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ARTICLE · 03 OCTOBER 2023

SEC's First Two NFT Enforcement Actions Cast Shadow Of Ambiguity

Farrell Fritz
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The Securities and Exchange Commission recently brought its first two enforcement actions against issuers of non-fungible tokens (NFTs), resulting in cease-and-desist orders...

United StatesTechnology
Alon Kapen
Alon Kapen

The Securities and Exchange Commission recently brought its first two enforcement actions against issuers of non-fungible tokens (NFTs), resulting in cease-and-desist orders, penalties and other remedies, finding that the NFTs were investment contracts and that each of the issuers had engaged in an offering of securities without registration in violation of Section 5 of the Securities Act of 1933. These enforcement actions create legal ambiguity and risk for NFT developers regarding the marketing, transferability and royalty generating capacity of NFTs.

What are NFTs?

Non-fungible tokens, often referred to as NFTs, are blockchain-based tokens that each represent a unique asset such as a piece of art, digital content or media. An NFT can be thought of as an irrevocable digital certificate of ownership and authenticity for a given asset, whether digital or physical.

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