In a recent speech that’s stirred conversation across the crypto world, SEC Commissioner Hester Peirce made it clear: NFT royalties don’t turn tokens into securities.
Speaking at an SEC event, Peirce emphasized that non-fungible tokens (NFTs)—even those that reward creators with royalties from resale—typically don’t fall under U.S. federal securities laws. Unlike stocks or traditional investments, NFTs are programmable digital assets. Their ability to send revenue back to creators, she said, is more like streaming platforms paying artists every time their content is played.
“Just as a musician gets royalties when their song is streamed, NFTs can give artists a cut when their work is resold,” Peirce explained. Crucially, these royalty features don’t grant buyers any ownership stake or profit-sharing rights in a business, which is what normally defines a security.
Media Got It Wrong, Says Legal Expert
Oscar Franklin Tan, chief legal officer at Enjin’s Atlas Development Services, thinks some headlines have missed the point. He told Cointelegraph that Peirce’s comments have been twisted out of context.
“The idea that royalties make NFTs securities was never really a debate,” Tan said. “The media spin made it sound controversial, but in reality, it isn’t—and never was.”
Tan clarified that U.S. securities laws are designed to regulate investments, not creator compensation. “Artists aren’t investors. Royalties are not investment income; they’re business income,” he added.
The Legal Line: When NFTs Might Raise Flags
Tan did point out that things get murkier when NFTs start promising shared profits from royalties to a group of holders—not just the original creator. That’s when securities laws might come into play.
He urged both regulators and the Web3 community to apply common sense legal thinking: “If this was done on paper instead of blockchain, would it still raise legal questions? If not, then let’s slow down.”
What About NFT Marketplaces Like OpenSea?
While NFT royalties themselves aren’t raising red flags at the SEC, NFT marketplaces have faced more scrutiny.
In 2024, NFT giant OpenSea received a Wells notice from the SEC, suggesting that some NFTs on its platform might be unregistered securities. However, in a big win for the industry, OpenSea CEO Devin Finzer announced in February 2025 that the investigation had officially been dropped.
Following that news, OpenSea’s legal team sent a letter to Hester Peirce, urging the SEC to formally declare that NFT platforms shouldn’t be treated as exchanges or brokers under securities law. Their argument? These marketplaces don’t actually facilitate trades or act as intermediaries in the way traditional brokers do.
The Takeaway
Peirce’s message is clear: not all things NFT-related fall under SEC jurisdiction—especially not royalties for creators. And while legal gray areas remain, especially around marketplaces and shared profit schemes, there's growing consensus that artists should be free to benefit from their work without triggering securities laws.
The future of NFTs may still be evolving, but one thing is certain: creator royalties are here to stay—and they’re not securities.
