The question is whether specific tokens should be classified as securities, and hence NFT market is subject to regulation.

The amount of digital assets, including the NFT market, has increased in recent years. Digital assets based on distributed ledger technology, also known as the blockchain, come in various forms and offer a variety of benefits to industry participants.

Blockchain technology is used to construct a secure, decentralized network for digital assets transactions. “An asset that is issued and transferred utilizing distributed ledger or blockchain technology,” according to the SEC. Virtual currencies, coins, and tokens are all examples of digital assets. In some cases, a digital asset may be considered a security under federal securities regulations. Although the term “digital asset securities” is not specified in the securities legislation, the SEC frequently refers to digital assets that are securities as “digital asset securities.”

According to Bloomberg, which cited persons familiar with the topic, the Securities and Exchange Commission (SEC) looks into whether specific NFT markets qualify as securities and should thus be regulated. According to the article, SEC prosecutors have sent subpoenas to NFT market inventors and several crypto exchanges in the last few months, demanding more information.

According to the sources, fractional NFTs, in which a token is divided into multiple units and sold individually, are a particular focus of the investigation. In December, SEC Commissioner Hester Peirce, dubbed “Crypto Mom” for her pro-crypto stance, said that the SEC might be looking into NFTs shortly.

“Given the scope of the NFT landscape,” Peirce added, “some elements of it might fall within our jurisdiction.” “People need to consider where NFTs could potentially run afoul of the securities regulatory environment.”

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Chairman Gary Gensler has been outspoken in his support for regulatory monitoring of the digital asset business and has been fighting the Commodity Futures Trading Commission for it. While the CFTC has been regulating bitcoin as a commodity, agency chair, Rostin Benham recently urged the Senate for a more significant role in regulating the NFT market business, which might put the SEC’s plans on hold. According to the SEC’s Howey test, anything is a security if it includes investors placing money into an asset with the goal of profiting.