Dubbed the “NFTSPA” (pronounced “Nifty Spa”), it’s a set of guidelines that asks early investors to buy into limited edition NFTs now, for the promise of future NFTs down the line: the fundraiser gets a nice cash infusion, and the investor gets something that could become more valuable over time. Outlier Ventures is also claiming that as fundraising vehicles, NFTSPAs “should not” constitute securities offerings in the US.
“Should not” is the operative phrase here—the lawyers we spoke to beg to differ.
Some context: NFTs are non-fungible tokens that can be used to represent “proof of ownership” in just about any digital artifact, such as music, video, or image files. They’ve become increasingly popular in the crypto art and collectibles space; collectively, NFT sales generated $1.5 billion in sales in Q1 2021 alone, according to DappRadar.
As for ICOs , or “initial coin offerings,” they were crypto’s buzziest trend back in 2017. An ICO worked a little like an initial public offering, but instead of buying shares in a company, investors shelled out for crypto tokens. The expectation was that those tokens would become more valuable over time, and that the company issuing them would use investor funds to make it happen.
Many of these ICOs were deemed unregistered securities offerings by the SEC, since they failed to pass what’s known as the Howey Test—a rubric for determining whether or not something is an investment contract. The SEC even published a fake website to educate traders on the dangers of ICO scams. In the wake of the craze, the SEC determined that ICOs would need to be regulated just like any other securities offering.
Outlier Ventures has been working in this space for years, financing crypto startups and putting out research about fundraising tactics in the vein of ICOs . And crowdfunding efforts around NFTs have become more popular in recent months; one writer just raised $50,000 for a novel-as-NFT through a blockchain-based publishing platform called Mirror. Others are looking into ways to “fractionalize” NFTs — essentially breaking them apart — and selling those pieces to raise money.
The NFTSPA framework involves issuing a set of limited edition “Access NFTs” for early investors, which “give holders an exposure to the future franchise value of an NFT project.” That future value comes in the form of deluxe NFTs, called “Preferential NFTs,” as well as “the value inherent in the NFT itself,” which suggests that the Access NFT will be worth something on its own. Outlier is also readying smart contracts (chunks of code on the blockchain) with this model baked in, giving companies a template for new NFT releases.
Meet The NFTSPA ~ NFT Simple Purchase Agreement License.