Fractional non-fungible tokens (NFTs) and their index baskets can be construed as investment contracts under US securities laws, SEC Commissioner Hester Peirce said.
“The concept behind NFTs is that tokens are non-fungible. As a result, they are difficult to classify as securities. But the situation is not so clear-cut for those who create fractional NFTs. This also applies to those selling index baskets of non-fungible tokens,” she said.
In her remarks, Peirce again criticized the Howey test, which “does not work very well” for the cryptocurrency industry.
She noted that, in its current interpretation dating to 1946, fruit trees would also have to be considered investment contracts.
The Howey Test became used as a precedent in a court case of that era. It concerned real estate contracts issued by the owner of a citrus grove to finance business expansion.
Peirce expressed hope of advancing her plan to provide regulatory sandboxes for blockchain startups under the new SEC chair Gary Gensler.
In August, the US Senate approved Peirce as a special appointee to the SEC for a second term through June 5, 2025.
Prior to that, she criticized her colleagues’ actions regarding the Telegram Open Network token sale.
Earlier, ForkLog published a piece focusing on the taxation of NFT-related deals.
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