Creators

United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce said many non-fungible tokens (NFTs), including those with mechanisms to pay creator royalties, likely fall outside the purview of federal securities laws.

In a recent speech, Peirce said NFTs that allow artists to earn resale revenue do not automatically qualify as securities. Unlike stocks, NFTs are programmable assets that distribute proceeds to developers or artists. The SEC official said that mirrors how streaming platforms compensate musicians and filmmakers.

“Just as streaming platforms pay royalties to the creator of a song or video each time a user plays it, an NFT can enable artists to benefit from the appreciation in the value of their work after its initial sale,” Peirce said.

Peirce added that the feature does not provide NFT owners any rights or interest in any business enterprise or profits “traditionally associated with securities.”

SEC never prohibited NFT royalties

Oscar Franklin Tan, chief legal officer of Enjin core contributor Atlas Development Services, told Cointelegraph that the recent remarks by Peirce on NFTs and creator royalties have been widely misunderstood.

Peirce had clarified that NFTs that send resale royalties to artists are not necessarily securities, a view Tan says is legally sound but mischaracterized in some media reports.

“So Hester Peirce said that an NFT that sends royalties back to the creator after a sale is not a security. This is correct, but the way some media reported this is completely out of context,” Tan told Cointelegraph. “The actual context is that this is not controversial, and it was never considered a security.”

The lawyer said US securities law focuses on regulating investments and not compensating creators for their work.

“The artist or creator is not an investor, not a passive third party in the NFT,” he said, noting that royalty payments are not considered investment income.

Instead, Tan told Cointelegraph that this type of earning is “analogous to business income,” which the SEC does not regulate. He added:

“The SEC never prohibited contracts where artists and creators get royalties from secondary sales of their work, not royalties from paper contracts or blockchain protocols.”

Tan explained that the legal distinction becomes more complicated when NFTs promise shared profits from royalties to multiple holders beyond the original creator.

Tan also urged regulators and market participants to apply traditional legal reasoning to new blockchain technologies. “Ask yourself, if this were done by pen and paper instead of blockchain, would there still be a regulatory issue?” he said. “If none, slow down.”

Source: Oscar Franklin Tan

Related: SEC charges Unicoin crypto platform over alleged $100 million fraud

OpenSea calls on the SEC to exempt NFT marketplaces from oversight

While NFT royalties may not have been a controversial SEC issue, NFT marketplaces are a different case. In August 2024, NFT trading platform OpenSea received a Wells notice from the SEC, alleging that NFTs traded on the marketplace could qualify as unregistered securities.

On Feb. 22, OpenSea CEO Devin Finzer announced that the SEC has officially closed its investigation into the platform. The executive said that this was a win for the industry.

Following the conclusion of the SEC’s investigation, OpenSea’s lawyers penned a letter to Peirce, who leads the SEC’s Crypto Task Force. OpenSea general counsel Adele Faure and deputy general counsel Laura Brookover said in an April 9 letter that NFT marketplaces don’t qualify as brokers under US securities laws.

The lawyers said the marketplaces don’t execute transactions or act as intermediaries. The lawyers urged the SEC to “clearly state that NFT marketplaces like OpenSea do not qualify as exchanges under federal securities laws.”

Magazine: NBA star Tristan Thompson misses $32B in Bitcoin by taking $82M contract in cash

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After posting a “looksmaxxing” video, Imeh, who is Black, says he received racist comments, including ones telling him to “just be white.” Upon realizing that the community was “toxic and racist,” Imeh pivoted to anti-looksmaxxing content and then stumbled on “SkinnyTok” and pro-eating disorder communities on X.

“It’s way easier to find SkinnyTok, eating disorder TikTok, than recovery,” Imeh said. “I went for a different approach, telling them the side effects and what could happen if you’re not eating.”

Imeh’s videos mention more extreme potential health outcomes of eating disorders, like organ failure and hair loss. But he also sometimes mocks the messaging found in pro-eating disorder communities. In one TikTok, he’s eating with a text overlay that says “none of your friends are gonna be jealous that your Ed made you look like a skeleton baby pick up the fork.”

Imeh says he’s not trolling, but stating “literal facts” that he doesn’t sugarcoat. “One thing I noticed in Gen Z, especially my generation, is that they will only stop doing something if they’re embarrassed by it,” he says.

“I got a lot of people emailing me and DMing me like ‘Stephen you’ve helped me so much with my eating disorder.’” He has over 70,000 followers, many of whom began following him after he took on eating disorder communities.

Pillepich says she can see a modern, “chronically online” approach working to redirect attention and ideally get people who need it into recovery.

“Leading with nuance doesn’t get people’s attention. It does have to be more extreme, more funny, whatever it is,” Pillepich said. “If that gets someone to the first step of seeing a dietician, a therapist, working on the deeper issues, then that’s great, too.”

Breithaupt said that content that is too judgmental or makes people with eating disorders feel ashamed could make them less likely to get help. “The most effective anti-ED content tends to validate the pain beneath the disorder while still rejecting the behaviors,” she says.

“When content creators use humor or mockery to push back against pro-ED culture, there’s a real risk that viewers—especially those actively struggling—won’t just see the disorder being criticized, they’ll feel like they are being mocked.”

E said that TikTok content like Imeh’s helped her realize how “stupid” SkinnyTok was. She said she has started watching eating disorder recovery content, instead. But the algorithm still shows her “harsh motivation” for weight loss in addition to recovery videos.

In late 2024, TikTok banned a controversial weight loss influencer whose content glorified extreme thinness. E thinks TikTok should ban more of “SkinnyTok,” although pro-eating disorder communities have historically migrated to other platforms when that happens.

Eating disorder recovery practitioners say that posting anti-”SkinnyTok” videos on the same platform is likely helpful, but that it’s only a first step.

“What I work with most people on is limiting social media,” Breithaupt said. “Doing something else rather than engaging in social media is more helpful toward recovery, even if you’re watching recovery-oriented videos.”

The National Alliance for Eating Disorders Helpline provides support, resources and information about treatment options at 1-866-662-1235, Monday through Friday. You can also text “ALLIANCE” to 741741 if you are experiencing a crisis to be contacted by a trained volunteer. More information about eating disorders, including other free and low-cost support options, can be found on the National Eating Disorder Association’s website.

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Many NFTs that pay creators over time are not securities: SEC’s Hester Peirce

SEC never prohibited NFT royalties

OpenSea calls on the SEC to exempt NFT marketplaces from oversight

Eating Disorder Content Is Infiltrating TikTok. Some Creators Are Going Viral Debunking It