The US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have supported a class-action lawsuit against Nvidia, accusing the company of misleading investors.

According to court filings, both agencies submitted an amicus brief backing Nvidia investors who allege that the firm misrepresented the impact of crypto mining on its 2017/2018 revenue.

The DOJ and SEC have urged the Supreme Court to revive the previously dismissed case. Solicitor General Elizabeth Prelogar and SEC senior lawyer Theodore Weiman argued that the lawsuit contains enough evidence to proceed.

The authorities have also requested 10 minutes to present oral arguments when the case goes before the court in November.

The lawsuit

This action follows the Ninth Circuit Court of Appeals’ decision to reinstate the case, overturning a lower court’s 2021 dismissal due to insufficient evidence.

According to the lawsuit, investors claim Nvidia and its CEO, Jensen Huang, misled them about the company’s reliance on revenue from crypto mining-related sales. They argue that Nvidia’s leadership downplayed the company’s dependency on crypto mining despite being fully aware of it. The firm’s vulnerability became apparent when its revenue declined after the 2018 crypto market crash.

In response, Nvidia countered that investors relied on fabricated data about its revenue sources. However, investors maintain that their data, drawn from multiple reliable sources, indicates securities fraud.

Among these sources are two former Nvidia employees, who disclosed that the CEO was aware of the firm’s sales tracking to crypto miners. They also noted that Huang attended meetings where the impact of crypto mining on the company’s revenue was discussed.

Based on this, the Ninth Circuit panel concluded that the CEO acted with the necessary intent, or “scienter,” to mislead investors, which could result in liability.

The US authorities acknowledged this and pointed out that Huang made several public statements between May 2017 and November 2018 about the effect of crypto mining on NVIDIA’s revenues.

According to them, the firm also consented to sanctions, including a civil penalty of $5.5 million, for violating federal securities-law provisions that establish reporting and disclosure requirements.

Considering this, the authorities stated:

“The observed correlation between crypto-mining demand and NVIDIA’s commercial success belie Huang’s prior public statements suggesting that crypto mining was only a ‘small’ part of NVIDIA’s business.”

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US Securities and Exchange Commission (SEC) Chairman Gary Gensler will testify twice this week before Congress.

Gensler will appear before the House Financial Services Committee on Sept. 24 and was scheduled to meet the Senate Banking Committee on Sept. 25, but the second hearing has now been postponed. Eleanor Terrett from Fox Business said, “Capitol Hill staffers tell me they don’t yet know the reason for the change.”

These hearings occur amid ongoing tensions between the SEC and the crypto industry. Data from Paradigm reveals that the SEC has taken 171 enforcement actions against the crypto space, with a marked increase since Gensler’s confirmation in April 2021.

Brendan Malone, Paradigm’s Policy Manager, noted:

“Since Chair Gensler took office on April 17, 2021, the SEC has increasingly gone to court to establish its policy positions—confirming what the industry has long known regarding regulation by enforcement.”

No mention of crypto in joint testimony

On Sept. 23, Gensler announced that he and four other commissioners—Caroline A. Crenshaw, Hester Peirce, James Lizarraga, and Mark Uyeda—would testify before the House Financial Services Committee in a hearing titled “Oversight of the Securities and Exchange Commission.”

The joint testimony emphasized the SEC’s role in safeguarding the $100 trillion US capital markets and maintaining dominance over the US dollar. It also highlighted the SEC’s $2.15 billion budget and noted that its enforcement division took 784 actions in FY 2023, resulting in $4.9 billion in penalties and disgorgement.

The commissioners wrote regarding enforcement:

“[The] monetary remedies [are] designed to remove wrongdoer’s ill-gotten gains and deter future violations. the Commission’s enforcement actions protect investors by obtaining remedial injunctions in district court and, similarly, remedial suspensions and bars in administrative proceedings.”

Although the commissioners did not directly address the crypto industry, a hearing memo reviewed by CryptoSlate indicated that crypto would be a topic of discussion at the event.

The memo pointed out that under Gensler’s leadership, the SEC prioritized the digital asset space and continued pushing for broader authority over the ecosystem while pursuing an aggressive enforcement agenda.

However, the memo noted that the SEC has not clearly defined digital assets as securities. This lack of clarity has left the digital asset space in regulatory uncertainty, threatening its future in the US.

[24/11/24 14:59: Updated to include postponement of the second committee hearing.]

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The restaurant in New York, FlyFish Club, has agreed to pay a fine of $750,000 to settle with the SEC and its accusations regarding the sale of NFT. For the Securities and Exchange Commission of the USA, the NFTs were sold following an unregistered offering of crypto-securities. 

New York: the restaurant FlyFish Club and the 750,000$ fine from the SEC for the sale of its NFTs

Last Monday, the Securities and Exchange Commission of the USA had accused the New York restaurant, FlyFish Club, of conducting an unregistered offering of crypto-securities in the form of NFTs.

In practice, it seems that through the sale of FlyFish NFT, the company raised about 14.8 million dollars from investors, to finance the construction and launch of a private restaurant for members.  

Specifically, the sale of the 1600 FlyFish NFT was carried out between August 2021 and May 2022. 

The ordinance highlighted that during this period, the Club promoted NFTs as investments and led investors to expect profits in return. In practice, for the SEC, FlyFish told investors that they could potentially make a profit if the club succeeded.

On one hand, the owners of the FlyFish NFT could have then resold them on the secondary market at higher prices, on the other hand, rented them to others interested in accessing the club as a “passive income strategy”.

With this marketing move, the SEC emphasizes that 42% of investors purchased more than one NFT in the offering, even though only one NFT was needed to become a member of the club. 

New York: the SEC and the fine to the restaurant for selling its FlyFish NFT 

After the accusation, without admitting or denying the SEC’s findings, FlyFish agreed to cease operations and pay the fine of $750,000. 

Not only that, the restaurant company has also agreed to destroy all Flyfish NFTs it has under its control in the next 10 days and to not accept future royalties from NFT sales. 

But the issue of the SEC and NFTs does not seem to end here. Last August, the one to be notified of being under investigation by the SEC was the NFT marketplace of OpenSea.

Even if not explicitly stated, it seems that the issue also appears to be related here to the possible accusations of offering unregistered security to the public. 

NFTs become “unregistered security” only if they are sold with the promise of making profits for those who buy them, derived solely from the activity of those who sell them. 

In any case, the co-founder and CEO of OpenSea, Devin Finzer, said he was shocked by the accusations made by the SEC against creators and artists. Not only that, just as it happens with crypto companies, also for NFTs, Finzer says he is ready to react and fight. 

The artists sue the SEC

While the SEC fires accusations in the NFT sector, as it has always done in the crypto sector, last July two artists sued it. 

In practice, Brian Frye e Jonathan Mann have accused the SEC for the confusion that exists regarding NFTs. In fact, the two artists have asked for clarifications on the laws about securities and Non-Fungible Tokens.

Specifically, their lawyers asked if crypto artists are required to “register” their NFT art before selling it to the public. Another question then concerns the publication of information on the risks of purchasing their art. 

Not only, the lawyers then made a comparison between the sale of NFT Art on the secondary market and Taylor Swift concert tickets, which are often sold on the secondary market. 

In this sense, just like Taylor Swift sells tickets on the secondary market and releases statements to promote her events, the two artists should also be free to do the same with their NFT. 

Robinhood’s Chief Legal Officer Daniel Gallagher criticized the US Securities and Exchange Commission’s (SEC) approach to crypto regulation in written testimony submitted for a Sept. 18 hearing before the House Financial Services Subcommittee on Digital Assets.

Gallagher detailed Robinhood’s efforts to comply with SEC regulations, citing over a dozen meetings and calls over 18 months. However, despite these efforts, the company received a Wells notice from the SEC’s Enforcement Division in May.

He pointed out that the SEC staff were often unresponsive to Robinhood’s requests for guidance on moving forward with its registration proposal.

‘Scorched earth approach’

Gallagher labeled the SEC’s strategy a “scorched earth” approach that negatively impacts US crypto investors.

He argued that the lack of clear guidance on which digital asset transactions qualify as investment contracts remains a fundamental issue. This uncertainty has led to multiple lawsuits by the SEC against crypto firms, further hampering industry progress.

Gallagher added that “regulation by enforcement” harms American consumers seeking greater access to digital assets. It also stifles innovation in blockchain and erodes the US’s competitive edge in global digital asset markets.

He contrasted the US with Europe, where the Markets in Crypto-Assets (MiCA) regulation provides a unified framework for crypto markets, enabling innovation to flourish overseas.

Next steps for SEC

Gallagher suggested that the SEC could use its existing authority under Section 36 of the Securities Exchange Act of 1934 to create a framework for registering and overseeing platforms that facilitate trading in digital assets deemed investment contracts.

He noted this rulemaking could address key issues such as registration, consumer protections, custody requirements, and transaction reporting. These measures, he added, could have mitigated some of the damage caused by the FTX collapse in 2022.

Congress roles

Gallagher emphasized the need for Congress to establish a clear, comprehensive regulatory framework for digital assets.

He argued that only Congress can provide the long-term regulatory clarity needed to ensure token issuers, exchanges, and other market participants can operate without fear of constant enforcement actions.

Such clarity, according to Gallagher, is crucial for maintaining the US’s leadership in responsible blockchain innovation and well-regulated digital asset markets.

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Kraken has requested a jury trial in response to the US Securities and Exchange Commission’s (SEC) lawsuit, according to a Sept. 12 court filing.

The move comes after a federal judge rejected Kraken’s bid to dismiss the case, which centers on claims that the platform operated an unregistered securities exchange.

Kraken’s defense

In its filing, Kraken denied any illegal activity and criticized the SEC’s approach to the crypto industry.

The exchange highlighted its attempts to engage with the regulator, which was met with resistance. It stated:

“Kraken has tried to work with the SEC to make registration feasible. But the industry’s efforts have been stonewalled at every step, as the SEC has instead chosen to pursue a strategy of fighting with its sister regulators for enforcement authority its Chair admitted it did not have.”

Further, Kraken claims it was unaware of which digital assets the SEC considered “investment contracts” until the lawsuit was filed. The regulator labeled these digital assets traded on the crypto platform as securities: ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and SOL.

Kraken also disputed the SEC’s term “crypto asset securities,” arguing that the courts have already rejected it. It stated:

“The SEC has pointed to no transactions where investment contracts were allegedly formed on Kraken. The digital assets themselves cannot be the investment contracts because they carry none of the rights and obligations of a share of stock, a bond, or any other financial asset that Congress has said is subject to SEC regulation.”

As a result, Kraken firmly denied that it engaged in any illegal activity.

Challenges SEC’s authority

Kraken also questioned the SEC’s authority to regulate its business under certain sections of the Securities Exchange Act. The exchange argued that digital assets do not qualify as securities or investment contracts, and therefore, trading these assets on Kraken does not violate the Exchange Act.

Additionally, Kraken claimed that the SEC failed to provide adequate notice that its actions were unlawful, violating the exchange’s due process rights.

Its legal team argued:

“Due to the lack of clarity and fair notice regarding Kraken’s obligations under the law, in addition to the lack of clarity and fair notice regarding Plaintiff’s interpretation of the law, Kraken lacked fair notice that its conduct was prohibited.”

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Trading platform eToro will halt trading for most digital assets on its platform following a $1.5 million settlement with the US Securities and Exchange Commission (SEC), according to a Sept. 12 statement.

The SEC’s investigation revealed that, since 2020, eToro has allowed US customers to trade crypto assets that are considered securities without complying with federal registration requirements.

While eToro did not admit or deny the SEC’s allegations, it agreed to restrict its crypto offerings to a few assets, including Bitcoin, Bitcoin Cash, and Ethereum.

Gurbir S. Grewal, SEC Director of Enforcement, noted that the $1.5 million fine reflects eToro’s commitment to halt its violations of federal securities laws while continuing US operations.

He stated:

“By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework. This resolution not only enhances investor protection, but also offers a pathway for other crypto intermediaries.”

As part of the agreement, eToro must liquidate all other digital assets within 180 days.

The move is part of the SEC’s broader regulatory crackdown on several crypto-related firms, including Binance, Kraken, and Coinbase. Notably, the regulator has also hinted at legal actions against Robinhood and the NFT marketplace OpenSea, with the issuance of a Wells Notice.

eToro’s response

eToro co-founder and CEO Yoni Assia remarked that the settlement allows the company to move forward and focus on offering innovative products across its US business.

He emphasized the company’s commitment to compliance, saying:

“It is important for us to be compliant and to work closely with regulators around the world. We now have a clear regulatory framework for cryptoassets in the UK and Europe and we believe we will see similar in the US in the near future. Once this is in place, we will look to enable trading in the cryptoassets that meet this framework.”

Meanwhile, eToro stated that its users can either close their crypto positions or transfer supported coins to the eToro wallet before March 11, 2025.

By March 18, 2025, any remaining crypto positions, except for those on BTC, BCH, ETH, or unsupported coins, will be sold, and the proceeds will be credited to users’ cash balances in their investment accounts.

It added:

“Only those positions that cannot be transferred to the wallet will be liquidated on March 18, 2025. This represents less than 3% of the total dollar value of US customers’ cryptoassets.”

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Ripple has requested a stay on the monetary portion of a recent judgment requiring the company to pay $125 million to the US Securities and Exchange Commission (SEC).

This request was made in a Sept. 4 filing in the US District Court for the Southern District of New York.

According to the filing, Ripple’s legal team stated that the SEC agreed to delay the payment beyond Sept. 6. Under the agreement, Ripple proposed depositing 111% of the judgment amount—about $139 million—into a bank account. This sum will remain there until 30 days after the appeal period expires or until the resolution of any appeal.

The filing also noted that post-judgment interest would accrue in favor of the SEC during this time. Ripple will maintain beneficial ownership of the funds without control, including any interest accumulating from the deposit.

The legal teams emphasized that this agreement protects both parties’ interests. It ensures the SEC will have access to the funds if necessary while allowing Ripple to avoid the costs and inconvenience of posting a bond for the full judgment amount.

Appeal speculation

Some experts believe this filing signals a potential appeal from the SEC. Pro-XRP lawyer Fred Rispoli commented that the odds of an appeal have increased given the case’s complexity.

He stated:

“This is not a guarantee that there will be an appeal, but putting that kind of money in a trust is not something that is done unless SEC is being evasive to Ripple lawyers as to whether it intends on appealing. Again, still possible that no appeal happens but odds have increased.”

Rispoli reassured the XRP community that a potential SEC appeal wouldn’t significantly affect the token, adding that a ruling wouldn’t occur until 2026. He further noted that the SEC’s recent lawsuits against exchanges and its classification of multiple tokens as securities have lessened the potential impact on XRP.

He stated:

“If Ripple and/or XRP don’t make it now, it’s not because of the SEC’s case.”

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Yesterday OpenSea revealed that it had received a Wells notice from the SEC for the sale of NFT. 

OpenSea has received a Wells notice from the SEC.

We’re shocked that the SEC would make a move that threatens creators and artists, and we’re ready to stand up and fight for our industry. https://t.co/7FyFH3NLdm

— OpenSea (@opensea) August 28, 2024

With this note, the SEC warns the company that it is considering filing a lawsuit against them.

The problem

Even though the SEC has not explicitly stated what the problem is, the issue seems to be related to possible accusations directed at the marketplace for offering unregistered securities to the public.

Given that the OpenSea marketplace allows the buying and selling of NFT, it is more than logical to think that the issue is precisely related to the alleged nature of some NFT as unregistered security. 

In and of themselves, NFTs cannot be considered securities. However, in the event that they are sold with the promise of making profits, for those who buy them, deriving solely from the activity of the seller, they could indeed fall under this definition.

The US law, like that of many other countries, prohibits offering unregistered security to the public, and it appears that no NFT offering has obtained registration with the SEC. Furthermore, even if it were requested, it seems highly unlikely that the SEC would grant it. 

And so the SEC has decided to investigate the offer of NFT on the marketplace of OpenSea. This is to verify if there might be grounds in some cases for a complaint against them for violation of security laws.

The position of the SEC for the NFT of OpenSea

From the Wells notice sent by the SEC to OpenSea, it is not possible to clearly understand the agency’s position regarding NFTs or their marketplace. 

However, at least it can be deduced that they are investigating the matter. 

However, for about two years the agency has been trying to push the idea that many digital assets should be considered unregistered securities. At this point, it is not surprising that, after cryptocurrencies, it has also started to examine NFTs. 

However, two key points need to be highlighted. 

The first is that until now all the most important cases opened by the SEC against subjects accused of offering the public digital assets considered by the agency as unregistered securities have essentially ended with the defeat of the SEC. 

To tell the truth, in the case against Ripple, it seems that the company has admitted some fault, agreeing to pay a fine of 125 million dollars. However, previously XRP had been declared not to be an investment contract if traded on the secondary market (the exchanges).

It remains a fact that until now none of the main digital assets in the world have been definitively delisted from exchanges for losing a case against the SEC. Precisely because all the cases concluded in this area have seen the agency effectively defeated.

The second key point is that behind the action of the SEC there could actually be political and propagandistic (i.e., electoral) intents, rather than technical ones. 

This year there are presidential elections in the USA, and the democratic government of Joe Biden is trying to attract the votes of cryptocurrency detractors. However, this attitude does not seem to have paid off. So much so that in May, probably from the Biden government itself, a sort of diktat arrived at the SEC to approve spot Ethereum ETFs.

So even in this case, the agency’s policy seems to be a bear.

The OpenSea case

After having effectively failed in the attempt to block or limit the crypto markets, the SEC is now trying with the NFT market. 

It should be remembered that, while the crypto market is in great recovery since 2023, compared to the minimum peaks of the bear-market of the previous year, that of NFTs is still in strong suffering. 

For example, the market capitalization of cryptocurrencies, which fell below 800 billion dollars in 2022, has now risen even above 2,000. 

Instead, the monthly trading volumes of NFTs in 2023 have continued to decline. The lowest point was reached just last month (July 2024).

In light of this strong difference, it really seems that the NFT sector is a much easier enemy for the SEC to attack. While the crypto market has not only awakened but has also become decidedly powerful again.

OpenSea is no longer the main NFT marketplace in the world, although it has been for years. However, it remains a point of reference for many reasons.

At this point, it even seems obvious, in some ways, that the SEC ended up going after them. 

The reaction of OpenSea

The co-founder and CEO of OpenSea, Devin Finzer, wrote that they are shocked that the SEC has made such a radical move against creators and artists. Furthermore, he claims that they are ready to react and fight.

He believes that by targeting NFTs, the SEC would stifle innovation on an even larger scale than it has tried to do so far. This is because hundreds of thousands of artists and creatives online would now be at risk, and many would not have the resources to defend themselves.

Finzer defines NFTs as “creative goods”, thus denying that they can be considered investment contracts. 

Writes: 

“It would be a terrible outcome if creators stopped making digital art due to regulatory threats. Take, for example, the lawsuit filed against the SEC by the musician Songadaymann and the conceptual artist Brian L. Frye, which describes their fear that the sale of their art and music might be considered an offering of unregistered securities”.

Finally, it declares that they are committing 5 million dollars to help cover legal expenses for NFT creators and developers who receive a Wells notice. 

It is not easy to understand where this story might be heading, also because on one hand there are no crypto giants like Coinbase or Binance, but on the other hand there is a public agency that until now has been constantly overruled by the courts in this type of action.

OpenSea CEO Devin Finzer announced that the firm received a Wells Notice from the US Securities and Exchange Commission (SEC) because the regulator considers the NFTs on its platform securities.

In an Aug. 28 statement on X, Finzer expressed surprise at the SEC’s broad action against creators and artists. He stated:

“We’re shocked the SEC would make such a sweeping move against creators and artists. But we’re ready to stand up and fight.”

$5 million fund

Finzer emphasized that the SEC’s move ventures into uncharted territory. He warned that targeting NFTs could stifle innovation on a larger scale, jeopardizing the livelihoods of hundreds of thousands of online artists and creators.

He also noted that many do not have the resources to defend themselves. Due to this, OpenSea is pledging $5 million to help cover legal fees for NFT creators and developers who receive a Wells Notice from the financial regulator.

Finzer argued that NFTs are fundamentally creative products, including art, collectibles, video game items, domain names, and event tickets. He asserted that digital art should not be regulated like financial instruments such as collateralized debt obligations.

The OpenSea CEO expressed concern that regulatory threats could discourage creators from making digital art.

Wells notice

The Wells Notice issued to OpenSea signals a continued regulatory crackdown on digital assets in the US.

A Wells Notice is a preliminary announcement by the SEC indicating its intent to recommend enforcement action. This notice allows the recipient to respond before charges are formally proposed.

Over the past year, the SEC has issued similar notices to several crypto-related firms, including Robinhood, Paxos, and Uniswap Labs. However, the notice to OpenSea is the first directed at an NFT-related company, showing that the regulator is closely scrutinizing NFT markets.

The outcome of this case could set a significant precedent for how NFTs are treated under US securities law, potentially affecting a wide range of digital artists and collectors.

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The court has levied a $125 million fine on Ripple in the lawsuit filed by the US Securities and Exchange Commission (SEC), ending the four-year-long dispute.

XRP’s price leaped 18% in minutes after the news broke and was trading at $0.61 as of press time, based on CryptoSlate data.

District Judge Analisa Torres from the District Court of the Southern District of New York partially rejected the SEC’s motion for remedies, which demanded over $2 billion from Ripple as compensation for allegedly selling XRP as an unregistered security.

According to the filing:

“The Court shall enter a final judgment enjoining Ripple from further violations of the securities laws and imposing a civil penalty of $125,035,150.”

The ruling comes after the court granted a partial summary judgment to both parties in July 2023. According to the filings, the court found that Ripple’s institutional sales of XRP constituted investment contracts and, therefore, violated securities laws.

However, the court also ruled that Ripple’s programmatic sales and other distributions of XRP did not meet the criteria for investment contracts under the Supreme Court’s Howey test and, therefore, did not constitute securities sales.

Notably, the court analyzed the XRP offerings conducted by Ripple and found out that only 1,278 transactions violated Section 5 of the Securities Act of 1933 (the “Securities Act”), 15 U.S.C. §77e(a),(c). The SEC suggested in its filing that each of Ripple’s “1,700 relevant contracts” constitutes a separate violation, reads the document.

This is a developing story and will be updated as new information is gathered.

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The US Securities and Exchange Commission (SEC) is seeking to modify its ongoing lawsuit against Binance to avoid a court decision on the security status of third-party tokens like Solana.

In a joint July 29 court filing, the SEC requested permission to amend its original complaint against the crypto trading platform, stating that it aims to avoid a court ruling on the “Third Party Crypto Asset Securities” referenced in the case.

The proposed amendment seeks to defer any court ruling on these tokens’ security status. If granted, it would effectively remove the SEC from classifying these assets as securities, but they would remain subject to regulatory uncertainty regarding their legal status.

Third-party coins are digital assets issued by entities other than Binance that were listed on its platform. Last year, the SEC accused Binance of breaching federal securities laws by listing native tokens of Solana, Cardano, Polygon, Cosmos, Filecoin, and Algorand, arguing that these tokens met the Howey Test criteria for securities.

However, the SEC’s case encountered a setback last month when a US federal court ruled that the secondary sales of digital assets like the BNB token do not qualify as securities.

Meanwhile, crypto community members on social media have interpreted the SEC’s filing as further indications that digital assets like SOL and ADA do not qualify as securities and are unfairly targeted by the financial watchdog’s regulation-by-enforcement approach.

Binance’s response to the SEC

In response, Binance stated it would not agree to begin discovery until it had reviewed the SEC’s proposed amended complaint. The firm argued that starting discovery on potentially amended claims was premature.

It stated:

“Until Defendants have a set of proposed amended allegations in front of them, it is premature and unreasonable for the SEC to expect them to agree to conduct merits discovery for claims on which the SEC may soon seek leave to amend its allegations.”

The exchange also noted that the SEC had only recently disclosed the amendment proposal and accused the agency of misrepresenting their agreement on the discovery timeline.

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Still confusion in the field of regulation in the USA: two artists have sued the SEC, drawing a comparison between their NFT Art sold on the secondary market and Taylor Swift concert tickets. 

Regulation: artists rebel against the SEC for the confusion regarding NFTs

Two artists sued the Securities and Exchange Commission (SEC) of the USA for the confusion regarding NFTs.

Specifically, the two plaintiff artists, Brian Frye and Jonathon Mann, have requested clarifications on security laws and Non-Fungible Tokens. 

In practice, their lawyers have asked if crypto artists are required to “register” their NFT art before selling it to the public. Not only that, another clarification concerns whether artists must disclose information about the “risks” of purchasing their art. 

The issue was raised after some actions could trigger US security laws when creating and selling art NFT.

The lawyers then made a comparison between the sale of NFT Art on the secondary market and Taylor Swift concert tickets, which are often also sold on the secondary market. 

In this sense, for Frye and Mann it would be absurd for the SEC to classify NFTs as security. 

NFT Regulation and the lawsuit against the SEC by crypto artists

Speaking of art, just like Taylor Swift sells tickets for concerts also on the secondary market and releases statements to promote those events, the two crypto artists should do the same with their NFTs. 

In both cases, the SEC of the USA is not required to intervene. 

Here is what the document states:

“Although Jonathan Mann and Brian Frye are different from Taylor Swift in many ways, in the context of this case they are in exactly the same position. They are artists and want to create and sell their digital art without the SEC investigating or suing them.”

The sector in crisis compared to the boom of 2021

Recently, the market of NFTs has been analyzed which seems to be still in deep crisis, at least compared to the boom of 2021. 

And indeed, in January 2021, the total monthly trading volumes of NFTs on the market had surpassed 100 million dollars for the first time. 

Not only that, in January 2022, a year later, the same had risen to over six billion dollars, recording a 60x. 

After this amazing growth, since 2023 a long bear-market has arrived which seems to be still ongoing. 

The US Securities and Exchange Commission (SEC) has reportedly accepted a proposal with exceptions for certain institutions affected by the controversial Staff Accounting Bulletin No. 121 (SAB 121), according to Bloomberg Tax.

The SEC has allowed some banks and brokerages to bypass balance sheet reporting through new business practices that provide exceptions to the crypto accounting compliance guidance.

Under this arrangement, the financial institutions will not report customers’ crypto holdings as a liability on their balance sheets per SAB 121 stipulations. However, they must protect their customers’ assets in cases of bankruptcy or failure.

Additionally, the institutions would be required to implement internal safeguards to address legal risks related to the emerging industry.

Market observers noted that this move will expand US crypto holders’ custody options and attract more traditional financial institutions into the crypto industry.

SAB 121

This development comes more than two years after the SEC introduced the controversial SAB 121 guidance, which was intended to bring greater transparency and improved risk management to the rapidly evolving crypto industry.

The regulation enforces the recognition of custodial obligations as liabilities on balance sheets and demands detailed disclosures about the nature and risks associated with them.

However, the implementation of SAB 121 has raised significant concerns. Many industry stakeholders see the regulation as an overreach by the SEC. They argue that it imposes undue burdens on companies and could stifle innovation.

Critics also note that the regulation does not adequately distinguish between crypto on public ledgers and traditional assets on permissioned ledgers, complicating compliance efforts.

As a result, US lawmakers recently tried to overturn the advisory. However, their efforts were thwarted when President Joe Biden vetoed the resolution. A subsequent attempt to counter the President’s veto also failed, as lawmakers could not meet the required threshold.

The US Securities and Exchange Commission (SEC) has ended its investigation into stablecoin issuer Paxos.

On July 11, Paxos announced that it received an investigations termination notice from the SEC a few days earlier on July 9. The notice confirmed that the regulator would not pursue enforcement action against Paxos Trust Company regarding the Binance USD (BUSD) stablecoin.

This development comes over a year after the SEC issued a Wells notice suggesting a potential enforcement action against the stablecoin issuer over its role in the dollar-backed BUSD stablecoin. Notably, it also follows a recent federal judge’s ruling that BUSD sales did not contravene securities law, as the financial regulator claimed.

While BUSD’s supply has all but evaporated, Paxos had publicly maintained that the stablecoin was not a security and promised to fight the SEC claims.

Following the completion of the SEC’s investigations, the firm reiterated this claim, stating:

“Paxos Trust Company has always maintained that its USD-backed stablecoins are not securities under federal securities laws and that the Wells Notice was unwarranted and unjustified.”

Paxos has issued several regulated digital assets, including PayPal USD (PYUSD), Pax Dollar (USDP), and Pax Gold (PAXG). The company holds licenses from various financial regulators, including the NYDFS in the US, the MAS in Singapore, and the FSRA in the Abu Dhabi Global Market.

‘New wave of adoption’

Paxos predicts that the conclusion of the SEC’s investigation into the BUSD stablecoin will spur a new wave of stablecoin adoption by major global enterprises.

It stated:

“Well-designed stablecoins with strong consumer protections – like those issued by Paxos – will transform the financial system in payments, settlement and remittance use cases. This transformative technology will make the financial system more stable, accessible and transparent.”

Stablecoins have proven to be one of the most effective real-world applications of crypto technology, particularly in emerging markets such as Nigeria. The assets are usually pegged to the US dollar and provide a stable alternative to volatile crypto like Bitcoin.

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