US Courts to Decide If NFTs Are Securities as DraftKings Case Goes to Trial | Hacker News Reader

US Courts to Decide If NFTs Are Securities as DraftKings Case Goes to Trial

decrypt.co

14 pointsRafelMri16 comments

bait. they are to decide if those NFTs were issued in a securities transaction

asset types themselves are not securities and neither a judge or the regulator is trying to decide that. transactions involving those assets can be securities and are tightly regulated.

some assets are standardized and only issued in a specific set of transactions 100% of the time, such that its redundant to call them anything other than securities. for assets that aren't standardized, the sequence of transactions has to be analyzed to determine if that set of transactions constituted a securities transaction.

this can be corroborated by how the courts have been reaching the conclusion that crypto asset's primary market (the initial sell or distribution from the creator to purchasers) has to be treated different from the secondary market trading (where the prices are listed on exchanges and fluctuate all day, everyday, which attracts most headlines and mindshare).

clarity from Congress about what level of consumer and investor protection is desired is what's really lacking here. The "securities" framework doesn't do that.

Do famous paintings/artworks count as securities? Some people like to invest in them, and there are lots of “fintech”s offering fine art investment as a service

This has been argued. It's really interesting actually. https://dilendorf.com/resources/can-a-piece-of-physical-art-...

> Do famous paintings/artworks count as securities? Some people like to invest in them […]

Just because you can invest in something does not mean it is a security: it can be a commodity.

* https://www.investopedia.com/terms/c/commodity.asp

* https://www.investopedia.com/commodity-vs-security-7509422

* https://www.findlaw.com/consumer/securities-law/securities-v...

A painting is clearly a tangible piece of property, so it’s not really analogous.

Stocks used to be owned by whoever owned the physical share certificate. I think the difference is more that paintings still have some intrinsic value (though only aesthetic) even if other people don’t think they’re valuable.

Right, the value in holding the stock certificate is that it provides the bearer with entitlements to control and a share of the assets of an intangible thing - a company.

The value in holding a painting is that you own some aesthetically arranged atoms.

But there's art that exists in freeports whose only value is that it's moved from locker A to locker B as a part of a financial transaction. Definitely, not all art is a security but it's an interesting question, both philosophically and legally whether there can be some class of art that functions so close to a security that security provisions should apply.

a painting can be sold in a securities transaction, hence "a security"

and those aforementioned fintech firms are selling them to accredited investors, to reduce the compliance burden of conforming it to the reporting requirements of publicly traded stocks.

A REIT is a security, but a house isn't.

transactions are securities, assets are not

we’re agreeing

How is digital art worth less than real world art? Are you buying the canvas or what it represents?

If you buy a painting, yes, you own the canvas. You can put it wherever you like, rent it out to others, destroy it, dismantle it and cut up the pieces to make your own collage artwork, whatever you like.

The copyright in the work belongs to the artist though. Your physical ownership of the painting doesn’t stop the artist making another work just like it or licensing the right to do so to someone else.

Museums and galleries sometimes claim copyright on images of works they possess, but that’s generally claiming a copyright over that particular photograph of the work, not the work itself. In order to do things like sell prints they will have to license the work from the artist or the current rights holder (for distributing prints of that work in that territory, which might not be the same as the rights holder for other uses).

Ownership of ‘what the painting represents’ isn’t really something the law takes much of a position on.

Canvas.

I wouldn't call it bait. That's the nature of case law. If they decide these NFTs are Securities, then given their criteria, other NHTs can be securities. If they use the Howey test then they are also deciding that is the proper test for this scenario. Spoiler: They did decide on the Howey test and also against Draft Kings. https://www.kmllp.com/news/judge-holds-digital-trading-cards...

that’s not a spoiler as your article is the same news as this article, its just a denying a motion to dismiss

and again the case isn't novel and the headline is is bait. its already been established that crypto assets can be issued as securities, one regulator is just mad that they can also be issued as products that aren't securities too and that its a hit with consumers

NFT collections are the same as the other crypto assets in this regard

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