Do Pokémon Cards, NFTs Count As Securities? Here's What SEC Chair Gary Gensler Told Congress

Securities and Exchange Commission (SEC) chair Gary Gensler, on Monday said that a Pokémon card is not a security in his view.

What Happened: Gensler was questioned by New York Representative Ritchie Torres during a U.S. House Committee on Financial Services meeting.

When asked about a physical Pokémon card, Gensler confirmed that it does not qualify as a security. However, his response became less clear when Torres brought up tokenized Pokémon cards, essentially Pokémon card NFTs, to which Gensler responded that he would need to know more.

Torres continued his line of questioning, seeking clarification on whether tokenization could convert a non-security transaction into a security transaction. "Suppose I were to purchase a Pokémon card," said Ritchie. "Would doing so constitute a security transaction?"

Responding to this, Gensler mentioned the Howey Test, a benchmark for determining if a transaction can be classified as an investment contract. "If the investing public is anticipating profits based upon the efforts of others and exchanging funds, that's the core of the Howey Test," Gensler responded.

Torres asked Gensler whether the card was a security, to which Gensler replied, "At a retail store, that's not a security."

See Also: EXCLUSIVE: Wolf Of Wall Street Jordan Belfort Says He Was Right About Crypto Being A Scam, But Bitcoin Is

Torres, unsatisfied with Gensler’s responses, accused them of being “incoherent” and displaying a bias against blockchain technology according to Decrypt.

Torres contended that tokenizing a Pokémon card wouldn’t necessarily transform it into a security, even though it bridges the physical and digital worlds, allowing collectors to earn passive income from their collectibles.

Why It Matters: Representatives of the House Financial Services Committee interrogated Gensler for nearly five hours.

This isn’t the first time Gensler’s stance on digital assets has been challenged. Congressman Tom Emmer (R-MN) criticized Gensler, suggesting that his regulatory approach favored large financial institutions and was harmful to innovation. Gensler’s extensive 18-year career at Goldman Sachs was also brought into question.

Price Action: At the time of writing, Bitcoin BTC/USD was trading at $26,365.36, up 0.43% in the last 24 hours, according to Benzinga Pro.

Photo by Oleschwander on Shutterstock

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