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The Securities and Exchange Commission is investigating the NFT market for possible securities law violations

According to various media sources, the investigation is looking into whether NFTs are being used to raise money in the same way that regular securities are.

The SEC is particularly interested in fractional NFT information.

If the “Howey Test,” a regulatory test for determining whether a transaction involves an investment contract, NFTs can be designated securities.

According to media sources, the SEC is looking into potential securities law breaches by NFT inventors and cryptocurrency exchanges.

Unnamed sources told the news site that the investigation is looking at whether non-fungible tokens (NFTs) are “being used to raise money in the same way traditional securities are.”

The Federal Bureau of Investigation is looking for information on fractional NFTs, which are crypto assets that have been divided or securitized, allowing numerous investors to acquire a piece of them.

According to the SEC, NFTs can be classified as securities if they pass the “Howey Test,” a regulatory criteria for determining whether a transaction involves a “investment contract.”

During an interview in December, SEC Commissioner Hester Peirce may have hinted at an investigation.

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

Crypto startups, on the other hand, have struggled to qualify as securities and comply with regulatory regulations. Last year, NFT maker Dapper Labs was sued in a class action lawsuit alleging that some of the digital items were unregistered securities.

An inquiry to the SEC for comment was not immediately returned.

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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