NFTs could soon be subject to new rules in N.J.

New Jersey is one step closer to passing new cryptocurrency and blockchain regulations after the state Senate Budget Committee advanced legislation requiring people to apply for a license to engage in digital assets business operations with the Bureau of Securities.

Though the bill advanced with unanimous support from both Democrats and Republicans on the committee, some lawmakers and lobbyists expressed concerns about how certain non-fungible tokens, or NFTs, would be treated under the current proposal.

NFTs are unique digital assets that “represent ownership of real-world items like art, video clips, music, and more,” according to Business Insider.

Like cryptocurrencies, NFTs are documented on a blockchain, a secure, decentralized digital ledger that records digital asset transactions. They have become increasingly popular in the last few years, functioning as a kind of digital collectible.

During Thursday’s hearing, Jon Potter, a lobbyist representing Dapper Labs and Sorare — two highly influential NFT companies — asked lawmakers to exempt certain digital art and sports card sellers from the bill’s broad “financial services” regulations.

“Our specific concern is that the bill’s definitions of digital assets and digital consumer assets unequivocally capture all sellers of NFTs regardless of whether there is financial utility or risk,” Potter said. “To be clear, I’m not sure if NFTs have ever been used for investment, payments or any financial services, but if and when that happens, they should absolutely be covered and regulated by this legislation. But digital baseball cards should not be.”