Is your NFT illegal?

in LeoFinance3 months ago

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Short story? Probably not.

If you are selling art, then you are probably perfectly fine.

When you try to raise funds, and using NFT's to skirt ICO regulations, then you may be looking at an unregistered security or even an illegal ICO.

SEC commissioner Hester Pierce made a recent statement they will be looking into NFTs created to skirt ICO regulations.

“The whole concept of an NFT is [it’s] supposed to be non-fungible, so it’s supposed to be unlike anything else,”

“Which means that it’s, I think, in general, less likely to be a security, but people are being very creative in the types of NFTs they’re putting out there. It’s a wonder what some people will pay for. And so I think, given that creativity, as with anything else, you should be asking questions.”

“If you’re doing something where you are saying, ‘I’m going to sell you this thing and I’m going to put a lot of effort into building something so that this thing that you’re buying has a lot of value,"
SEC commissioner Hester Peirce

What does this mean?

Most people using NFTs as a vehicle to sell art and unique items will have nothing to worry about. This is a perfectly valid and legal use of NFTs.

Where things get sketchy is when you use NFTs as a promise of a future return down the line or to raise funds. Say for example you were to make a game using NFTs as a way to raise money. This would put you in very dangerous territory of being an unlicensed ICO. Another example is selling fractional "shares" of an NFT with the promise of some return in the future. This would result in an unregistered security. Because you use an NFT instead of a token doesn't protect you from these regulations.

SEC commissioner Hester Peirce spoke in a recent Security Token Summit webinar to express her concerns where NFTs are being used to side step regulations and that it will not be tolerated.

People tend to have a difficult time understanding illegal securities and unlicensed ICOs. Even in courts the definition isn't black and white and requires interpretation.


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A couple posts ago I said I believe the foundation is a bit shaky when it comes to NFT and my art. When I arrived back here after being away from the cryptosphere entirely for a long while, I saw people calling it a scam. Not just here, of course. But I did see comments like, "I hate artists." And part of the reason I've become so disillusioned with crypto lately is because of crap like you mention here. I feel like somehow, someone out there will squander the potential and ruin it for honest artists and entertainers who are so goddamn fed up with being taken advantage of by a seemingly endless supply of hands dipping into the profits.

It's bad enough digital art was always labelled 'cheating' but nobody ever f'n said I'm cheating for not using a pen to write this comment. Could get a deal in retail, sell a million units and maybe see 1% if I'm an idiot and actually signed that dotted line.

Worse case scenario someone comes along, f's it up with a stupid scam, then our saviors of humanity will come along and apply a special 'tax' and call it a deterrent. Then I'm right back to square one dealing with shady middleman and their half-truths.

upvotes your comment sadly

Yeah. There are really bad problems with dishonesty and people trying to capitalize into creative spheres.

Totally agree with your comment about digital art too. There is no cheating the effort my 3D animations that take multiple hours to stage and even more time to render.

I'm more of a cartoonist and like to be rough around the edges. I love how technology can help make things look so crisp and pure but damn, it doesn't happen just at the push of a button. I admire the basic Hive business model. Putting on a show and just having fun but it would be nice to expand.

And there's so much potential.

Funny thing is I've never really considered myself a visual artist. I'm much more of a musician than anything else.

That said, I have been working the past few years on improving my 2D/3D skills to be able to create better digital art.

And I totally get what you mean about putting on a show. That was the entire point of me making my Hot Potato NFT. It cost me 14HIVE to make an NFT that I had to, by the rules of the NFT, give away for free. An NFT with (humorous) negative value.

Funny sidenote: What if someone actually sells one of those. How does that effect my taxes? Lol #idunno #yolo

Probably just write that off as a temporary case of insanity.

Temporary?

Good call. Make it permanent. Qualify for benefits.

When it comes to art, I don't think there are any issues at all. It is when people use NFTs as a vehicle for other activities (raising funds, building shares like systems, and even money laundering). I could name a few but I don't want to be unfair and harsh.

Using NFTs to represent unique distinct objects (art or other limited items) is perfectly fair game.

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I hear you bud. Loud and clear. Anyway....

Any time you see a post about Hive going up, DRINK.

I'm sure there will be a lot. Luckily I don't drink.

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I don't really drink either but today, was different. Certainly won't be getting slammed though.

I know what post brought this post of yours on. Sometimes a guy just has to be honest. And sometimes it's ugly. But that's never stopped me before.

Later dude.

I honestly feel confused lol.

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Good.

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You should expect it. There are always some lazy and dishonest people out to exploit other people's hard work and trust. Sadly I have to agree, then come along the "saviours" to "fix" the rules in favour of those very said dishonest people, because they have the lobbyists.

Okay, @nftshowroom is absolutely fine then, crypoart is a legit use-case after all :)

I see no reason why it wouldn't be. NFTs are perfectly legal, unregistered ICO and illegal securities are not, regardless on how you dress them up. There are many who are trying to use NFTs as a way to call a duck something other than a duck.

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Real estate NFTs obviously come to mind. I can see people using that to try and skirt the securities law, especially as a "percentage of the income" token.

It is a great race. The technology developers and innovators versus the governments and regulators.

Let us not forget they are still trying to get through the ICO mess and that was in 2017. They still have the entire DeFi arena and then NFTs.

By the time they get though them, what we will be dealing with?

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True story I mean, look around!

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I have a query @themarkymark and it is related to this post. I know I am just a small fish compared to you so perhaps I shouldn't make comparisons but regardless how informative this post could be I can see that:

  • you have written a post using 361 words (many of which is mentions of the Sec);
  • you have used 1 photo that I presume and I hope it is yours as there is no mention on the source;
  • you have upvoted yourself with buildawhale and there are others that follow you automatically.

So my simple query is... how can you be so hypocrite of downvoting me on every single post I write if you don't know how much effort I have put in it; you don't consider that English isn't my first language so clearly it costs me a bit more; photo editing, video editing, writing even more than you and just because it has reached "the same amount" of your posts you disagree and you continuously downvote me?
I know it is something you can do because it is a tool of this blog but seriously put your hand on your heart and think .... Do I really deserve it? I have stopped writing posts for 3 months because of you... I felt I wanted to give it a go again as this is the way I stress out and you just downvote me? It is not about the loss of value it is the principle of it. I would like to have your comment here as being on the blockchain everything will remain in the blockchain!

For instance I have received 94$ of Downvote. from Buildawhale. Instead of using all of you power why don't you have a chat with me? We are mature enough to have a conversation are we?

Aku tak tau

“Which means that it’s, I think, in general, less likely to be a security, but people are being very creative in the types of NFTs they’re putting out there. It’s a wonder what some people will pay for. And so I think, given that creativity, as with anything else, you should be asking questions."
SEC commissioner Hester Peirce

Aye...I never thought about NFTs being used in this way. For the creative in me, I see NFTs as this huge new novel area to explore and create in. It is kind of like going from no internet, to building a website. Its a new realm to explore in terms of functionality.

I've never been super money oriented mostly because I loathed fiat, so I suppose I never got into finances on such an esoteric and intricate level. I'm somewhat glad I suppose, I think I would be too dumb to try to sell an NFT like a startup ICO or something and succeed. I just hope I will still be able to create art, even silly pieces that have negative value without some authoritative force coming down on me. It isn't so much about the money, its about the novelty of the creation itself.

Oh wow. That is really dodgy stuff. I have thought that alot of instances resemble money laundering. Made a heap off cryptocurrancy, can't get it off an exchange. Pump it into NFT sell and split the cash all cleaned out the other end.

No doubt future legislation will focus on this behaviour. 2.5m for a URL of a tweet...... gob smacking.

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I thought this post would be about copyright or some other intellectual property issue. I guess that comes later after it's clear NFTs are worth filing multi-million dollar lawsuits over.😅

There are multi million dollar NFTs. Regardless, the government has no concern spending any amount of money going after people they know they have a good chance of winning against, it's not out of their pocket. I warned you personally about something similar back on Steem. The fines can even exceed the value of the NFT.

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I just meant when I saw that title that's the first thing that came to my mind mostly because of art NFTs being sold through nftshowroom.com. I am not suggesting people infringe on trademarks, copyrights and patents. I respect intellectual property law.

I didn't think you did, but I do remember our conversation about your Steem Engine tokens where I warned you about a potentially unregistered ICO.

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Hahaha!!! Very interesting... Promising future value is dangerous but as NFT'S are still new in the crypto space , i guess it's safe to say they have great future values considering the craze over them as fresh ideas in the cryptospace

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Where do you think NFTs for games that can potentially generate some income belong? Games like dCity producing SIM which one can exchange for SWAP.HIVE, and NFT's like Splinterland cards being played to generate DEC or traded for better rates?

There is no promise of a return, just some amount of tokens that may or may not be worth anything. There are other concerns that can be an issue though.

Something like FarmFarmer/Mythical though can be considered an unregistered ICO as it was stated it is used to raise money for Hive Engine and NFT's were chosen as they are "except" from certain regulations.

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There are other concerns that can be an issue though.

On the case of SIM, you mean holding the minimum sim power amount to generate daily rewards from the pool as an example? The farmfarmer thing was a joke right from the stating the purpose up to how it was launched in just a few days.

On the case of SIM, you mean holding the minimum sim power amount to generate daily rewards from the pool as an example?

No

The farmfarmer thing was a joke right from the stating the purpose up to how it was launched in just a few days.

I'm pretty sure it wasn't.

*Laughs in Farm Farmer *

Gotta love the wording and silver lining all the time. Say one wrong word when you list a NFT and you could be slammed. This could potential put some artists at risk who have teamed up with games?

It's not as much wording as actions. You can call it whatever you like, but doesn't change what it is.

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Nice reading through your post sir at least I am informed about what Hester said but sincerely I am always confused when I read post like yours cause I see so many stuffs like ICO, NFTs and others.

Please can someone tell me more about it.

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I can see the use case of NFTs and the value in the concept of them, especially in regards to art and a few other things. But right now with all the hype surrounding them and the shear quantity of how many are popping up all over the place, to me they really just feel like a new way to trick people out of their money lol. It reminds me of the craziness and hype back a few years ago when ICO were invented. Personally I am "for" regulating NFTs and cracking down on misuse. The last thing we need in the crypto and blockchain space is more tools that people can use to scam others. There is enough of that as it is. For the average person, its challenging to trust crypto when a significant portion of the tools out there are a scam or misleading.

Intention matters a lot here. I think people who are selling their tweets while talking about how NFTs are going to the moon may be in trouble... but if an artist is just selling art in the form of NFTs, that seems so unlikely to lead to trouble as far as I can tell.

I still need to know how it is done though I doubt I can afford to mint. But I have a good friend that works for marvel and is selling at high price yet he found forgeries selling his art as nft so how do they fix those things it is all confusing to me.

I don't want to keep fighting with you. But it is YOU who started the fight. I have no choice but fight back. Now you have two options.

Option 1: STOP downvoting my posts. I will also STOP replying to your posts.
Option 2: If you keep doing what you are doing now, I will just keep doing what I am doing now.

I encourage you to take Option 1. As a first step to stop the fight between us, I upvoted your post. But if you decide to take Option 2, I am pretty sure that you know what will happen.

Luddite legislation is not capable of keeping up with advancing technology and innovation.