SEC Charges NFT Firm, Stoner Cats, Stirring Mixed Reactions from Commissioners

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Mon, 02 Oct 2023, 05:44 PM
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SEC Charges NFT Firm, Stoner Cats, Stirring Mixed Reactions from Commissioners

The SEC charged Stoner Cats 2 LLC over NFT offerings, resulting in mixed internal and external reactions.

Fri, 15 Sep 2023, 10:49 am UTC

The U.S. Securities and Exchange Commission (SEC) recently took action against Stoner Cats 2 LLC, the company responsible for the "Stoner Cats" animated series. The SEC contends the firm engaged in unregistered cryptocurrency securities offerings via nonfungible tokens (NFTs). In response, the company acceded to a halt order and additional regulatory stipulations.

The crux of the SEC's claim lies in their belief that Stoner Cats 2 LLC promoted their NFTs with promises of potential future sales, hinting at an increase in their value. It was also brought to attention that the company would profit from a 2.5% royalty fee for each subsequent sale of these NFTs. Significantly, the SEC unveiled that over 10,000 of these NFTs, priced at $800 each, were sold. The revenue generated was funneled into producing the series. Moreover, the SEC revealed that secondary sales exceeded 10,000, translating to a value surpassing $20 million.

But the SEC's decision hasn’t garnered unanimous agreement within its ranks. Two of its commissioners, Hester Peirce and Mark Uyeda, took an opposing stand, suggesting the NFTs' sale could be categorized under fan crowdfunding – a typical practice among artists and entertainers. They also underscored the need for clarity over punitive measures, advocating for transparent guidelines rather than imposing sanctions on NFT initiatives.

Drawing a parallel, Peirce and Uyeda pointed out a similar strategy employed by Star Wars in the past. They highlighted that in the 1970s, Kenner, a toy manufacturer, sold certificates promising future action figures, coupled with an invitation to join the Star Wars fan club. The commissioners insinuated that had the SEC been consistent in its approach, it would have intervened during the 1970s Star Wars campaign.

Outside of the SEC, there’s been notable discontent within the cryptocurrency arena regarding the SEC's stance. Crypto Tea, a prominent YouTube personality, opined that Stoner Cats effectively utilized the funds they raised to produce their series. She voiced her personal experience, stating she purchased the NFTs purely for entertainment and as a gesture of support, with no anticipation of monetary gains.

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