The U.S. Securities and Exchange Commission is suing a non-fungible token challenge, marking the first time the authority has taken enforcement motion towards a company for promoting unregistered NFTs.
Impact Theory, a Los Angeles-based media company, “encouraged potential investors to view the purchase of Founder’s Key [the company’s NFT project] as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts,” the SEC order mentioned, including that the digital property provided to traders have been within the type of “investment contracts” and subsequently “securities.”
All in all, Impact Theory raised round $30 million from tons of of traders, together with these within the U.S.
The case is critical to the crypto business, which has been hit with a flurry of regulatory clampdowns within the U.S., because it affords a clue for the way NFTs could possibly be regulated sooner or later. Many different NFT initiatives have used language that’s much like how Impact Theory marketed its digital property, that’s, touting their blockchain-based identifiers representing digital asset possession as funding alternatives.
Impact Theory neither admitted nor denied the SEC’s findings however agreed to pay greater than $6.1 million in penalties to settle the allegations. The order additionally established a “Fair Fund” to compensate impacted traders in addition to required Impact Theory to destroy all of its Founder’s Key NFTs and remove any royalties that it’d accumulate from secondary market transactions.
The company shouldn’t be giving up on its NFT endeavor. In an X post, the founding father of Impact Theory careworn that his company will guarantee its future digital property might be of utility moderately than monetary functions:
“We will operate our go-forward business consistent with our good faith best understanding of all applicable laws, rules, and regulations, will make clear that all of Impact Theory’s digital assets are collectibles with utility within the exciting new landscape of Borderless Entertainment, and will fiercely discourage people from treating our digital assets as anything other than what they are—collectibles with utility. We will have more news on this in the coming weeks and months.”