As it prepares to launch its Solana-focused NFT marketplace, crypto exchange FTX has stated that it will avoid projects that offer royalties.
According to a recently published FAQ, “we will reject any NFT from a collection/project that distributes or advertises the distribution of royalties to NFT holders.”
When it comes to NFTs, royalties are a relatively new concept. With so many projects out there, many are looking to add value to their token holders and experimenting with different ways to do so. One method is to return to token holders a portion of the fees generated when NFTs are bought and sold on marketplaces, which is known as royalties. The idea is that this will encourage buyers to invest for the long term. However, market participants are concerned that this may cause the JPEGs to violate US securities laws.
FTX. “We will list NFT projects that pay royalties to artists/creators, but we cannot list projects that distribute royalties from collection sales to NFT holders,” said US president Brett Harrison. A token that guarantees you a percentage of the proceeds from the sale of a pool of assets begins to resemble a security.”
NFT marketplace centered on Ethereum OpenSea has similar reservations. Its terms and conditions list a variety of NFTs that may be unsuitable for its platform, including those redeemable for financial instruments and those that “entitle owners to financial rewards.”
These concerns prompted OpenSea to halt the buying and selling of the Turtle DAO NFT collection — which awards tokens to NFT holders — last week, though the company did not specify which specific term the project violated.