The U.S. Securities and Exchange Commission (SEC) has increased its regulatory enforcement action against unregistered offerings of non-fungible tokens (NFTs). Over the past two weeks, the SEC announced two actions against major NFT platforms, notably Impact Theory, LLC and Stoner Cats 2, LLC. These enforcement measures derive from unregistered offerings of cryptocurrency asset securities by the entities.
Having examined the transactions, the SEC ruled that the NFTs in question were securities as per the Howey Test. With these announcements, the SEC joins a growing global trend of increased regulation over this comparatively new asset class, highlighting the complexity of establishing a clear regulatory framework for this innovative financial asset.
Details of the enforcement actions reveal that the SEC’s focus is not just on outright fraud, but on ensuring that offerings in the cryptocurrency realm undergo the same regulatory scrutiny as traditional securities. In these cases, both Impact Theory and Stoner Cats 2 did not register their offering as potentially required by the federal law.
This recent flurry of enforcement actions reinforces the need for NFT platforms and other technology and finance companies involved in the blockchain and cryptocurrency sectors to understand securities laws and the potential implications attached to their business decisions.
For more information on the SEC’s enforcement actions and the broader scope of securities regulation for NFT offerings, see the full update provided by Reed Smith on JD Supra.