The Chamber of Digital Commerce, a big player in the digital asset and blockchain world, has praised SEC Commissioners Peirce and Uyeda for asking crucial questions regarding the SEC‘s recent moves in the NFT space. In their joint statement titled “NFTs & the SEC: Statement on Impact Theory, LLC,” the Commissioners touched on some significant issues about the SEC’s role in NFTs. Now, the Chamber, representing more than 200 members of the blockchain industry, has shared its detailed responses to these questions, considering the perspectives of various people involved in the NFT world.
1. Sorting NFTs
NFTs (non-fungible tokens) are tricky to classify because they serve many different purposes. The Chamber suggests that we can group NFTs into two main categories:
- Financial Product NFTs: These NFTs are linked to financial interests in projects or assets. Depending on their specific use, some could be treated as securities.
- Consumer Product NFTs: These NFTs are more about owning or proving the authenticity of digital or physical items, like digital art or collectibles. These, the Chamber argues, are not securities. They serve as digital identifiers, use blockchain tech, and are sold for enjoyment or collectible purposes.
2. Guidance for NFT Creators
The Chamber stresses the need for clear rules or a no-action letter from the SEC. This would lay down the rules about marketing practices that might make NFT creators subject to securities laws. Having this guidance would help NFT creators know exactly what’s expected of them in terms of compliance.
3. Legal Framework for NFTs
Recent laws, like the FIT for the 21st Century Act, seem to indicate that the SEC shouldn’t have full control over NFTs. They suggest that the SEC should only oversee NFTs with the traditional traits of securities. The Chamber notes that, so far, no proposed laws have given the SEC control over NFTs.
4. Keeping NFT Buyers Informed
When it comes to informing NFT buyers, the Chamber thinks that applying securities law disclosure rules to consumer product NFTs is just not right. Instead, existing laws that protect consumers are a better fit for these kinds of assets. What NFT buyers usually want is to know about the intellectual property rights tied to the NFT and any associated costs or fees.
5. SEC Registration Rules for NFTs
The Chamber is against the idea of treating consumer product NFTs as securities. Doing this would go beyond the SEC’s powers, and it could hurt the NFT market. Instead, the Chamber backs the Lummis-Gillibrand Responsible Financial Innovation Act, which makes a clear difference between the initial offering and the “ancillary assets.” This approach respects what makes NFTs unique and sets out precise rules.
6. The Impact of Forced Destruction
The SEC’s requirement to destroy NFTs as part of the Impact Theory, LLC settlement raises some eyebrows. This could be seen as a violation of the First Amendment rights of creators, and it might lead to cultural and market issues.
7. Doing Away with Royalties
Taking away royalties from NFTs goes against the core idea behind NFTs. It’s a move that could hurt independent creators, especially those from disadvantaged backgrounds, and might make it harder for them to find success in the world of digital art. This change might also have an impact on the diversity of the digital art space and could reduce the availability of certain artworks.
The Chamber of Digital Commerce’s detailed responses show the need for clear and specific rules for NFTs. The key takeaway is that it’s important to distinguish between financial product NFTs and consumer product NFTs and make sure that any regulatory moves don’t slow down innovation or infringe on the rights of creators. What’s most crucial is to create rules that offer clear guidance and promote inclusivity and certainty in the NFT space.
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