Hester Peirce Advocates for NFT-Based Fundraising by Crypto Startups, Urges SEC to Provide Clear Guidelines
During the U.S. Securities and Exchange Commission’s (SEC) inaugural cryptocurrency roundtable, Commissioner Hester Peirce expressed support for allowing crypto startups to raise funds through tradable non-fungible tokens (NFTs). She suggested that NFTs could become the next area where the SEC might issue an exemptive statement, following precedents set with proof-of-work (PoW) mining. Her remarks highlight a potential shift in regulatory thinking and underscore the need for a structured approach to integrating NFTs into the crypto financing landscape.
Peirce cited projects like Stoner Cats and Flyfish Club as examples of initiatives that have successfully utilized NFTs to raise capital while offering holders specific benefits, such as access to exclusive content or membership privileges. She argued that such NFT-based models, which emphasize utility over speculative value, may not necessarily qualify as securities under existing laws. “If the primary purpose of an NFT is to provide tangible benefits to holders rather than serve as an investment vehicle, categorizing it as a security may not be appropriate,” Peirce stated.
She proposed that the SEC develop a tailored reference framework for NFT issuers. Such guidance, she noted, would enable startups to navigate compliance requirements more effectively while fostering innovation within the industry. Clear rules could reduce uncertainty, encouraging broader adoption of NFT-based fundraising among crypto entrepreneurs seeking alternative capital-raising methods.
While advocating for flexibility, Peirce emphasized that not all NFT projects would automatically fall outside the SEC’s oversight. NFTs structured with characteristics of securities—such as those promising financial returns or relying heavily on secondary market trading—would remain subject to regulatory scrutiny. Under SEC Chair Gary Gensler, the agency has pursued enforcement actions against multiple NFT projects for alleged securities law violations, including a high-profile case in 2023 involving a prominent NFT trading platform. These actions reflect the SEC’s ongoing commitment to investor protection amid evolving market dynamics.
Peirce acknowledged the need for a balanced approach, distinguishing between legitimate technological experimentation and projects that exploit NFTs for speculative purposes. Her stance contrasts with the SEC’s historically stringent enforcement posture, signaling a call for more nuanced regulatory policies.
The proposal comes as the NFT market continues to grow, with global transaction volumes exceeding $30 billion in 2024, according to industry data. NFT-based fundraising offers distinct advantages over traditional methods like venture capital or initial coin offerings (ICOs), including lower entry barriers and direct engagement with supporters. For startups, this approach provides a decentralized and efficient means of securing capital without intermediaries.
However, challenges persist, including legal ambiguities surrounding NFT classifications, risks of market manipulation, and concerns over illicit activities such as money laundering. Peirce’s recommendation, if implemented, could address some of these issues by establishing a clear compliance pathway for issuers.
Peirce’s comments signal a potential turning point for the role of NFTs in crypto financing. Should the SEC adopt her suggestion and issue specific guidelines, it could pave the way for broader acceptance of NFTs as a legitimate fundraising tool. This development would likely benefit both entrepreneurs and investors by enhancing regulatory clarity and supporting the growth of blockchain-based innovation. As of March 22, 2025, her proposal positions her as a forward-thinking voice within the SEC, advocating for policies that adapt to the rapidly changing digital asset landscape.