NFT market violations under the microscope of the US Securities and Exchange Commission

With the rise of illegal activities in the non-traditional token (NFT) markets, the US Securities and Exchange Commission (SEC) has launched a new wave of investigations into these markets and the makers of NFTs.

According to Cointelegraph, the US Securities and Exchange Commission, led by Gary Gensler, who has a skeptical view of digital currencies, has launched an investigation into possible cases of unregistered securities among NFT creators and markets.

Also read: Report: Increasing use of NFTs in criminal activities

Anonymous sources claim that the Securities and Exchange Commission is investigating whether certain non-traditional tokens (NFTs) are being used to raise money, like traditional securities!

Over the past few months, lawyers from the Commission’s executive branch have sent several subpoenas demanding information about certain NFTs and token offerings.

Over the past year, the Commission’s focus has been on digital currency lending projects, and now we are witnessing a strong entry of the Commission to investigate NFTs. The Commission is particularly interested in examining the use of divisible NFTs. These NFTs can be divided into smaller units to sell them separately.

Of course, market participants have been seeing the warning signs of these investigations for some time. In March of last year (March 2019), Hester Peirce (Crypto Mom) warned that the sale of divisible NFTs may violate the law.

Preferably don’t create something that is known as an investment product, because that thing is classified as a security.

The investigation is the latest in a wave of legal actions that have been launched recently aimed at further controlling the cryptocurrency market. Recently, the United States Securities and Exchange Commission fined BlockFi, a digital currency lending company based in New Jersey, USA, with an unprecedented $100 million fine for not including the phrase “High Interest: Lending Product as Securities”.

Bitcoin and Ethereum are not included in these reviews because the SEC does not consider them securities (at least not yet); But other digital assets have not been so lucky, notably Ripple Labs, XRP’s parent company, which has been embroiled in a lawsuit since late 2020 over unregistered securities sales.