The Securities and Exchange Commission (SEC) initiated enforcement action against non-fungible token (NFT) operations. However, this hasn’t sat well with all of its members. Notably, in a recent release, U.S. SEC`s Mark Uyeda and Hester Peirce voiced their dissent against the agency’s decision to enforce regulations on NFT sales classified as securities.
A Matter of Overreach or Protection?
The commission’s concerns were evident. Despite unclear prospects of use or profit, the enthusiasm with which people invested in the NFTs was alarming. However, the dissenting commissioners argued that the legitimate concerns don’t necessarily grant the US SEC jurisdiction. The promotional statements made by the company and its purchasers, they say, don’t align with promises typically seen in investment contracts.
For context, according to the commissioners, when artists or manufacturers market tangible goods such as watches or art, promoting the potential of the brand’s value isn’t usually grounds for SEC scrutiny. The commissioners emphasized this distinction, arguing that the NFT scenario presented a similar case.
Moreover, for registration violation cases, the usual remedy is an offer of rescission. Impact Theory had already proposed repurchase programs, compensating their purchasers to $7.7 million in Ether.
Controversy Around Impact Theory NFT
Impact Theory raised eyebrows with a $30 million NFT sale, boosting its offerings with bold claims that the value of these tokens would see a rise. Notably, a certain enthusiasm resonated amongst the purchasers.
One was even allegedly quoted comparing their purchase to investing in major names like “Disney, Call of Duty, and YouTube.” However, unlike shares, these NFTs didn’t represent any ownership in the company or provide dividends to its holders. The SEC’s main contention was that Impact Theory projected the NFTs as investment contracts, leading to them operating an unregistered securities offering.
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