Speaking at Draper Goren Holm's Security Token Summit on March 25, SEC commissioner Hester Peirce, also known every bit "Crypto Mom" warned the issuers of fractionalized non-fungible tokens and NFT alphabetize baskets that they could inadvertently be distributing investment products.

While Peirce stated that "the whole concept of an NFT is supposed to exist non-fungible" — meaning that "in general, it'southward less probable to be a security" — she noted that "people are beingness very creative in the type of NFTs they are putting out there."

Peirce urged NFT issuers to be cautious if they determine to "sell fractional interests" in NFTs or NFT baskets, stating:

"Yous better be careful that you're non creating something that's an investment production — that is a security."

With NFTs fetching increasingly exorbitant prices, fractionalized interests in these assets enable smaller investors to still exist able to gain exposure to a minor share of a loftier-priced NFT. Earlier this month, Cointelegraph reported on ii emerging teams offering novel solutions for fractionalizing non-fungible tokens.

Peirce also criticized the apply of the Howey Exam to assess whether crypto assets are securities, asserting information technology "hasn't worked that well" for the industry.

The Howey Test is often used past courts to decide whether an nugget is a security, with the exam being derived from a landmark 1946 courtroom instance concerning real estate contracts issued by the owner of a citrus grove to fund the business' expansion.

Peirce said that if the exam was used in the 1946 case in the aforementioned way it is applied to crypto, the courts would have been seeking to determine whether the fruit copse were securities, rather the investment contracts relating to the plants.

Peirce noted she hopes to collaborate with incoming SEC chairman Gary Gensler on developing her "safe harbor programme," which would reduce regulatory scrutiny of emerging blockchain networks.

The safe harbor plan would permit new token issuers a three-twelvemonth window in which to build a robust and decentralized network and demonstrate securities laws practise non apply. The programme would also require that issuers provide detailed plans regarding the network's roadmap, token sale, and the individuals and investors backside the project.

Yous accept three years to develop the network and so that the token is really usable or the network is decentralized — and at that point, it's clear the securities laws don't apply. And everything that you lot say will be covered by the anti-fraud laws under the securities laws."