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Gaming tokens may be in for a setback after non-fungible token (NFT) platform CyberKongz received a Wells notice from the United States securities regulator.
The Securities and Exchange Commission (SEC) conveyed the “concerning rhetoric” that an ERC-20 token in tandem with a blockchain game cannot be issued without first being registered as a security, CyberKongz <a data-ct-non-breakable="null" href="https://x.com/CyberKongz/status/1868746903053127941" rel="null" target="null" text="null" title="null">said</a> in a Dec. 16 X post.
This would have “major implications” for the <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/web3-crypto-gaming-tokens-chiliz-farm-tap-review-web3-gamer/" rel="null" target="null" text="null" title="null">Web3 gaming industry,</a> CyberKongz said, adding that it would “defend against this stance for the wider space.”
<figure>
 <img alt="SEC, Games, Web3" src="https://s3.cointelegraph.com/uploads/2024-12/0193d1bf-9671-7074-89d8-a7b5ff20c073" title="">
 <figcaption style="text-align: center;">
 Source: <a data-ct-non-breakable="null" href="https://x.com/CyberKongz/status/1868746903053127941" rel="null" target="null" text="null" title="https://x.com/CyberKongz/status/1868746903053127941">CyberKongz</a>
 </figcaption>
</figure>
A <a data-ct-non-breakable="null" href="https://cointelegraph.com/explained/what-is-a-wells-notice-explained" rel="null" target="null" text="null" title="null">Wells notice</a> is a formal letter issued by the SEC informing an entity that the regulator has completed a preliminary investigation and is considering an enforcement action.&nbsp;CyberKongz will have 30 days to file a response.
One of the SEC’s issues with CyberKongz stemmed from its “sale” of <a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/articles/what-are-nfts-and-why-are-they-revolutionizing-the-art-world" rel="null" target="null" text="null" title="null">Genesis Kongz NFTs</a> in April 2021. The NFT firm said that it was a contract migration, not a primary sale.
CyberKongz said it has never raised capital and has been mostly bootstrapped, so it has a small treasury, adding that it has been “suffering in silence” since it was first contacted by the SEC two years ago.
CyberKongz said the enforcement action was a last-minute attempt from the Biden administration to set the industry back, adding:
<blockquote>
 “We hope that the new administration puts an end to this unjustness on our industry, but until then we will fight for NFT projects on all chains.”
</blockquote>
The CyberKongz team has received words of <a data-ct-non-breakable="null" href="https://x.com/Jihoz_Axie/status/1868751099072745558" rel="null" target="null" text="null" title="null">support</a> from one of Axie Infinity’s founders, Jihoz Zirlin, who is “confident that the new administration will end the persecution of our people.”
<figure>
 <img alt="‘Major implications’ for gaming tokens as CyberKongz hit with SEC Wells notice" src="https://s3.cointelegraph.com/uploads/2024-12/0193d1ba-00ac-7d51-a81c-5d6a0a2158fa" title="">
 <figcaption style="text-align: center;">
 Source: <a data-ct-non-breakable="null" href="https://x.com/Coco__Bear/status/1868771674750947830" rel="null" target="null" text="null" title="https://x.com/Coco__Bear/status/1868771674750947830">Coco.kongz.eth</a>
 </figcaption>
</figure>
CyberKongz NFTs are randomly generated two and three-dimensional social avatars that can be used in “play &amp; kollect” and “adventure runs” games on the Ronin blockchain.
Related: <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/animoca-brands-yat-siu-interview-bitcoin-mena-2024" rel="null" target="null" text="null" title="null">NFTs will be ‘even bigger’ than they were in 2021 — Animoca’s Yat Siu</a>
The <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/crypto-gaming-tokens-memecoins-gamer-coaches-parallel-web3-gamer/?utm_source=rss_feed&amp;utm_medium=rss&amp;utm_campaign=rss_partner_inbound" rel="null" target="null" text="null" title="null">CyberKongz NFT price</a> wasn’t impacted by the Wells notice and is still up 11.7% over the last 24 hours to an average floor price of 6.69 Ether (<a data-ct-non-breakable="null" href="https://cointelegraph.com/ethereum-price" rel="null" target="null" text="null" title="null">ETH</a>) — worth $26,900, <a data-ct-non-breakable="null" href="https://www.coingecko.com/en/nft/cyberkongz" rel="null" target="null" text="null" title="null">according</a> to CoinGecko data.
<figure>
 <img alt="SEC, Games, Web3" src="https://s3.cointelegraph.com/uploads/2024-12/0193d1bd-b324-7e83-a01f-f9ea51170912" title="">
 <figcaption style="text-align: center;">
 CyberKongz NFTs listed on NFT marketplace OpenSea. Source: OpenSea
 </figcaption>
</figure>
Cointelegraph contacted CyberKongz for comment but didn’t receive an immediate response. 
On Nov. 1, Australian-based NFT and gaming firm Immutable was also <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/immutable-hits-back-sec-after-receiving-wells-notice" rel="null" target="null" text="null" title="null">served a Wells notice</a> from the SEC, though it hasn’t reported any enforcement actions.
Magazine: <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/13-christmas-gifts-bitcoin-crypto-degens-will-love/" rel="null" target="null" text="null" title="null">13 Christmas gifts that Bitcoin and crypto degens will love</a>

‘Major implications’ for gaming tokens as CyberKongz hit with SEC Wells notice

Cointelegraph

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