Do Pokémon Cards, NFTs Count As Securities? Here’s What SEC Chair Gary Gensler Told Congress
In a recent U.S. House Committee on Financial Services meeting, Securities and Exchange Commission (SEC) chair Gary Gensler clarified his views on whether a Pokémon card qualifies as a security. Gensler stated that a physical Pokémon card does not meet the criteria to be considered a security. However, when questioned about tokenized Pokémon cards, which are essentially non-fungible tokens (NFTs) representing Pokémon cards, Gensler responded that he would need more information to make a determination.
New York Representative Ritchie Torres pressed further, asking if tokenization could potentially transform a non-security transaction into a security transaction. Gensler referred to the Howey Test, which determines if a transaction is an investment contract. According to Gensler, if the public expects to profit from the efforts of others and funds are exchanged, it meets the core criteria of the Howey Test.
When specifically asked if a Pokémon card purchased at a retail store is a security, Gensler replied that it is not. However, Representative Torres accused Gensler of being “incoherent” and biased against blockchain technology, suggesting that tokenizing a Pokémon card does not automatically make it a security, even if it allows collectors to earn passive income.
This exchange is part of a larger examination of Gensler’s stance on digital assets and his regulatory approach. Critics, such as Congressman Tom Emmer, have accused him of favoring large financial institutions and stifling innovation. Gensler’s previous career at Goldman Sachs has also been scrutinized.
The clarification on whether a Pokémon card can be classified as a security has implications for the broader NFT market. As NFTs gain popularity and value, regulatory clarity becomes increasingly important for both investors and collectors.
It is worth noting that Gensler’s views are not definitive legal interpretations but offer insights into the SEC’s thinking on the matter. As the regulatory landscape continues to evolve, it will be crucial for market participants to stay updated on developments regarding the classification of NFTs and similar digital assets.
In conclusion, while a physical Pokémon card is not considered a security, the question of whether tokenized Pokémon cards, or NFTs, qualify as securities is still under consideration. The SEC’s views on these matters will have significant implications for the NFT market and the broader digital asset space. As stakeholders await further regulatory guidance, it is important to stay informed and adapt to the evolving landscape of alternative investments.
