The Securities and Exchange Commission (SEC) has finally put its unwieldy paws into the world of NFTs. In a nutshell, the YouTuber sued: Impact theorywith the sale of unregistered securities in the form of non-fungible tokens.
At the end of 2021, while in the process of “building the next Disney”, the “education and entertainment” company offered subscribers the chance to purchase NFTs in the form of 3 levels of “Founders Keys”. At the time, $30 million was reportedly raised from the sale of 13,572 NFTs. Impact Theory, however, chose to tread nebulous territory in concluding that the tokens represented an “investment” in the company.
The SEC took this statement to heart and took action, eventually concluding that the NFTs represented investment contracts, and therefore securities. As a result, the SEC ruled that the tokens violated the Securities Act because Impact Theory sold them without prior registration.
Following the SEC’s investigation, Impact Theory agreed to allocate more than $6 million to settle the case. However, at the time of writing, it has not yet formally admitted to the allegations put forth by the SEC. In addition, the LA-based media company has also set up a fund to compensate those involved in the NFT initiative and potentially recover and burn the affected tokens.
Will be live in Discord later to answer questions. @impact_theory is pleased to announce that we have reached a settlement with the US Securities and Exchange Commission in which we have resolved the SEC’s investigation. We’re glad we’ve completed the SEC’s investigation, so…
— Tom Bilyeu (@TomBilyeu) August 28, 2023
The SEC opens a big 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 general trend, a large number of projects have similarly offered a stake in their company, as well as future dividends, in the form of NFTs. Essentially, we see the technology as a way to track support in their efforts and reward loyal followers.
However, as the SEC ruling implies, many of these projects could now be in violation of the Securities Act and face similar charges. So now that precedent exists, this latest research may portend a turbulent period for a number of players in the NFT space.
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