SEC Commissioners Peirce, Uyeda push back against SEC’s NFT enforcement action

Aug. 29, 2023

By Jacob Oliver

The two commissioners issued a public statement raising concerns about the SEC's handling of its first NFT case.

SEC Commissioners Hester Peirce and  Mark T. Uyeda have vocalized their disagreement over the Commission’s handling of its enforcement action against Impact Theory, marking the first enforcement action of the SEC against a non-fungible token (NFT).

The concerns, articulated in a public statement, highlight the complexities surrounding the regulation of NFTs, a rapidly evolving asset class that continues to challenge traditional notions of securities laws.

In the statement dated August 28, 2023, the Commissioners expressed their dissent with the application of the Howey analysis, a test used to determine whether a certain transaction constitutes an investment contract. The contentious point lies in the SEC’s classification of NFTs as investment contracts, thereby accusing Impact Theory of engaging in an unregistered securities offering. The media firm had sold nearly $30 million of NFTs, promising value appreciation, a move rousing the Commission’s concerns.

Regulatory advocates

Critical of the SEC’s approach, the Commissioners felt that the case, the first of its kind, necessitated deeper deliberation before moving to enforcement. They noted the importance of considering the nature of non-fungible tokens, which they described as not an “easy-to-characterize asset class,” given the vast array of rights it can accord to digital or physical assets. They argued that these complexities could result in challenges should the enforcement action be used as precedent.

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