities. She compared NFTs to streaming platforms, where musicians and filmmakers receive payments for each view or listen. Similarly, NFTs allow creators to earn income from the subsequent sales of their work.
Legally speaking, the creator is not acting as an investor nor participating in a business as a passive party. Therefore, receiving royalties is not considered investment income but is more akin to revenue from creative work.
Enjin Lawyer Says Media Misinterpreted the Statement
Oscar Franklin Tan, chief legal officer at Atlas Development Services — a participant in the Enjin project — stated that Peirce’s comments were misrepresented by several media outlets. He clarified that the idea that royalty-bearing NFTs are not securities has long been accepted within the legal community. According to him, this question was never seriously considered as a subject of SEC oversight.
Tan explained that U.S. securities law governs investments, not contractual payments to creators. He added that similar contractual models existed long before blockchain and never raised regulatory concerns. The key factor is that payments to creators are not distributed among outside token holders and are not accompanied by profit promises.
He also noted that legal risks could arise if NFTs are structured to distribute royalties not only to the creator but also to other holders. Such a model may resemble an investment mechanism and attract regulatory scrutiny. Tan urged applying standard legal reasoning to such cases: if the agreement were written on paper, would it attract the SEC’s attention?
The OpenSea Case and Conclusion of Investigation
While individual NFTs and their royalties have not triggered SEC enforcement, NFT marketplaces have come under the regulator’s attention. In August 2024, the SEC issued a Wells notice to the trading platform OpenSea, suspecting that some of the tokens listed on the platform could be unregistered securities.
On February 22, 2025, OpenSea CEO Devin Finzer announced that the investigation had been closed. Following this, the company’s legal team sent a letter to Hester Peirce. In the letter, OpenSea attorneys Adele Faure and Laura Brookover stressed that NFT marketplaces do not act as brokers, do not execute transactions on behalf of clients, and do not operate as intermediaries.
The letter includes a call for the SEC to formally confirm that NFT platforms do not fall under the definition of exchanges within the framework of existing securities regulations.
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