Why not all Non Fungible Tokens are legal

Investors who seek to invest in Non Fungible Tokens, also known as NFTs, should avoid creating unregistered securities when trading fractional shares. According to Hester Peirce, an SEC commissioner, some NFTs could be considered unregistered securities in some specific situations. She recommends that investors take great care to avoid creating unregistered investment products with NFTs.

She said that these fractions of NFTs could be considered securities. Regulators are undoubtedly aware of the latest ascending trend around investing in Non Fungible Tokens, so they aren't going to close their eyes regarding these matters.

In one of the most recent Security Token Summit webinars, Peirce stated that Non Fungible Tokens' very concept should be non-fungible. This means it can't be security. Nevertheless, considering that many of these NFTs result from extreme creativity, you should always be extremely careful where you put your money. You should ask all questions that pass through your mind before making an investment decision.

Non Fungible Tokens as digital assets

Non Fungible Tokens are nothing but cryptographically secured digital assets. In other words, they are tokens attached to a video or image file. Artists and journalists use NFTs to promote their creations. Some of them manage to score big money out of these creative endeavors. For instance, the digital artist Beeple sold one of his Non Fungible Tokens for a whopping $69 million.

Investors have to put up with potential copyright issues and ethical concerns. According to some people, crypto art can be an excellent money laundering method, just like traditional art.

Also, Hester Peirce expressed her worries that NFT-related fundraising endeavors might raise many questions, just as ICOs (initial coin offerings) have introduced a while ago.

This kind of sales that involves putting in a lot of effort to create such immaterial possessions could attract more regulatory attention.

It's already a well-known fact that the SEC has never been too fond of ICOs. These ICOs allow early investors to acquire their share of cryptocurrencies right from the initial stage, with the promise to get an excellent return on their investment later on. 

The problem is that the SEC has stated that all these tokens sold through an ICO are unregistered securities. The commission put a lot of effort into multiple lawsuits against many of these tokens issuers.

Peirce then suggested that fractionalized Non Fungible Tokens could be exposed to the risk of being unregistered securities. Unfortunately, many investors choose to purchase a partial interest in extremely expensive NFTs, which is the only way to afford them. According to Peirce, they should always ask questions to ensure they will be on the safe side with the SEC and their security definition.

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