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The SEC is suing a non-fungible token project for selling unregistered NFTs for the first time.
The SEC order stated that 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 digital assets offered to investors were “investment contracts” and “securities.”
Impact Theory raised $30 million from hundreds of investors, including U.S.
The case offers a glimpse into future NFT regulation, which is important to the crypto industry, which has been hit by a wave of U.S. regulatory clampdowns. Many other NFT projects have promoted their blockchain-based identifiers for digital asset ownership as investment opportunities, like Impact Theory.
Impact Theory paid over $6.1 million in penalties to settle the SEC allegations without admitting or denying them. The order also created a “Fair Fund” to compensate investors and required Impact Theory to destroy its Founder’s Key NFTs and eliminate secondary market royalties.
The company will continue NFT. The Impact Theory founder stated on X that his company will ensure its future digital assets are useful rather than financial:
“We will operate our future business consistent with our good faith best understanding of all applicable laws, rules, and regulations, will make it clear that all of Impact Theory’s digital assets are collectibles with utility in the exciting new landscape of Borderless Entertainment, and will fiercely discourage people from treating them otherwise. More information will be available in the coming weeks and months.”
