The NFT collection CyberKongz announced on Monday that it has received a Wells Notice from the U.S. Securities and Exchange Commission (SEC).
The NFT collection CyberKongz announced on Monday that it has received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), indicating that the agency's staff may recommend enforcement action against it. This development follows two years of discussions between CyberKongz and the SEC.
In a statement posted on X, CyberKongz expressed disappointment with the SEC's approach, asserting that it has "been suffering in silence" since the agency first reached out. The collection noted that the SEC raised concerns about the legality of having a token (ERC-20) linked to a blockchain game without registering it as a security.
CyberKongz also highlighted issues related to its business dealings with Genesis Kongz in April 2021, describing the situation as a "contract migration." The collection criticized the SEC's inability to differentiate between primary sales and contract migrations, questioning the clarity of the regulatory framework for NFT projects moving forward.
An SEC spokesperson stated that the agency does not comment on the existence of potential investigations but confirmed the issuance of the Wells Notice.
Over the past year, the SEC has intensified its scrutiny of the NFT market, filing charges against several entities, including podcast studio Impact Theory and Stoner Cats 2 LLC for unregistered NFT offerings.
The current SEC Chair, Gary Gensler, is expected to step down following President-elect Donald Trump’s inauguration on Jan. 20. Trump has nominated former SEC Commissioner Paul Atkins, who has displayed a more favorable stance towards the cryptocurrency sector, to lead the agency.
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