Not clear whether this is even illegal, though. As long as they refer to existing objects, they're not securities, and since they're all different, they're not commodities. So they escape both SEC and CFTC regulation in the US. (The UK's Financial Conduct Authority, though...) That's the whole point of NFTs.

In 2019-2020, the SEC cracked down on Initial Coin Offerings. They grandfathered in the early coins, and shut down some out and out scams. Then the SEC started sending out letters, "explain to us why your ICO isn't a security offering requiring registration as an IPO". Suddenly there was a huge drop in ICOs.

So then came NFTs, which looked like they were going to evade regulation. Then some of the NFT issuers started making NFTs which looked like IPOs. Selling land in virtual worlds that don't exist yet, for example. That's a no-no. That passes the Howey Test - value paid into a common enterprise, with the expectation of future gains, to be derived from the efforts of others. That's the definition of an investment in the US. If the value of an NFT depends on the future efforts of the organization involved with the NFT, it's a security.

That doesn't quite seem to be the case here, though. It's legal, and fairly common, for an art dealer to front-run artworks or have shill buyers. You're supposed to know what the art is worth.

Selling NFTs in bulk, though, might start to look like a security for regulation purposes. Selling fractional shares in NFTs definitely is. The SEC is working on a guidance memo. If you're starting up an NFT, you definitely need some time with a securities lawyer. Remember, the whole point of most NFTs is to try to evade securities regulation. That comes with serious legal risks.

[1] https://www.howeycoins.com