In this week's episode of The Legit Ledger, Sheppard Mullin attorneys Jim Gatto and Gabe Khoury discuss the current state of NFT regulation, including misconceptions regarding the regulatory status of NFTs, the conditions under which an NFT might be considered a security, which regulatory agencies market participants should be watching, and more.

 

About Jim Gatto

Jim Gatto is a partner with the Intellectual Property Practice Group in Sheppard Mullin's Washington, D.C. office, where he co-leads the Blockchain & Fintech Team. His practice focuses on blockchain, interactive entertainment, digital art, AI, and online gambling. He advises clients on IP strategies, development and publishing agreements, licensing and technology transaction agreements, and tech regulatory issues. Jim has been involved with blockchain since 2012 and has been recognized as a thought leader by leading organizations, including Best Lawyers in America 2021-2022; Cryptocurrency, Blockchain and Fintech Trailblazer, The National Law Journal, 2018; and Thought Leader on Blockchain & Cryptocurrencies, National Law Review, 2018. 

 

About Gabe Khoury

Gabe Khoury is an associate with the Corporate Group in Sheppard Mullin's Washington, D.C. office. As Lead Associate of the Blockchain and Digital Assets team, he handles regulatory compliance issues relating to the use of blockchain technology, social media, Web3.0, video games, online gambling, virtual goods and currency, social tokens, decentralized autonomous organizations, decentralized exchanges, cybersecurity, privacy, Esports, the metaverse, money transmission, financial technologies, NFTs, and artificial intelligence. Gabe holds certifications in NFT technology, Metaverse Technologies, and Blockchain Law from the Blockchain Council.

 

What We Discussed in This Episode:

• People frequently assume NFTs aren't subject to many of the same regulatory issues relevant to cryptocurrencies. Is that assumption accurate?
• Have there been any NFT-related regulatory enforcement actions?
• Has the SEC issued any guidance on NFTs?
• When might NFTs be subject to securities laws?
• How does FinCen's guidance on the applicability of the Bank Secrecy Act to convertible virtual currencies apply to NFTs?
• How does the Department of Treasury's recent study on the facilitation of money laundering and terrorist financing through the art trade relate to NFTs?
• Are there any sanctions-related issues that apply to NFTs?
• Many traditional video game companies have faced lawsuits over the alleged use of gambling mechanics. How might the growing use of NFTs in blockchain-based games play into that trend?

 

Resources:

• Tokenization and the Law: Legal Issues with NFTs

• OFAC Enforcement Impacts NFTs: As Crypto Enforcement Ramps Up to Combat Ransomware, Robust Compliance is Key 

• The Crypto Enthusiast and The Regulator: What OFAC is, Could Be, and Should Be Doing to Regulate CryptoCurrencies

• When Does Cryptocurrency Mining Create a Taxable Event? IRS Does Not Clarify

• Money Laundering and High-Value Art: Treasury's Study Discusses Financial Crimes and NFTs

• SEC Announces 2022 Examination Priorities, Includes Crypto-Assets 

• Crypto and Russia Sanctions: A Primer and Survival Guide For Crypto Companies

• March 2022 Crypto Enforcement Actions Roundup

• April 2022 Crypto Enforcement Actions And Regulatory Guidance Roundup 

• May 2022 Crypto Enforcement Actions and Regulatory Guidance Roundup 

 

Sheppard Mullin's Law of the Ledger blog is designed to provide breaking news, insights, legal analysis, and resources on legal issues related to blockchain technology and the digital asset sphere. Subscribe now! 

 

Contact Information:

James G.Gatto

Gabe Khoury