Amid growing concerns over the Securities Exchange Commission’s (SEC) latest overreach into the digital asset industry with their wells notice issuance to OpenSea, The Digital Chamber (TDC) is calling for legislation to clearly define certain NFTs as consumer products and exempt them from federal securities laws. This language should:
- Clearly define that NFTs, which are created for the purpose of consumptive use, are not financial products.
- Highlight that NFTs should not be classified as securities under the authority of the SEC, or as any other type of financial instruments.
NFTs Are Consumer Goods, Not Financial Products
In 2023, TDC conducted an in-depth study of the NFT ecosystem. In our Pixels to Policy report, we highlight a number of the most popular NFT applications, from digital art and collectibles to video games, to unique digital event experiences, and more. Many NFT applications are clearly not designed as investment contracts or financial tools for speculation, even if consumers occasionally sell NFTs for a profit, much like traditional collectibles or artwork. This secondary market feature does not make them financial products.
These items should be classified as consumer goods, not securities. TDC is advocating for legislative clarity that reflects this distinction.
The Importance of Protecting NFT Creators and Communities
However, SEC Chair Gary Gensler’s regulation-by-enforcement approach has jeopardized the livelihoods of countless individuals who rely on NFTs to pursue their passions, connect with their communities, and sustain themselves by selling and trading digital goods and access rights within this thriving ecosystem.
NFT companies providing these minting services and data transfer infrastructure have also endured a lack of legislative clarity and have suffered as a result. Recent securities lawsuits against DraftKings and Dapper Labs, along with a threat of an enforcement action against the NFT marketplace OpenSea, have not only put the industry at risk but also sent a troubling message to consumers: their rights are unjustly restricted by an agency acting beyond its authority.
Call for Congressional Action
Congress must act now to ensure that this burgeoning industry remains within the US, for the benefit of the US economy, and not move overseas to more favorable regulatory environments. The Digital Chamber strongly encourages Congress to clarify that Consumptive-Use NFTs are consumer goods and not financial products.
Update 9/16:
TDC is please to announce that the US Congress is directly addressing the legal and regulatory treatment of non-fungible tokens (NFTs). We applaud Congressman Timmons’ leadership and the announcement of the New Frontiers in Technology Act (NFT Act). Read more about this monumental legislation in the TDC Update here.