Securities and Exchange Commission (SEC) chair, Gary Gensler, has come under fire over his understanding of digitized assets. An alarming development considering the SEC’s recent decisions concerning several high-profile NFT collections.
During a lengthy committee hearing held on September 27, U.S. representative, Ritchie Torres, questioned Gensler on what essentially qualified an NFT as a security. Using Pokémon cards as an example, Torres proceeded to extract from Mr. Gensler that these popular trading cards do not fall within its remit.
However, when Torres pressed further and asked whether the same cards, if tokenized on a blockchain, would be classified as securities, Gensler struggled to provide a clear and coherent response.
Undeterred by the lack of a definitive answer, Ritchie Torres continued to probe, seeking clarification on whether the process of tokenization itself was the key factor in categorizing an NFT as a ‘security.’ However, his line of questioning was ultimately met with blank stares and indecisive responses.
Gensler’s responses throughout the exchange were marked by phrases like “I’d have to know more” and “If the investing public is anticipating profits based upon the efforts of others and exchanging funds, that’s the core of the Howey Test.” These vague statements only added to the confusion surrounding the regulatory framework for NFTs.
The Securities and Exchange Commission Fails to Impress
This exchange between members of the USA’s governing bodies has raised eyebrows concerning the SEC’s treatment of NFTs. Over recent Months, the commission has charged both the Stoner Cats, and Impact Theory with violating federal securities laws. Meanwhile, many other NFT projects remain firmly in the crosshairs of decision makers who have very little knowledge of the industry they are dealing with.
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