SEC Files and Settles First NFT Enforcement Action, Crypto Community Reacts

The U.S. Securities and Exchange Commission (SEC) escalated its crackdown on crypto assets on Monday, accusing a Los Angeles-based media company of offering unregistered securities in the form of non-fungible tokens.

Impact Theory, an entertainment company, allegedly garnered nearly $30 million from hundreds of investors through its NFT offerings. According to the SEC, the offerings should have been registered with the agency. Impact Theory agreed to pay more than $6 million to settle the claims and a cease-and-desist order without admitting to or denying the SEC’s allegations.

The settlement is the SEC’s first enforcement action against NFTs and another move in the agency’s crackdown on crypto goods that it claims are securities under its jurisdiction.

Crypto community reacts

SEC commissioners Hester Peirce and Mark Uyeda released a dissenting statement, saying they disagreed with how the regulator applied the Howey test in determining investment contracts.

Coinbase CLO Paul Grewal responded with a witty remark, referencing the original statement from the action: “We do not routinely bring enforcement actions against people that sell watches, paintings, or collectibles along with vague promises to build the brand and thus increase the resale value of those tangible items.” Grewal, slamming the SEC, said: “True. There is nothing routine about what we are witnessing.”

Legal expert Marc Fagel reacted: “The SEC no longer brings litigated administrative proceedings due to the various legal challenges, but it still brings settled administrative actions.”

Bitcoiner and altcoin critic Max Keiser, who believes that all cryptocurrencies except Bitcoin are securities, took advantage of the situation to make a disparaging remark: “I’ve been saying since the moment NFTs first appeared. NFTs are securities. Full stop.”