NFT Royalties Get Legal Clarity From the SEC

Legal experts agreed, and explained that these NFT royalties are typically business income. In New York City, Mayor Eric Adams announced a digital advisory council to explore blockchain use in public services. In contrast, South Korea is enacting stricter rules for nonprofit crypto sales and exchange operations, including tighter listing standards and mandatory real-name accounts, ahead of broader institutional participation in its crypto market.

NFT Royalties Likely Not Securities

United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce clarified that many non-fungible tokens (NFTs), particularly those programmed to pay royalties to artists and creators, likely do not fall under federal securities regulations. In a recent address, Peirce pointed out that the functionality of NFTs allowing for resale royalties is more similar to the compensation models used in the music and film industries. 

Hester Peirce

She explained that just as streaming platforms reward creators every time their work is played, NFTs can make it possible for artists to earn from the appreciation of their work on secondary markets—without necessarily qualifying as securities. Peirce did add that these royalty features do not give NFT holders ownership in a business or rights to any profits in the traditional sense associated with securities. 

Her remarks were largely welcomed in the crypto community but were reportedly misrepresented by some media outlets. Oscar Franklin Tan, chief legal officer of Enjin core contributor Atlas Development Services, believes that the idea of NFTs paying resale royalties has never been controversial or considered to fall in the SEC’s jurisdiction. According to Tan, compensating a creator through resale royalties is considered business income, not investment income, and thus falls outside the scope of securities law.

He added that the legal framework never prohibited creators from earning royalties from the resale of their works, whether via traditional contracts or smart contracts on blockchain networks. However, he acknowledged that legal complexities can arise if NFT structures begin to promise royalty shares to holders beyond the original creator, which may resemble profit-sharing schemes. 

In a case like this, regulators might be more inclined to classify them under securities law. Still, Tan urged regulators to apply traditional legal principles logically, asking, “If this were done on paper instead of blockchain, would it be a legal issue?”

On a related note, NFT marketplace OpenSea recently emerged from a regulatory challenge involving the SEC. In August of 2024, OpenSea received a Wells notice from the SEC suggesting that NFTs on the platform might be considered unregistered securities. 

But on Feb. 22, 2025, OpenSea CEO Devin Finzer confirmed that the SEC officially closed its investigation into the platform. The move was seen by many in the industry as a positive outcome. After this resolution, OpenSea’s legal team wrote a letter to Commissioner Peirce in April, arguing that NFT marketplaces like OpenSea should not be classified as brokers or exchanges under current US securities law. 

The lawyers contended that these platforms do not facilitate transactions directly or serve as intermediaries and asked the SEC to formally clarify that NFT marketplaces are not exchanges. While royalty mechanisms for artists seem safe from classification as securities, broader questions about the structure and function of NFT trading venues are still on the table.

Eric Adams Vows to Make NYC the Crypto Capital

Crypto regulation is also making strides in The Big Apple. New York City Mayor Eric Adams once again said that he is committed to making the city a global hub for cryptocurrency and blockchain innovation, and announced plans to form a digital advisory council that is aimed at attracting jobs and investment. 

At the inaugural New York City Crypto Summit on May 20, Adams explained that the initiative was not about following fads but about embracing technologies that can enhance government services and economic development. While he did not share the full composition of the upcoming advisory group, Adams said a chair and formal policy recommendations will be unveiled in the coming weeks.

The mayor also placed a lot of emphasis on the importance of crypto and blockchain technologies in creating a more efficient and inclusive city infrastructure. He pointed to tokenization, fintech, and blockchain applications as tools that could enhance how the city manages sensitive records and delivers public services. Specifically, Adams said the city will explore the use of crypto for paying taxes and other services, as well as implementing blockchain technology to secure documents like birth and death certificates.

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To support these efforts, the city already enlisted the help of financial services company Figure and private equity firms Traction and Scale, who will contribute to shaping New York's crypto strategy. Adams said these partnerships will help the city stay ahead of emerging digital trends and build a stronger, more inclusive tech sector.

New York State lawmakers are also pushing forward with their own digital asset legislation. Assemblyman Clyde Vanel introduced a bill in April to allow state agencies to accept cryptocurrency as payment, while state Senator James Sanders Jr proposed the Blockchain Study Act in February to examine the broader impact of crypto in New York. Although the latter has not yet passed the House, the state’s legislative activity reflects a growing interest in digital assets.

Mayor Adams attracted national attention after opting to receive his first three paychecks in Bitcoin when he took office in January of 2022, and continues to champion digital assets despite past controversies. He was previously indicted on allegations of accepting illegal campaign donations from the Turkish government, but the case was dismissed with prejudice by federal authorities.

South Korea Tightens Crypto Rules

On the other hand, South Korea is set to implement stricter regulations for digital asset transactions in June as it prepares to open its crypto market to institutional investors. The Financial Services Commission (FSC) announced the finalized measures during its fourth Virtual Asset Committee meeting on May 20, and introduced new rules for nonprofit crypto sales and digital asset exchange operations. 

Under the new guidelines, nonprofit organizations will be allowed to accept and sell crypto donations, but only if they have at least five years of audited financial records and establish internal committees to review each donation and liquidation plan. All transactions must go through verified Korean won accounts, with banks and exchanges sharing verification responsibilities.

To reduce speculative risks, nonprofits can only handle cryptocurrencies listed on at least three major domestic exchanges, and liquidation must occur immediately upon receipt. Exchanges, meanwhile, will be permitted to liquidate user-paid crypto fees solely for operational costs, with strict daily limits and restrictions to the top 20 tokens by market cap. Exchanges are also barred from selling tokens on their own platforms to prevent conflicts of interest.

The FSC is also tightening token listing standards, requiring minimum circulating supply before a token can be traded and temporarily banning market orders after new listings. Tokens with low volume, limited market cap, or no clear utility—like meme coins—will face more scrutiny and may be delisted if they fail to meet liquidity or engagement benchmarks. From June, nonprofits and exchanges can apply for real-name accounts, with plans to expand the system later this year to listed firms and professional investors.