SEC Commissioner Clarifies NFT Creator Royalties Not Securities

According to Odaily, U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce stated in a public speech that NFTs with creator royalty mechanisms are generally not considered securities. Peirce highlighted that the ability of NFTs to allow artists to profit from resales is similar to how streaming platforms pay creators for copyrights, and this form of revenue distribution does not constitute a 'share in corporate profits' as defined in traditional securities. Oscar Franklin Tan, Chief Legal Officer at Atlas Development Services, added that some media outlets have misinterpreted Peirce's remarks, 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, they resemble 'business income' rather than 'investment returns.' However, if an NFT's design involves distributing royalty profits to multiple holders, it could potentially trigger securities compliance issues.