Over the past two weeks, the U.S. Securities and Exchange Commission (“SEC”) charged non-fungible token (“NFT”) platforms Impact Theory, LLC (“Impact Theory”) and Stoner Cats 2, LLC (“SC2”), crypto asset securities In respect of their unregistered offering. In both enforcement actions, the SEC determined that NFTs were securities under happen Examination
On August 28, 2023, the SEC accused Los Angeles-based media and entertainment company Impact Theory of conducting an unregistered offering of NFTs in violation of federal securities laws. According to the SEC, Impact Theory marketed these NFTs as investments, meaning investors would profit if Impact Theory was successful in its efforts. The SEC concluded that these NFTs were investment contracts and, thus, securities under happen Examination Impact Theory and the SEC entered into a consent decree settling the charges by paying disgorgement, interest, and civil monetary penalties totaling approximately $6 million.
On September 13, 2023, the SEC doubled down on its enforcement in the NFT space, accusing SC2 of conducting an unregistered offering of NFTs that raised nearly $8 million from investors to finance an animated web series called Stoner Cats. Gathered. According to the SEC, on July 27, 2021, SC2 offered more than 10,000 NFTs and sold each for about $800, which sold out in just 35 minutes, generating approximately $8.2 million. The SEC found that SC2 offered and sold Stoner Cats NFTs as investment contracts. happen In testing, it was required to register the offering and sale of the Stoner Cats NFT with the SEC. Gurbir S., Director of the SEC’s Enforcement Division. Grewal emphasized that “It is the economic reality of the offering – not the labels you put on it or the underlying commodities – that guides the determination of the investment contract and therefore the security.” In this case, SC2’s marketing. The practices and promises of potential profits led the SEC to classify Stoner Cats NFTs as securities, which were not registered.
Notably, SEC Commissioners Hester M. Pierce and Mark T. Ueda dissented in both cases, and called for more clarity for artists and other creators who want to explore the NFT sphere. This open disagreement among SEC commissioners underscores the need for clear rules rather than regulation by enforcement.