The Federal Trade Commission is fully equipped to handle consumer fraud.
If I sell you a hand drawn stick figure for $100, and you buy it because it's "art", then there's no rug to pull. You bought it, and it doesn't matter to the artist whether the resale value goes up or down. If it goes down, it's still not fraud.
But if I sell you a hand drawn stick figure for $100, and you buy it with the mutual expectation that it will eventually be worth more because of the value of the brand/project, and the effort I put in to grow that value... isn't that a security, by definition?
its either go after all collections with this outstanding low hanging and untenable application of Howey, or show the exact distinction that asset creators can follow to act solely as a consumer product like the fine artists and watch collections
it is also accurate that if following a consumer protection framework, most activities and behaviors would not be fraud.
so for a creator or secondary market operator or promoter, not knowing which branch of theory to follow makes all of their behavior bifurcated and prosecutable under one framework, a securities framework, but not a consumer protection framework. and vice versa.
This seems equivalent to buying a baseball card of a specific player with the expectation that the player will put in effort into the game and thus increase the value of the card. People buy cards of specific players on the assumption that they can buy in cheap and sell when the value of the player's brand increases.
I'd argue that there was a brief moment -- right at the start, when NFTs were a novelty and most of the ones being minted were one-offs which purportedly represented unique things created independently from the NFT, like a YouTube video or a tweet or a piece of art -- where one could conceivably argue that NFTs could be collector's items and not investments.
The moment that groups like Larva Labs started minting runs of thousands of NFTs with images stamped out from a template, though, that argument became much harder to support. Nowadays, it's thoroughly dead.