NFTs Can Be Considered Securities Under Certain Conditions

On March 7, the U.S. District Court for the Southern District of New York recently confirmed for the first time that under certain circumstances, NFT can be re…

NFTs Can Be Considered Securities Under Certain Conditions

On March 7, the U.S. District Court for the Southern District of New York recently confirmed for the first time that under certain circumstances, NFT can be recognized as a security under the Securities Act of 1933. Recently, the United States District Court for the Southern District of New York ruled on a class action lawsuit against the basketball theme NFT Moments. According to Howey’s test, the court recognized the NFT as an “investment contract” and rejected the defendant’s motion of rejection. The court pointed out that the plaintiff’s claim that Moments was reasonable for the securities. (jdsupra)

The US District Court implied that NFT may be regarded as securities

Analysis based on this information:


The recent ruling of the United States District Court for the Southern District of New York on the class action lawsuit against NFT Moments is being considered as a milepost in the realm of Non-Fungible Tokens (NFTs). The ruling confirms that NFTs can be regarded as securities under specific circumstances, applying Howey’s test, which examines whether something constitutes an “investment contract.”

The plaintiff claimed that NFT Moments’ tokens qualified as a security, therefore, protected under the Securities Act of 1933. The court reviewed the case using the four Howey’s test criteria, which included investment of money, the expectation of profits, investment in a common enterprise, and the work of others. The court determined that the plaintiff’s claims had merit, and the defendant’s motion was dismissed.

As a result of this ruling, cryptocurrency companies issuing and trading these digital assets must ensure compliance with the SEC regulations on securities. These entities must provide disclosure notices, be registered with the SEC, and adhere to strict reporting standards.

This ruling may also impact NFT creators, who are already dealing with the legal ramifications of this new technology. Moreover, it may encourage more artists to market their work using this innovative and potentially lucrative platform. However, without adequate understanding of the legal implications of NFTs, creators may put themselves in legal jeopardy.

In conclusion, this case sets a precedent for NFT securities regulation and may spark a new phase of growth for the market. As the use of NFTs becomes more widespread, the SEC will likely continue taking steps to regulate them further fully. Therefore, companies and creators should prepare themselves for stricter requirements in the future.

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