SEC Chair Paul Atkins said most non-fungible tokens do not appear to meet the legal threshold of an investment contract under the Howey test, offering a clearer signal on how the agency is approaching NFTs. The SEC’s message is that NFTs will not be judged by branding alone, but by the underlying economic reality of each offering.
That distinction is especially relevant for treasury teams, market makers, and DAO treasuries trying to assess legal exposure before allocating capital or launching products. The practical takeaway is that regulatory risk now turns less on whether an asset is called an NFT and more on whether buyers are relying on an issuer’s ongoing efforts to generate value.
The SEC’s focus is on function, not format
Atkins described the agency’s approach as substance over label, stressing that the vast majority of crypto assets still require a case-by-case review under Howey. The SEC’s interpretive release did not create a blanket carveout for NFTs, but instead reinforced a facts-and-circumstances analysis.
Under that framework, the SEC said many NFT sales may satisfy the “investment of money” element, but the harder questions lie elsewhere. The real legal pressure points are whether a common enterprise exists, whether buyers are expecting profits, and whether those profits depend primarily on the efforts of others.
Where an NFT is bought for personal use, collectibility, or some distinct utility, the SEC indicated that the common-enterprise and profit-expectation elements are less likely to be present. An NFT tied mainly to ownership, identity, access, or collecting is less likely to resemble a security than one sold as a financial opportunity.
The opposite is true when promoters link value directly to their own continued managerial activity. Projects that encourage buyers to expect appreciation from an issuer’s future work, or that attach NFTs to profit-seeking ventures, face a materially higher securities risk.
Marketing and structure now matter more than the NFT label
That logic is consistent with the SEC’s broader enforcement posture. When an NFT is marketed as a source of revenue or bundled with profit-sharing mechanics, regulators are more likely to view it as an investment contract rather than a simple digital collectible.
Inside the Commission, not everyone framed the issue the same way. Commissioner Hester Peirce argued for a narrower reading centered on utility and economic reality, maintaining that many NFTs do not inherently qualify as securities. Peirce’s position emphasized that creator royalties and business income should not automatically be confused with investor returns.
If the goal is to avoid securities classification, token terms, resale mechanics, and access rights should be designed so that expected value does not depend predominantly on centralized issuer efforts.
That leaves NFT projects with a clearer, though still demanding, regulatory path. Going forward, risk managers and treasury teams will need to review offering design, revenue flows, and promoter dependence carefully, because the SEC has made clear that the label “NFT” offers no automatic protection.
