{"id":21666,"date":"2023-08-29T02:10:58","date_gmt":"2023-08-29T02:10:58","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/nft\/sec-settles-first-nft-enforcement-action-impact-theory-fined-6-1-million\/"},"modified":"2023-08-29T02:10:58","modified_gmt":"2023-08-29T02:10:58","slug":"sec-settles-first-nft-enforcement-action-impact-theory-fined-6-1-million","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/nft\/sec-settles-first-nft-enforcement-action-impact-theory-fined-6-1-million\/","title":{"rendered":"SEC Settles First NFT Enforcement Action, Impact Theory Fined $6.1 Million"},"content":{"rendered":"
At long last, the U.S. Securities and Exchange Commission (SEC) has officially taken (and settled) its first-ever NFT enforcement action against LA-based entertainment company, Impact Theory.\u00a0<\/p>\n
According to the SEC\u2019s press release issued on August 28, Impact Theory violated federal securities laws by offering and selling three tiers of NFTs that generated $30 million from hundreds of investors across the U.S. \u2013 without registering them.\u00a0<\/p>\n
The SEC\u2019s Order stated that from October to December 2021, Impact Theory offered and sold three tiers of NFTs, known as \u201cFounder\u2019s Keys\u201d \u2013 Legendary, Heroic, <\/em>and Relentless<\/em>.\u00a0<\/p>\n As part of the offering, Impact Theory reportedly encouraged potential investors to consider their purchase of a Founder\u2019s Key an investment into a business it was building that it described as \u201cthe next Disney.\u201d\u00a0<\/p>\n The SEC believed that these NFTs, as marketed and promoted, were considered \u201cinvestment contracts\u201d under the Howey <\/em>Test, and therefore, violated federal securities laws and an unregistered security offering.\u00a0<\/p>\n The golden question which continues to haunt investors still has regulators and lawmakers going back-and-forth as they painstakingly are working to determine which regulatory body \u2013 SEC or CFTC \u2013 should govern the regulation of digital assets and the parameters in which both bodies would operate within. <\/p>\n While most digital assets are treated as \u201csecurities,\u201d there is still a required analysis that doesn\u2019t make that question black-and-white \u2013 and it centers around the \u201cinvestment contract\u201d element of the Howey Test<\/em> \u2013\u00a0<\/p>\n (1) was there an investment of money?<\/strong><\/p>\n (2) was it invested into a \u201ccommon enterprise?\u201d<\/strong><\/p>\n (3) was there an \u201cexpectation of profits\u201d that would be derived from the efforts of the promoter or a third party?<\/strong><\/p>\n Regardless of that analysis, previous enforcement decisions haven\u2019t clarified the specific criteria or focal points in which the watchdog concentrated its analysis on.<\/p>\n While Impact Theory did not admit nor deny the charges, it did agree to a cease-and-desist order, in addition to agreeing to pay penalties that totaled around $6.1 million, which included disgorged profits and royalties.\u00a0<\/p>\n As part of the settlement, the company also agreed to (1)<\/strong> publish the SEC\u2019s order on its company website and social media channels, as well as (2)<\/strong> destroy all of the Founder\u2019s Keys NFTs it had within its control.<\/p>\nAre NFTs Securities?<\/h2>\n
The Settlement<\/h2>\n