With crypto legislation potentially coming to a standstill due to Congressional gridlock and the upcoming retirement of Rep. Patrick McHenry, Fortune reached out to Financial Markets and Funds senior counsel Gary DeWaal regarding the regulatory status of non-fungible tokens (NFTs). Gary offered two reasons why NFTs and collectibles are not securities — (1) their non-fungibility or uniqueness sets them apart from traditional securities like stocks or bonds because every investment is an investment in a unique asset — there is no common enterprise. Also, (2) an NFT's rise in value is not necessarily tied to an underlying project; rather its value is tied to an individual something like baseball cards or beanie babies.

He added that specific facts and circumstances could result in a collectible being classified as a security. For example, in a collectible project, where promoters create and maintain an NFT's value, NFTs could resemble securities. Ideally, the Securities and Exchange Commission (SEC) would offer clear guidance on the classification of collectibles; however, he says this is not likely to happen any time soon.

"So why isn't a Pokémon card a security?," Fortune, December 6, 2023

*Subscription may be required for article access.