Jennifer J. Schulp
Jennifer J. Schulp and Jack Solowey
What do Yankees tickets and Pokémon cards have in common? If you guessed wish list items for elementary school kids, you wouldn’t be wrong. But another thing they share is that Securities and Exchange Commission (SEC) Chairman Gary Gensler has been asked to opine on whether they are securities during congressional testimony.
To most people, the answer to that question seems easy: Pokémon cards aren’t traded on the New York Stock Exchange—and neither are Yankees tickets—so they must be different from securities like Walmart or Tesla stock, right? That’s hardly a technical analysis (and decidedly not legal advice), but it reveals a piece of common sense underlying our intuitions about securities laws: If we buy something that has some use—even if we hope that it may become more valuable—it is usually not treated as a security subject to all of the rules and regulations that go along with offering and trading investment assets.
But, in yet another example of Gensler’s expansive view of SEC jurisdiction, his answers to Rep. Ritchie Torres (D‑NY) on whether items like Pokémon cards and baseball tickets are securities were not definitive and seemed to rest on an incoherent theory that takes into account whether the assets are in some way stored on a blockchain. That doesn’t sound like the “technology neutral” regulator the SEC claims to be.
Unfortunately, this isn’t just the idle musing of an agency head dreaming of enlarging its fiefdom. The SEC has settled several actions asserting that NFTs (i.e., non-fungible tokens) granting holders certain rights to digital art and exclusive restaurant access were unregistered securities. (The SEC has also issued a Wells Notice, indicating that it intends to file an enforcement action, against a platform that facilitates NFT trading.)
The stated rationale for these actions is that purchasers of the NFTs were led to expect profits when the token appreciated in value based on the efforts of the NFT issuer. » Read More
https://www.cato.org/blog/collecting-jurisdiction-secs-wrongheaded-expansionary-approach-nfts