4. Are NFTs Securities ?

Why NFTs Aren’t Securities

NFTs manage to scoot by because they fail to meet condition number three of the Howey test.

You see, unlike the founders of certain scam cryptos that I won’t mention, the creators of NFTs generally don’t call their products “investments.” They mint them, tweet about them to generate buzz, and sell them as products.

After that point, some of their NFTs might rise in value due to limited supply and high demand. But as far as the creator is concerned, they’re simply selling products, not investments. There’s no written expectation between buyer and seller that the price of the NFT is going to soar.

That’s a critical distinction because outright labeling your digital asset “a good investment” is a surefire way to invite regulatory scrutiny and get classified as a security.

In summary, NFTs may share a lot in common with stocks, but they’re not securities because they’re not sold with the expectation of profits. Capital gains aren’t part of an NFTs initial value proposition to buyers.

Instead, NFTs are marketed purely as art and collectibles. They can’t be classified as securities simply because their value increases.

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