Hester Pierce, the head of the SEC Crypto Task Force, has shared her thoughts that most NFTs do not classify as securities. Pierce made the comment while speaking at the commission’s recent event in Washington, tagged “SEC Speaks.”
Pierce’s new comments are a huge contrast to the views held by former SEC Chair Gary Gensler. Popularly called “Crypto Mom,” Peirce remarked that cryptocurrencies and NFTs that do not reflect interest in a business should not be classified as securities.
The SEC commissioner explained some NFTs do not offer economic rights and should not be classified as securities. NFTs offer royalties to creators. This is similar to how platforms like Spotify pay royalties to artists every time their work is streamed.
Pierce argues that while NFTs provide constant royalties for creators, they do not wield economic rights. So, it does not qualify as security. She said, “These NFTs are powered by smart contracts, which can be programmed to automatically transmit a portion of the sale price of an NFT to the creator of the artwork as a royalty each time that it is resold.”
The 55-year-old also argued that since NFTs do not meet securities standards, federal laws should not apply to them.
What assets are non-securities?
The classification of crypto assets has been a major debate in the last few years. Former SEC Chair Gary Gensler argued that cryptocurrencies such as XRP were securities, leading to a prolonged legal battle.
Peirce believes that projects distributing tokens too early (via ICOs) are the cause of this lack of clarity over a token’s status. Most beneficiaries of this early distribution often have expectations of profit. However, some tokens fail to attract value, which means buyers could lose their funds if the developers fold.
SEC Commissioner @HesterPeirce announces the initial list of priorities the SEC Crypto Task Force will tackle:
-security/commodity status
-scoping out: identify areas outside the SEC’s purview, and define them as such (no-action letters, etc)
-token offerings: (potentially… pic.twitter.com/Zsi9j26kl7— Alexander Grieve (@AlexanderGrieve) February 4, 2025
Peirce explained, “Because the crypto assets are sold with promises to develop the network or application and deliver functionality, the crypto assets may be subject to a contract, transaction, or scheme that qualifies as an investment contract, a type of security under federal securities laws.”
While the argument remains across many corners, Peirce noted that the SEC’s Crypto Task Force is working towards establishing clarity, which would serve the industry better.
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