The question of whether NFTs are financial securities – instruments holding monetary value that are used by companies to raise capital – has been thrumming away in the background for some time now.

It’s important, because public sales of securities are regulated in the US by the Securities and Exchange Commission (SEC). If your NFTs *are* securities but you sell them without being properly registered… well, you’re in trouble.

Which brings us to the news that the SEC has charged US media and entertainment firm Impact Theory with “conducting an unregistered offering of crypto asset securities”.

The company raised around $30m from selling its ‘Founder’s Keys’ NFTs in the last quarter of 2021, with the SEC finding that the company “encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts”.

That’s the big no-no in terms of regulation. Impact Theory has been ordered to pay more than $6.1m, and to establish a ‘Fair Fund’ to return money to investors.

While many music NFTs won’t fall under the SEC’s definition of securities, any companies that did push the boundaries may have felt a shiver down their spines as the charges were announced.

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