While some legal experts predict a possible conclusion to the SEC vs Ripple (XRP) lawsuit coming later this year, the SEC is currently also investigating some NFT creators as they try to determine whether they have violated any rules or regulations.
According to a March 3rd, 2022 report by Bloomberg, The SEC has some concern regarding certain NFT’s and started a probe to investigate if these NFT’s are being “used to raise money like traditional securities” without registering as such. The probe is mostly focused on fractional NFT’s which offer the ability for several people to own or trade the NFT. It was reported that subpoenas have been dispelled by SEC attorneys in order to obtain further information from the NFT creators.
XRP lawsuit and NFT probe similarities
Under SEC chair Gary Gensler, the regulating body has taken a tougher stance towards the crypto space. The legal battle currently being fought between XRP and the SEC revolves around the regulator accusing Ripple (XRP) of not properly registering as a security therefore committing securities fraud. This is also a key legal question regarding NFT’s, do they qualify as securities? The XRP case continues to be closely monitored by the overall crypto community in hopes to gain regulatory clarity not just for XRP but the overall cryptocurrency space. It is also possible that this NFT probe could provide similar clarity for the rapidly growing NFT space.
NFTs take center stage
The popularity of NFT’s has skyrocketed over the past year reaching over $25 billion dollars in 2021 alone. Hester Price, the current SEC Commissioner who is sometimes referred to as “Crypto Mom” due to her crypto friendly opinions had warned the regulatory body may be focusing on Non Fungible Token’s (NFT) next. She recently stated “Given the breadth of the NFT landscape, certain pieces of it might fall within our jurisdiction”. She also added “people need to be thinking about potential places where NFTs might run into the securities regulatory regime.”
Since the SEC vs XRP lawsuit was announced prices for the XRP token have greatly suffered compared to similar top tier market cap cryptocurrencies in the space. It is yet to be seen which NFT’s may be targeted in this probe and what effect that may have for investors in these projects or the larger NFT space.