This week’s featured collector is Gjturnbull
Gjturnbull is a self described “NFT junkie” whose focus is on Ethereum NFTs. They’ve collected a few unique art pieces along with various generative pfps. Worth a look at lazy.com/gjturnbull
Unraveling the Impact of Three Recent Court Cases on NFT Collectors and Crypto Enthusiasts
This week, the legal battle over NFTs and cryptocurrencies reached a new peak with three court cases in the US with big significance for the classification and regulation of digital assets. In this post, we will unpack the implication of these court cases for NFT collectors and crypto enthusiasts.
1. The SEC’s First NFT-Related Enforcement Action
In a landmark case, the SEC fined LA-based entertainment company Impact Theory $6.1 million for allegedly selling NFTs as unregistered securities. The SEC claims that the NFTs, called Founder’s Keys, were sold under the premise of future profit generation for investors, therefore constituting an investment contract and, hence, a security.
While this move was taken based on the argument that the NFTs were being sold as investment contracts, two Commissioners at the SEC wrote a dissent. The dissenters argued that the limited statements from the company and purchasers don’t constitute an investment contract, likening the situation to selling collectibles with the potential of increasing in resale value. The dissent emphasized that the primary remedy for such registration breaches, a rescission offer, had already been executed by the company. They critiqued the Commission for not providing clarity earlier regarding the rising NFT market and underscored the challenge of categorizing NFTs.
Despite this enforcement action, it may not affect the broader NFT market significantly as many questions regarding securities registration for crypto and NFTs remain unresolved.
2. Clarification of Cryptocurrency as a Commodity: Uniswap Case
A New York court dismissed a case against Uniswap, a decentralized crypto exchange, and called ETH a commodity. The lawsuit argued that Uniswap violated securities laws by failing to register and allowed scam tokens to be traded. However, the judge stated that true defendants in this case were the issuers of these scam tokens, not Uniswap, and challenged the notion of ETH being a security.
3. Grayscale Ruling: Further Mainstreaming of Crypto
Perhaps the biggest win for the broader crypto ecosystem is the the U.S. Court of Appeals siding with Grayscale against the SEC. The judges criticized the SEC’s inconsistent treatment of similar products when it rejected Grayscale’s Bitcoin Trust ETF conversion. The judges also challenged the SEC’s persistent denial of bitcoin ETPs despite approving bitcoin futures ETPs. This court case moves Bitcoin one step closer to being an asset that is easily traded on the stock market by anyone in the US.
These three court cases suggest that even during a time when the mainstream is focused elsewhere, the crypto ecosystem continues to march forward toward a seismic shift in the legal understanding of NFT and crypto assets. While these cases don’t provide definitive interpretation, they signal a changing regulatory landscape with some signs of a positive future for NFTs and crypto.
This week’s poll: Will the SEC’s action against Impact Theory change your behavior with NFTs?
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