We have previously addressed the recent indictment against Nathaniel Chastain, a former executive of a major NFT marketplace, for insider trading involving NFTs. The indictment charges Chastain with one count of wire fraud and one count of money laundering. It does not allege that the NFT is a security. It does not allege violation of the insider trading laws under securities law. Since then, as we have reported, that SEC has been investigating lack of insider trading policies for NFT/crypto exchanges.

All of this has lead many people to ask whether these charges can stick if the NFT is not a security. It is likely Chastain will at least try to argue this. But will he prevail?

The answer may depend in part how the 1987 Supreme Court case Carpenter v. United States is interpreted. While the Carpenter case was based on insider trading of securities, it also contained a mail and wire fraud charge as well. The analysis of the mail and wire fraud in that case likely will be relevant in the Chastain case. See here for more information on that case.