By: Brian Elzweig*, Lawrence J. Trautman**, Michael Conklin***
Abstract
The explosive rise and rapid decline of the NFT art market has intensified uncertainty over whether an NFT constitutes a security subject to regulation by the SEC. In the absence of clear rulemaking, the SEC has relied heavily on regulation-by-enforcement, producing inconsistent guidance and prompting widespread concern among NFT creators. This Article provides the most comprehensive examination to date of the legal landscape governing NFT art. It traces the evolution of blockchain-based digital art; analyzes major SEC enforcement actions; assesses artists’ attempts to obtain declaratory relief; and evaluates the significance of the landmark Adonis v. Yuga Labs decision, which rejected securities classification for certain NFTs under the Howey test. The Article further surveys pending legislative proposals—including the NFT Act, the Digital Asset Market Clarity Act, and the Responsible Financial Innovation Act—and highlights the growing role of no-action letters following the SEC’s 2025 DoubleZero determination. Finally, it explores how the second Trump Administration’s deregulatory stance is reshaping the SEC’s approach to digital assets, including new interpretative guidance. Synthesizing these developments, this Article proposes a practical framework for NFT artists to structure, market, and sell their works without triggering securities regulation, emphasizing economic-reality analysis, limitations on pooling and promotional claims, and strategic use of no-action relief.
Keywords: art, blockchain, crypto, cyber, digital art, Non-fungible tokens, NFTs, regulation, Securities and Exchange Commission, SEC, virtual art
* LL.M., securities and financial regulation, Georgetown University Law Center; J.D., California Western School of Law; BS, Florida State University. Professor Elzweig is Professor of Business Law and a Research Fellow of the Askew Institute for Multidisciplinary Studies at the University of West Florida. He may be reached at belzweig@uwf.edu.
** B.A., The American University; MBA, The George Washington University; J.D., Oklahoma City University School of Law. Mr. Trautman is Professor of Business Law and Ethics at Prairie View A&M University; Associate Professor, Texas A&M University School of Law (By Courtesy); External Affiliate, Indiana University Bloomington, Ostrom Workshops in Data Management & Information Governance, and Cybersecurity & Internet Governance. Professor Trautman is a past president of the New York and Washington, DC/Baltimore chapters of the National Association of Corporate Directors (NACD). He may be reached at Lawrence.J.Trautman@gmail.com.
*** J.D., LL.M., MBA, MSBA, MPhil; Lecturer, Texas A&M University School of Law; Assistant Professor of Business Law, Texas A&M University Central Texas. He may be reached at mconklin@tamuct.edu.