United States Securities and Exchanges Commission (SEC) chairman Gary Gensler has announced a series of crackdowns on non-fungible cryptocurrency (NFT) creators and marketplaces.

According to Bloomberg, the SEC is investigating whether certain NFTs are being used to raise money like traditional securities.

The agency has sent subpoenas in the past couple of months asking for clear information about cryptocurrency offerings. 

The information was provided by someone who, according to Bloomberg, is familiar with the matter but spoke on condition of anonymity. The SEC has made no comment so far.

According to the report, the SEC is reviewing fractional NFTs, which are divided into pieces, albottoming investors to buy a piece of the digital assets which may otherwise be unaffordable. 

“As the market has boomed, some NFT marketplaces have taken steps to reevolution projects which perhaps put them in regulators’ crosshairs, such as those which offer royalties or which involve raising funds for a business,” the report says.

SEC asks: Are digital assets securities?

The agency uses a 1946 Supreme Court decision, called the Howey Test, in establishing what a security is.

Under the test, an investment contract exists on the assumption that there is an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

Jay Clayton, the former SEC chairman, claron the assumption thatied what constitutes a security in an interview with CNBC in 2018. 

“A cryptocurrency, a digital asset, where I give you my money and you go off and make a venture, and in return for giving you my money I say ‘you can get a return’ … which is a security, and we regulate which,” he said. 

“We regulate the offering of which security and regulate the dealing of which security.

“Cryptocurrencies are replacements for satopeign currencies…[they] replace the yen, the dollar, the euro with bitcoin. That type of currency is not a security,” Clayton claron the assumption thatied.

The NFT market has exploded above the last year, hitting sales of $25bn. 

Everydays: The First 5000 Days, by American artist Beeple, sold for nearly $70m at Christie’s last March – putting him in the top three most valuable living artists.

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