  What you need to know today in crypto and beyond August 24, 2021 Sponsored by  Welcome to The Node.
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–Daniel Kuhn
Today's must-reads Top Shelf  GOING STRONG: Blockstream has raised $210 million in a Series B funding round that values the bitcoin technology firm at $3.2 billion. The capital will fund expansion into manufacturing mining chips. U.K. investment management firm Baillie Gifford and iFinex participated in the round. Blockstream also said it had acquired the intellectual property and key employees of Israeli bitcoin mining hardware manufacturer Spondoolies. Terms were not disclosed.
GAME TIME: The FTX.US exchange has signed a $17.5 million, 10-year agreement with Cal Athletics, the athletic department of the University of California Berkeley, for naming rights at the California Memorial Stadium. Cal Athletics’ multimedia rights holder Learfield will accept the payment in cryptocurrency on behalf of the university. The field will be known as the “FTX Field” and the deal is FTX.US’s first college-related naming rights sponsorship.
JOINING FORCES: Three crypto-focused firms in Switzerland – Crypto Finance, InCore Bank and Inacta – have joined forces to use the Tezos blockchain to offer tokenized assets to institutional clients. InCore Bank also announced the launch of institutional-grade storage, staking and trading services for the native asset of the Tezos blockchain.
CONFIRMED: El Salvador President Nayib Bukele confirmed that the use of bitcoin as legal tender will not be mandatory, backtracking on a controversial provision of his original plan. Echoing El Salvador’s finance minister, Alejandro Zelaya, Bukele said the government would not force any of the nation’s residents to receive bitcoin as a form of payment.
–Helene Braun
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Overheard on CoinDesk TV Sound Bite  “People miss that there is an enormous amount of unused green power in the world."
–Blockstream CEO Adam Back on ESG concerns, on CoinDesk TV’s “First Mover.”
What others are writing... Off-Chain Signals 
–H.B.
A Message from BlockBank  Looking for a crypto wallet with DeFi and CeFi coupled with banking and debit cards? Look no further, V2 of BlockBank’s super application launches this fall, offering access to:
BlockBank has already obtained licenses for Estonian virtual currency service provider, and Australian digital currency exchange and payment service provider.
Putting the news in perspective The Takeaway  Are NFTs Securities? And why are some of them trying so hard to be? Good morning readers, David Z. Morris here filling in for Daniel Kuhn, who is on a well-deserved vacation.
NFT mania has reached such a fever pitch (see yesterday’s news of Visa buying an NFT) that people are now comparing it to the initial coin offering boom of 2017. Of course there’s one big difference: ICOs were touted as a chance to buy what amounted (very roughly) to a share in a project.
That meant these were, as many observers were happy to point out at the time, unregistered securities offerings, leading to a series of crackdowns by the SEC and other regulators. Many of those enforcements took three or four years to work their way to a judgment or settlement, which sometimes reached into the millions of dollars, even when no outright fraud was alleged.
So if you’re an NFT maker, you might reasonably hear a nagging voice in the back of your head wondering: Am I going to wake up three years from now to the U.S. Securities and Exchange Commission knocking on my door?
First, a caveat: I’m not a lawyer, and those who are will get plenty of billable hours out of addressing the question of NFT regulation in a definitive way. But I have been reporting on financial regulation for a while, which is about the best definitely-not-legal-advice you can expect for free in an email newsletter.
Anyway, here’s the good news: Most NFTs currently circulating are almost certainly not securities. A security is generally defined as a claim on the future proceeds from the work of others, while an NFT is usually the product of work that has already been undertaken. The closest and most obvious comparison is to a painting: Even if you buy it because you think the value of the thing will go up, you still only bought the thing itself, rather than any sort of secondary claim. The SEC is unlikely to take much interest.
Which makes it all the more strange that a good number of NFT series or adjacent projects are going out of their way to turn their nice little non-security collectibles into things the SEC would definitely take an interest in.
The most straightforward way that NFTs can become securities, or at least security adjacent, is through fractionalization. Fractionalizing an NFT means allowing multiple investors to buy portions of it instead of requiring that one person or entity own the whole thing. With CryptoPunks in particular regularly reaching multimillion-dollar valuation, the appeal of just owning a piece of one as an investment is clear (even if to my mind it’s against the spirit of the entire endeavor, on which more in a bit). At least one marketplace, Fractional.art, is pursuing the idea.
We already know that these organizations are within the purview of the SEC. We know because there are already significant companies, particularly Masterworks, which fractionalize physical art for investors. Masterworks registers its offerings with the SEC, though the company is not a registered broker. Nominally that’s because it is primarily an issuer – though it seems to be running a public over-the-counter board for art shares on its website, so I guess that’s also fine? Seems weird to me but, again, I’m not a lawyer.
But there are other NFTs moving much more clearly into securities territory, particularly by offering revenue distributions to current holders. Two examples are Buzzed Bears and Lazy Lions, which both attach certain governance rights to ownership. That can include the right to redistribute the profits from future sales to current holders. Buzzed Bears even has a staking system that lets you “hibernate” your bears to increase returns.
Now, the thing that must be said is that these are worthy experiments, part of the potential of NFTs to be something weird and novel. You can build a lot of features into them, and a lot of those are interesting. Most obviously, the idea that owning an NFT can get you special access to an artist or band has a lot of potential.
But it will be a complicated and likely messy process to determine the boundary between “an NFT with some cool secondary features” and “an NFT that is definitely a security.” And by “messy,” I mean “the SEC might sue some people.” The projects on the market now are likely too small for any such attention (Lazy Lions' initial sale netted a reported $380,000), but I’d wager we’re about to see much bigger targets given the market’s vibrancy.
And here’s the other thing: These security NFTs may cause problems down the road for the individual issuers, but they’re even more likely to become a problem for NFT marketplaces like OpenSea. You need a special license to sell securities, and it comes with all sorts of more or less burdensome requirements about tax reporting and the like. OpenSea could certainly get that registration; plenty of crypto projects that aren’t nearly as big have done it. And the various regulatory requirements, while burdensome, are certainly doable.
The bigger loss, I think, would be to the spirit of the NFT mania. One reason it’s fun is that, yeah, some people are “investing” and getting rich, but it’s also all just kind of a big, fun joke, and in many cases a genuinely creative process. OpenSea and other NFT markets have the feel of a playground, and that’s what makes it fun, and – here’s the real catch – the fun is what makes it valuable, both monetarily and just as a human activity. Turning that into just another batch of magic internet money-beans would be a downgrade.
–David Z. Morris
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