Key Points:
Certain statements by the company and the buyer cited in the non-promising order constitute an investment contract. Even if NFT sales fully complied with Howey’s regulations, more than a series of events would be required to warrant enforcement action.
According to the trustees, as the first NFT settlement, this enforcement action raises many conundrums. The Commission should have addressed these questions long ago and provided guidance when the NFT began spreading. The SEC is long overdue to address these issues and provide advice as the NFT evolves. Discussing the NFT can now help the Commission handle the matter wisely.
Hester Peirce said that the NFT is not an asset class with a single use case and that different NFTs have many use cases, so the Commission may need a new category to determine how the law should be applied to securities for incentives and sales.
As previously reported, the SEC has accused Los Angeles entertainment company Impact Theory of issuing NFTs without registration, which is also the regulator’s first enforcement action against the NFT.
The Commission’s enforcement underscores the need for compliance and transparency in the evolving landscape of crypto assets and NFTs. It is one of the rare times the agency has noticed “interest” in this area.
In response to the allegations, Impact Theory agreed to a settlement with them paying fines of more than $6.1 million. In addition, the company will return the investment amount to the stakeholders and guarantee the destruction of the NFTs associated with the offering.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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