SEC Breaks Ground in NFT Regulation
The United States Securities and Exchange Commission (SEC) marked its debut intervention in the non-fungible token (NFT) space, targeting Impact Theory over unregulated securities trade.
The Details of the Charge
Impact Theory, an LA-based entertainment juggernaut, is under fire for allegedly trading $30 million in NFTs while asserting their future value surge. Notably, these NFTs weren’t synonymous with company shares, nor did they confer dividends to holders.
NFTs or Securities?
The SEC’s contention lies in Impact Theory’s tri-tiered NFTs, labelled “Founder’s Keys” and categorized as “Legendary,” “Heroic,” and “Relentless.”
Impact Theory conveyed that procuring a Founder’s Key was tantamount to company investment. They insinuated that these “investors” would witness considerable returns on their outlay, contingent on the company’s roaring success. Echoing aspirations akin to giants like Disney and YouTube, Impact Theory raked in a staggering $30 million from backers.
The SEC postulated that these NFTs were tantamount to security investment contracts. This viewpoint landed the company in hot water for potentially transacting unregistered securities via their NFT offerings.
The SEC commented, “We’ve charged Impact Theory with unregistered crypto asset securities trade via alleged NFTs, pulling in around $30 million from several investors.”
The settlement encompasses disgorgement, a pre-judgment interest, and a civil penalty. A Fair Fund will also be created to indemnify the aggrieved investors. The firm has been mandated to obliterate all Founder’s Keys, broadcast the order across their online channels, and nix future royalty transactions in the secondary market.
ZachXBT, a crypto aficionado, had previously flagged potential concerns with Impact Theory, likening it to a “growth mindset pyramid scheme” and one of the most blatant “NFT cash grabs.”
An Amicable Conclusion
Impact Theory’s helmsman, Tom Bilyeu, publicized a settlement accord with the SEC, ushering in the end of the investigation.
Bilyeu communicated his chagrin over the SEC’s broad-brush critique of “the technical novelties underpinning digital assets.” However, he remains bullish about the industry’s prospective landscape in the US.
