The Limits of Howey: What the SEC May Be Signaling Through its Approach to NFTs and F-NFTs

In particular, a subset of NFTs known as “fractionalized” NFTs (F-NFTs)—though certainly not the largest by market cap—presents unique legal questions and may provide insight into where U.S. regulation of digital assets is headed. Recent actions by the U.S. Securities and Exchange Commission (SEC), together with certain statements by SEC commissioners, may indicate a shift in approach toward a rebuttable presumption that digital assets are securities, without deference to formal legal tests.

As NFTs gained mainstream traction, the market produced sky-high prices that made individual ownership of popular NFTs cost-prohibitive for many. F-NFTs allow a group to pool resources to purchase an NFT, dividing ownership of the NFT into fractional interests, which are, ironically, generally fungible in relation to one another.