US federal agency issues legal advice on NFT investments

The United States Office of Government Ethics (OGE) issued a legal advisory recommending various instances when high-ranking government officials are required to disclose their investments in non-fungible tokens (NFTs).

In the legal advisory presented to the agency’s designated ethics officials, Director Emory Rounds III said that all NFT investments — both fractional (F-NFTs) and collectibles — worth $1,000 must be reported if “held for investment or production of income ” at the end of the reporting period.

The guidance issued by the federal agency also requires reporting of NFT investments if officials earned over $200 during the reporting period, adding that:

“Public financial disclosure filers must also disclose purchases, sales and exchanges of collectibles and F-NFTs that qualify as securities.”

The advice is primarily aimed at reporting NFT’s investments that represent “property”, for example real estate. However, OGE previously ruled that personal property, including clothing, electronics, or family photos — or NFTs representing the same — are not reportable.

Based on the circumstances disclosed by each file, collectibles may be required to be disclosed as financial investments. The rounds set down seven questions to help filers determine their reporting requirement, as shown below.

Filers have been directed to use OGE Form 278e for reporting NFT investments, where investors must include details such as value, type of income, and amount of income for all eligible NFTs. OGE revealed to continue to monitor progress in crypto and amend the above guidance as deemed necessary in the future.

Related: US lawmaker criticizes SEC enforcement director for not going after ‘big fish’ crypto exchanges

Congressman Brad Sherman advised the Securities and Exchange Commission (SEC) to pursue securities cases against cryptocurrency exchanges “against and against.”

Enforcement Director Gurbir Grewal highlighted the SEC’s efforts to investigate crypto exchanges, citing a case filed against Poloniex in August 2021. However, Sherman pointed out the need to pursue investigations against larger exchanges such as Binance and Coinbase:

“The big fish that run the big exchanges did many, many tens of thousands of transactions with XRP. You know it’s a security – that means they illegally operated a security exchange. They know it’s illegal because they stopped doing it, even though it was profitable. […] I hope you focus on that.”

In line with Sherman’s request for stricter oversight of crypto exchanges, both SEC Chairman Gary Gensler and Grewal cited concerns about cryptocurrency enforcement in the government department’s budget request for fiscal year 2023.