The Securities and Exchange Commission (SEC) has finally laid its ponderous paws on the world of NFTs. In a nutshell, it has charged YouTuber, Impact Theory, with selling unregistered securities in the shape of Non-Fungible Tokens.
Back in late 2021, while in the process of attempting to “build the next Disney,” the ‘education and entertainment’ company offered subscribers the chance to purchase NFTs in the shape of 3 tiers of ‘Founders Keys.’ At the time, raising a reported $30 million from the sale of 13,572 NFTs. However, Impact Theory chose to tread some hazy ground by inferring that the tokens represented an ‘investment’ in the company.
Taking this statement to heart, the SEC labored into action, eventually concluding that the NFTs represented investment contracts, and therefore securities. As a result, the SEC judged that the tokens violated the Securities Act due to Impact Theory selling them without prior registration.
Following the SEC’s investigations, Impact Theory has agreed to fork out in excess of $6 million to settle the case. However, as of writing, it has not formally admitted to the allegations that the SEC put forwards. In addition, the L.A. based media firm has also established a fund to compensate those that engaged with its NFT initiative, and potentially reclaim and burn the tokens involved.
Will be live in Discord later to answer questions. @impact_theory is pleased to announce that we have reached a settlement with the U.S. Securities and Exchange Commission in which we resolved the SEC’s investigation. We are happy to have concluded the SEC’s investigation, so…
— Tom Bilyeu (@TomBilyeu) August 28, 2023
The SEC Opens a Major Can of Non-Fungible Worms
Despite the SEC ruling being the first of its kind in the NFT world, Impact Theory is not alone in its non-fungible promises. In what became a common trend, a large number of projects have similarly offered a share in their company, as well as future dividends, in the shape of NFTs. Essentially, seeing the technology as a way of tracking support in their endeavors, and rewarding loyal followers.
However, as the SEC ruling implies, many of these projects could now fall foul of the Securities Act and face similar charges. So, with a precedent now in place, this latest investigation may forecast a turbulent period for a number of players in the NFT space.
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