In a decision that could have significant implications for the blockchain and digital asset sectors, the United States Securities and Exchange Commission (SEC) has taken its first enforcement action against non-fungible tokens (NFTs). Targeting Impact Theory, a Los Angeles-based media company, the SEC has ruled that the company’s NFTs were being sold as unregistered securities, thereby encroaching on the SEC’s jurisdiction.
The regulator has imposed fines and ordered Impact Theory to establish a fund to reimburse investors, stating that these NFTs are not simply collectible assets but fall under the stricter category of securities.
Impact Theory encouraged potential investors to consider purchasing a founder’s key as an investment in the company, stating that investors would profit from their purchases if Impact Theory succeeded in its endeavors.
The Stakes and Penalties: Impact Theory’s Costly Lesson
Raising nearly $30 million from its three-tier NFT offerings, Impact Theory was under the impression that it was selling digital collectibles. However, the SEC clarified in a statement on Monday that the company’s team had promised investors significant profits based on the “enormous value” of the collectibles. The regulatory body also highlighted that Impact Theory was encouraging buyers to view the acquisition of a founder’s key as an investment in the company. These promises, according to the SEC, are what qualified the NFTs as securities. As a result, Impact Theory has agreed to establish a fund to reimburse investors who purchased these NFTs and to destroy any remaining NFTs in its possession. Additionally, the company will incur penalties exceeding $6.1 million to be paid to federal regulators.