• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Cult Of Money

Cult Of Money

Intersection Of Personal Finance And Cryptocurrency

  • About
  • Podcast
  • Contact
  • Cryptocurrency
      • How To Start

      • What Is Cryptocurrency And How To Invest?
      • What Is Bitcoin And How Can You Invest In 2025?
      • How To Invest In Ethereum (ETH)?
      • Most Common Crypto And NFT Scams (And How To Avoid Them)
      • Proof Of Work vs. Proof Of Stake vs. Proof Of History
      • How To Invest In Crypto In Your IRA Or 401k
      • Tools + Resources

      • Best Cryptocurrency Exchanges
      • Best Cryptocurrency Wallets
      • Best Crypto Savings Accounts
      • Best Tax Software For Crypto And NFT Traders
      • Reviews

      • Coinbase Review
      • Gemini Review
      • Binance Review
      • Ledger Wallet Review
  • DeFi
      • How To Start

      • What Is DeFi?
      • What Is Staking Your Crypto?
      • Centralized vs. Decentralized Exchange
      • Tools + Resources

      • Uniswap Review And How Do Decentralized Exchanges Work?
      • Reviews

  • NFT
      • How To Start

      • What Is An NFT?
      • Tools + Resources

      • Most Popular Play-To-Earn Crypto Games
      • Popular Projects

      • What Are VeeFriends And Are They Worth It?
      • Bored Ape Yacht Club NFTs Are Popular (And Expensive)
      • What Is The Sandbox And How Can You Play?
      • Why Visa Bought A CryptoPunk
  • Latest News
  • Personal Finance
      • Banking

      • Investing

      • Tax

      • Income Tax Prep Guide
      • Bookkeeping And Accounting For Crypto And NFTs
NFT

Are NFTs Securities? The Controversy And The Implications

By Miranda Marquit • April 17, 2023

At The Cult of Money, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners who compensate us. This doesn’t influence our evaluations or reviews. Our opinions are our own. Any investing information provided on this page is for educational purposes only. We do not offer investment advisor or brokerage services, nor does it recommend buying or selling particular stocks, securities, or other investments. Investing in cryptocurrency and crypto assets is high risk. Don’t invest unless you’re prepared to lose all the money you invest. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. CultOfMoney.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The Cult of Money does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. CultOfMoney.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

Are NFTs Securities?

When we talk about crypto assets, non-fungible tokens (NFTs) are sure to come up. The total market cap for well-known NFT collections is more than $11 billion as of May 25, 2022, according to CoinMarketCap.

But what are the investment implications of NFTs? Are they considered securities? Or are they something else altogether? Let’s take a look at NFTs and where they might fit when it comes to investment opportunities.


Table of Contents
Why Are NFTs Considered Assets?
What Is A Security?
NFTs As Securities

SEC Looking Into NFTs
Bottom Line

Why Are NFTs Considered Assets?

Many people consider NFTs assets because they represent something of value. They can potentially increase in value over time. Additionally, some NFTs tokenize ownership in digital content, including videos, images and music. 

As a result of this tokenization of ownership, some people view NFTs as collectibles. Much as you could collect a piece of fine art, antique, baseball card or even classic car, NFTs could be thought of as collectibles. Many people enjoy displaying their NFTs as profile pictures, and collection various NFTs from popular collections.

Even though the NFT market has crashed in recent weeks, there are still those who believe that there’s enough value there for many NFTs to recover.

But does that mean that NFTs are securities? Let’s take a look at when they might be considered securities  — and when they might not be.

What Is A Security?

So far, the Securities and Exchange Commission (SEC) hasn’t issued any formal guidance on NFTs and whether they’re securities. However, some experts are looking to what’s known as the Howey test to try to determine if NFTs could be considered securities.

The Howey test stems from a 1946 Supreme Court decision that tried to nail down what is considered a security. Looking at the Howey test and applying it to digital assets in general, the SEC has a basic framework to try to determine whether NFTs are securities. There are three main considerations when applying the Howey test to digital assets:

  1. Exchange for ownership of the asset. First of all, someone must have provided some type of payment or consideration for the asset. This can technically include cryptocurrency. So, someone paying ether for an NFT would be considered to have made an exchange for the asset.
  2. Common enterprise. The next part of the test is whether there’s a common enterprise involved. In many NFT projects, there’s a goal and those who buy NFTs get some sort of common benefit.
  3. Reasonable expectation that profits will result from the efforts put forth by others. The final part of this test is the most problematic when it comes to applying the Howey test to NFTs. When you buy a security like a stock, you expect that the company owners will continue to develop the company and grow it. You invest with the expectation that there will be ongoing profits. Further functionality might not be guaranteed with an NFT.

Basically, even though you might buy an NFT with the hope that it will increase in value and you can get more money for it later, it doesn’t mean it’s a security. In most cases, you aren’t likely to see ongoing revenues or dividends from the investment. 

Additionally, in some cases, an NFT is little more than a receipt. Actual licensing and true ownership of the asset isn’t always cut and dry, especially when it comes to intellectual property.

A security is basically something that should provide ongoing profit and potential for multiple people to participate in an “enterprise.” By that definition not every NFT could be considered a security. Just like you don’t own a security when you buy a valuable Magic card, you might not have a security when you purchase an NFT.

NFTs As Securities

There are some instances in which some experts think that NFTs could be considered securities. 

One of the biggest ways that NFTs could migrate to security status includes the fact that some NFTs come with ownership in a larger project. If buying an NFT also includes ownership participation in a decentralized autonomous organization (DAO), it could potentially be considered a security. After all, that NFT represents a portion of ownership in a shared enterprise expected to develop and provide ongoing profits.

Another possibility is fractional ownership. For example, if it costs more than $1 million to buy a Bored Ape, you might not be able to purchase one on your own. However, someone could take a leading position for a group of investors to pool their resources and purchase a Bored Ape or a Top Shot or any other type of costly NFT.

Each person would have a “share” in the asset. By creating this type of arrangement, including potentially forming an organization that invests in buckets of NFTs or projects, it might be possible to securitize NFTs in a way that would bring them under the jurisdiction of the SEC.

There are also issues that relate to using NFTs as a way to raise money for a business (include DAOs) or that pay royalties to those who purchase them. If royalties are being paid out, that could be considered ongoing profits.

One of the biggest sticking points is the fact that NFTs are essentially governed by smart contract. So whether an NFT is actually a security depends on what the contract allows, and how the contract is structured. Some NFTs are little more than licenses that allow the buyer exclusive rights to display a piece of digital art, while other NFTs offer privileges and bestow intellectual property and commercial rights.

SEC Looking Into NFTs

Even though the SEC hasn’t issued official guidance beyond offering a framework to apply the Howey test, it’s doing a bit of digging. According to various reports, the SEC is issuing subpoenas to various organizations and trying to determine how to classify NFTs. 

One result of some of these investigations is the $100 million fine against BlockFi. The platform has been lending out digital tokens and paying high interest rates to participants. The SEC fined BlockFi for its failure to register these digital assets properly.

So far, one of the commissioners of the SEC has pointed out that, while not all NFTs could be considered securities, there are so many types of NFTs that some of them likely fit the definition of a security, according to Bloomberg.

There have also been lawsuits, including those against NBA Top Shots, the popular NFT marketplace that offers access to videos of top moments in sports, such as LeBron James dunking a basketball. 

Other regulators are also looking at whether certain NFTs could be fall under the purview of other agencies, such as the Commodity Futures Trading Commission or even the Federal Trade Commission. Additionally, what are the implications of intellectual property law when it comes to tokenized versions of artwork sold online. What if you turn a picture you took of a famous painting into an NFT? What happens when someone grabs a clip of music and then turns it into an NFT and then sells it without permission from the original artist?

Finally, there are concerns about contract law and transferred ownership when it comes to NFTs that are connected to “real world” assets. What about the title to a home? You could potentially use a smart contract to complete the sale of a home and then have the title issued in NFT format. What happens when someone then sells that NFT? Does the contract still apply to the real-world asset when the NFT is sold?

Bottom Line

There are many types of NFTs, and right now regulators are trying to figure out where they fall in the investment landscape. Some NFTs might be considered securities, while others wouldn’t qualify as securities. Navigating this space can be tricky since NFTs have implications in a variety of spheres, ranging from securities law to intellectual property concerns to contract law.

Until these issues are properly sorted out, it can be difficult to know how NFTs will be viewed. In fact, there’s a good chance that there’s no one way to regulate NFTs and that the type of NFT will matter. Your purchase of a collectible meme NFT might not qualify as a security, but going in on a Bored Ape with other investors that is designed for a commercial project could be.

Miranda Marquit
Miranda Marquit

Miranda Marquit, MBA, has been covering personal finance, investing and business topics for more than 15 years, and covering crypto topics for more than 10 years. She has contributed to numerous outlets, including NPR, Marketwatch, U.S. News & World Report and HuffPost. She is an avid podcaster, co-hosting the podcast at Money Talks News. Miranda lives in Idaho, where she enjoys spending time with her son playing board games, travel and the outdoors.

1 shares
  • Share
  • Tweet
  • Email
  • Print

Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.

Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors’. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone’s responsibility to ensure all posts and/or questions are answered.

Subscribe
Login
Notify of

0 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

Primary Sidebar

  • Facebook
  • Instagram
  • Pinterest
  • RSS
  • Twitter

Editor’s Picks

  • 8 best cryptocurrency exchanges ranked | Source: Cult of Money

    8 Best Cryptocurrency Exchanges Ranked For 2025

  • crypto savings accounts

    5 Best Crypto Savings Accounts For 2025

  • Cryptocurrency Bonus Offers

    8 Best Crypto Promotional And Bonus Offers

  • best crypto wallets | Source: Cult of Money

    Best Crypto Wallets For 2025 (Software And Hardware Options)

  • Best Portfolio Trackers For Cryptocurrency And Stocks

    Best Portfolio Trackers For Cryptocurrency And Stocks

  • best tax software for crypto and NFT traders | Source: Cult of Money

    Best Tax Software For Crypto And NFT Traders In 2025

Popular Posts

  • proof of work vs. proof of stake vs. proof of history

    Proof Of Work vs. Proof Of Stake vs. Proof Of History

  • Why I Bought An NFT

    Why I Bought An NFT [And 5 Reasons You Should Too]

  • Dogecoin Experiment | Source: Cult of Money

    My Dogecoin Experiment: What I Learned From Investing $2,000 In DOGE

  • common crypto and nft scams

    Most Common Crypto And NFT Scams (And How To Avoid Them)

  • Bookkeeping and Accounting for Crypto and NFTs

    Bookkeeping And Accounting For Crypto And NFTs

  • what is a 51% attack

    What Is A 51% Attack? (And How Is That Game Over For Crypto?)

  • what is staking crypto

    What Is Staking And How Can You Make Money With Your Crypto?

  • what are veefriends

    What Are VeeFriends And Are They Worth It?

  • how to file a complaint against crypto exchanges

    How To File A Complaint Against A Crypto Exchange [Crypto Regulators]

Footer

Pages

  • Best Cryptocurrency Wallets
  • Best Cryptocurrency Exchanges

Categories

  • Cryptocurrency
  • DeFi
  • NFT
  • Personal Finance

About

  • About The Cult Of Money
  • Contact
  • How We Make Money
  • Advertise With Us
  • Bluesky
  • Facebook
  • Instagram
  • Mastodon
  • Pinterest
  • Reddit
  • RSS
  • Threads
  • TikTok
  • Twitter

Copyright © 2025 | Cult of Money | Privacy Policy | Terms of Service

1 shares
wpDiscuz