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U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce has clarified that NFTs (non-fungible tokens) with resale royalty features do not automatically qualify as securities under federal law. Speaking recently on the legal status of NFTs, Peirce emphasized that programmable royalties — where artists earn a share of secondary sales — are not the same as financial investments traditionally regulated by the SEC.

“Just as streaming platforms pay royalties to creators when their content is played, NFTs can be programmed to do the same upon resale,” Peirce said. She noted that this does not grant the NFT holder any profit-sharing rights or business interests akin to a security.

BTC/USD 1-day chart. Source: TradingView

Clarifying Misunderstandings: Royalties ≠ Securities

Oscar Franklin Tan, chief legal officer of Enjin core contributor Atlas Development Services, said Peirce’s comments have been misunderstood in media coverage. “The idea that NFT royalties could classify an NFT as a security was never a serious legal argument,” Tan explained.

He pointed out that U.S. securities law targets investments, not creator compensation. Royalties paid to artists or developers are more akin to business income, not investment returns.

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“The SEC has never prohibited contracts or mechanisms that return royalties to creators from secondary sales,” Tan said. However, he noted that legal concerns could arise if multiple holders — not just the original artist — receive shared royalties, especially if marketed as investment products.

BTC/USD 1-day chart. Source: Keith Alan/X

Tan urged regulators and industry participants to apply consistent legal reasoning, regardless of whether a system uses blockchain or traditional contracts. “Ask if the same setup, done on paper, would raise issues. If not, slow down,” he said.

OpenSea Seeks Clarity from SEC on Marketplace Oversight

While NFT royalties themselves aren’t legally contentious, NFT marketplaces remain under regulatory scrutiny. In August 2024, leading platform OpenSea received a Wells notice from the SEC, alleging that some NFTs on the platform could be classified as unregistered securities.

BTC/USDT 12-hour chart with RSI data. Source: Michaël van de Poppe/X

However, in February 2025, OpenSea CEO Devin Finzer confirmed the SEC had closed its investigation, calling the outcome a positive signal for the NFT industry.

Following the resolution, OpenSea’s legal team addressed a letter to Commissioner Peirce in April 2025. Attorneys Adele Faure and Laura Brookover argued that NFT marketplaces do not function as brokers or exchanges, and therefore should not fall under SEC oversight.

BTC/USD 1-day chart. Source: Henry/X

They asserted that platforms like OpenSea do not execute trades directly or act as intermediaries, distinguishing them from traditional securities exchanges. The lawyers urged the SEC to formally state that NFT marketplaces are outside the scope of federal securities regulations.