To ensure that your event mascot NFT is not considered a financial transaction as a sports digital asset, you can take the following circumvention measures to ensure compliance:
- Highlight the “collectible” attribute of NFT and avoid investment and speculation
- Focus on promoting NFT as a souvenir or fan collection of sports events, rather than an investment tool.
- Avoid using terms such as “value-added” and “return on investment”, and do not encourage users to buy NFTs for future gains.
- Do not promise NFT holders that they can make a profit when resold in the future, which may cause NFTs to be considered securities.
- Avoid NFTs involving securities attributes (Howey test)
The U.S. Securities and Exchange Commission (SEC) uses the Howey test to determine whether an asset is a security. If the following four conditions are met, it may be classified as a security:
- Investment of money: Users spend money to buy NFTs.
- Common enterprise: The value of NFTs is linked to business operations or the efforts of others.
- Expectation of profits: Users buy NFTs to gain future appreciation or dividend income.
- Efforts of others: The profits of NFT holders come from the management and operation of the company or team.
How to avoid?
- NFTs are only used as collectibles or sports event peripheral products, and holding NFTs does not generate profits or dividends.
- Do not share event revenue or commercial returns with NFT buyers.
- Make it clear that NFTs are only used for digital collections, not investment tools.
- Avoid NFTs as “payment tools”
If NFTs can be used to pay for other services or goods, payment licenses or virtual currency supervision may be involved.
- NFTs can only be exchanged for official sports peripheral products within the platform, and cannot be widely traded as a payment tool.
- When NFTs are exchanged for physical goods (such as T-shirts and sports equipment), sales tax regulations must be followed to avoid financial compliance issues.
- NFT transactions are limited to official platforms to avoid becoming “universal digital currencies” or freely tradable tokens.
- Avoid NFTs from becoming tradable “Securities NFTs”
- If NFTs are only used as sports souvenirs or event peripherals and do not involve returns, they are not securities.
- Avoid secondary markets binding NFT value, for example:
- Do not provide an official repurchase mechanism for NFTs.
- Do not promote the “value-added potential” or “investment value” of NFTs.
- Do not provide additional financial incentives to NFT holders, such as dividends or future cash rewards.
- Comply with New York State law and avoid financial regulation (BitLicense)
New York State has strict regulations on virtual asset transactions, and companies involved in financial transactions may need BitLicense.
- Since NFTs are not “virtual currencies”, if NFTs are only used as collectibles and are not widely traded, BitLicense is not required.
- Avoid NFT platforms storing or hosting user funds, otherwise they may involve “money transmission business” regulation.
- NFT transactions are limited to commodity exchanges, not cash transactions, which can reduce the risk of being classified as financial transactions.
- Ensure tax compliance (sales tax)
- New York State may impose sales tax on NFT transactions if NFTs are considered “digital goods” or redeemable for physical goods.
- Ensure that sales tax is clearly calculated when NFTs are redeemed for sports goods to avoid tax compliance issues.
Conclusion: How to avoid financial transaction regulation
✅ As sports event souvenirs and collectibles, not investment tools.
✅ NFTs do not have profit returns, investment value or tradability.
✅ Avoid NFTs from becoming payment tools or securities assets.
✅ Ensure that NFTs are only used to redeem official sports merchandise, not virtual currencies or tokens.
✅ Comply with New York State tax regulations to ensure sales tax compliance.
If your NFT involves more financial attributes in the future, such as being freely tradable, providing dividend income, or having investment attributes, it is recommended to consult a New York State lawyer to ensure compliance.
Notes on using digital wallets such as MetaMask in New York State
In New York State, using digital wallets such as MetaMask to trade NFTs on your website may involve regulatory requirements for financial transactions. To ensure compliance, it is recommended that you take the following steps:
- Determine the legal nature of NFTs: Evaluate whether the NFTs you are trading may be considered securities, commodities, or other regulated financial assets. If so, you may need to comply with the corresponding financial regulatory provisions.
- Comply with anti-money laundering (AML) and know your customer (KYC) regulations: If your platform involves financial transactions, you may need to implement AML and KYC procedures to prevent illegal activities.
- Tax compliance: NFT transactions may involve tax obligations, including sales tax and capital gains tax. Make sure to comply with New York State and federal tax regulations.
Because the regulatory environment in the NFT field is complex and constantly changing, it is recommended that you consult a professional attorney familiar with New York State law to ensure that your platform operations comply with all applicable laws and regulations.
About NFTs of event mascots as digital assets of sports events
From a legal and regulatory perspective, your NFT is mainly used as a collectible of sports events and can be used to exchange for T-shirts or sports goods with sports event logos. This is generally not considered a financial transaction, nor is it a security or a regulated financial asset, but the following points should still be noted:
- Does it constitute a security?
The U.S. Securities and Exchange Commission (SEC) usually uses the Howey test to determine whether an asset constitutes a security. If your NFT:
- Is only a digital collectible, with no expectation of investment or appreciation return;
- The main purpose of users buying NFTs is to collect or exchange physical goods, not for speculation;
- Does not involve profit sharing or equity (for example, NFT holders will not receive dividends from sports event earnings);
Then, such NFTs are generally not considered securities and are therefore not subject to SEC securities regulations.
- Is it a virtual currency or financial transaction?
If your NFT is only used to redeem goods (such as T-shirts or sports equipment) and not a means of payment or investment tool, then it will not be considered a virtual currency or financial transaction, and you do not need to obtain a New York State virtual currency license (BitLicense).
However, if your NFT can:
- Circulate between different merchants as a payment method;
- Used in secondary market transactions and bring added value returns;
Then financial regulation may be involved and even additional licenses may be required.
- New York State Sales Tax and Goods Redemption Compliance
Since your NFT can be used to redeem physical goods (such as T-shirts, sports equipment), you may need to comply with New York State sales tax regulations. Key considerations include:
- Whether the NFT itself is subject to sales tax (New York State has specific regulations on sales tax for digital products);
- Whether additional taxes need to be paid when redeeming NFTs (whether sales tax needs to be collected when redeeming T-shirts or sports equipment).
It is recommended to consult a New York State tax professional to ensure tax compliance.
- What procedures are required to comply?
- Ensure that the marketing method of NFT highlights its collectible attributes and avoids promoting “investment returns” or “value-added potential”;
- Avoid NFTs from being circulated in multiple merchants as a payment tool, otherwise payment license requirements may be involved;
- Comply with tax and consumer protection laws and ensure transparent disclosure of NFT exchange rules;
- KYC/AML (if applicable): If the NFT transaction amount is large, it is recommended to consider basic KYC (know your customer) and AML (anti-money laundering) measures to reduce legal risks.
Conclusion
Your NFT is mainly used as a collectible and can be exchanged for sports peripherals. It is usually not considered a financial transaction and does not require a financial license. However, it is still necessary to comply with tax compliance, consumer protection and advertising regulations to ensure legal operations in New York State.
If your NFT involves secondary market transactions, financial functions or investment returns in the future, it may trigger additional regulatory requirements. It is recommended to pay attention to changes in laws and regulations at any time and consult professional lawyers to ensure compliance.