US SEC Commissioner Peirce: NFT Royalty Mechanism Does Not Make Tokens Securities

Hester Peirce, a commissioner of the U.S. Securities and Exchange Commission (SEC), clearly stated in a public speech that NFTs with creator royalty mechanisms are generally not considered securities. Peirce pointed out that the feature of NFTs allowing artists to profit from resales is similar to the model of streaming platforms paying royalties to creators, and this type of revenue distribution does not constitute the "right to share in enterprise profits" as defined in traditional securities. Oscar Franklin Tan, Chief Legal Officer of Atlas Development Services, added that some media have misinterpreted Peirce's statement, emphasizing that the SEC has never regarded creator royalties as a subject of securities regulation. He explained that when royalties are solely attributed to the original creator, their nature is more akin to "business income" rather than "investment income"; however, if the NFT design involves distributing royalty profits to multiple holders, it may trigger securities compliance issues. (Cointelegraph)