The United States Securities and Exchange Commission’s (SEC) first enforcement action on a nonfungible token (NFT) project triggered responses from community members, pointing out how the decision could be “problematic,” and how many NFT projects fit the description and may be next on the SEC’s hit list.
On Aug. 28, the SEC charged the entertainment company Impact Theory for allegedly conducting the sales of unregistered securities. According to the SEC, the NFTs called “Founder’s Keys” were sold as an “investment into the business.” The company allegedly raised around $30 million through the sales.
The SEC believes that the NFTs that were sold were investment contracts and qualified as securities. The filing noted that the firm violated the Securities Act of 1933 for selling the NFTs without registration.
Not everyone agrees with the SEC’s decision. On Aug. 28, SEC commissioners Hester Peirce and Mark Uyeda also wrote their dissenting statement against the SEC’s action. The duo argued that the “handful of company and purchaser statements cited by the order are not the kinds of promises that form an investment contract.”
The SEC filed and settled its first NFT enforcement action today: https://t.co/RwaMGueBZK Here’s Commissioner Uyeda’s and my dissent: https://t.co/WhLKX3Tl8X
— Hester Peirce (@HesterPeirce) August 28, 2023
In addition, the SEC commissioners also highlighted that the SEC does not routinely bring enforcement actions against the sellers of “watches, paintings, or collectibles” that also give out vague promises to “build the brand” and increase the resale value of the items.
Apart from this, the event triggered responses from community members saying that many NFT projects fit the description put out by the SEC. According to a researcher from the popular NFT collection Azuki, the case may be a big deal as some of the details may apply to “quite a few” NFT projects out there.
The SEC suing Impact Theory for selling NFT securities is a pretty big deal.
Because if you take a closer look at the details, the description applies to quite a few NFT projects – probably also to one you are holding right now. pic.twitter.com/75kY0QQIDG
— wale.swoosh (@waleswoosh) August 28, 2023
Other members of the community posted that many NFT project founders put out messaging that’s very similar to what Impact Theory put out that encourages potential buyers and promising profit as the project succeeds.
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