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US SEC Goes After NFTs In A First Of Its Kind Enforcement Action

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Recent events have shown the US SEC might be going after non-fungible tokens (NFTs). In a recent press release, the SEC charged Los Angeles-based media and entertainment company Impact Theory LLC for unregistered securities in the form of NFTs.

SEC Goes After Impact Theory NFTs

Impact Theory was one of many entertainment firms that launched its own NFT collection when the issuance and sales of NFTs exploded in 2021, taking advantage of the growing popularity of non-fungible tokens at the time.

The proceeds from the sale of this collection were reportedly up to $30 million and according to the SEC’s charges, Impact Theory had promised buyers that the non-fungible tokens would appreciate in value, promising that the purchase of the tokens meant investors were making investments in the company. Because of this act, the regulator believes the tokens could be classified as investment contracts and, thus, securities.

Following the action from the SEC, Impact Theory has agreed to a cease-and-desist order without accepting or denying the charges. As part of the agreement, Impact Theory had agreed to forgo any royalties from secondary sales of its NFTs and destroy the 2,936 NFTs it had repurchased from the original collection of 13,921 NFTs. The company also agreed to pay a $6.1 million penalty.

Third, and most interesting to me, there were 13,921 NFTs. IT repurchased 2,936 NFTs, not sure from the order how much else IT had versus what is in the secondary market. The interesting part is the reference to the secondary market. The order does not allege those…3/5

— Fred Rispoli (@freddyriz) August 28, 2023

Dissent From SEC Commissioners

Two SEC commissioners have dissented from the SEC’s decision to take action against Impact Theory NFTs, arguing that the SEC’s enforcement action raises many difficult questions. Go to Source to See Full Article
Author: Scott Matherson

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