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CyberKongz faces SEC action over NFT token classifcation
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SEC challenges CyberKongz token pairing game with blockchain
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CyberKongz campaigns for clearer NFT regulations and Web3 regulations.
Gary Gensler’s tenure as chairman is coming to an end. The agency has just sent another Wells Notice to NFT collection CyberKongz. This could be a sign of enforcement action. The SEC sent a similar warning to Unicoin earlier today.
This Wells notice follows charges against CyberKongz. The SEC believes CyberKongz has violated securities laws. CyberKongz has, for its part, vowed to fight against the SEC and push clearer rules for NFTs.
CyberKongz and its ERC-20 token are a concern to the SEC. The SEC claims that this setup could make the ERC-20 token a security and require registration under US law.
The SEC has taken a similar stance in the past, such as when it ruled that tokens are securities. CyberKongz rejects that, claiming the SEC does not understand Blockchain tech.
Read Also : SEC Targets Unicoin as Gensler’s resignation Nears
According to CyberKongz the project has been under SEC inspection for more than two years. During this time, the team faced a silent battle, as the SEC misinterpreted aspects of their operations.
CyberKongz to Challenge SEC at Court
CyberKongz, despite having a small staff and a lack of capital raises or large treasuries, intends to challenge SEC’s ruling in court. The team wants clearer regulatory guidelines in order to avoid setting a precedent that could be damaging for the entire Web3 gaming sector.
CyberKongz questioned the SEC’s understanding of smart contract. The SEC objects the sale of Genesis Kongz NFTs to be held in April 2021. CyberKongz claims this was not a sale but a contract transfer.
Read Also : OpenSea Faces SEC Scrutiny Over NFT Classification
The project asks how effective regulation can become if the SEC is unable to distinguish between a primary sales and a contract-migration, calling this a fundamental misunderstanding of the technology.
The SEC uses the Howey Test, however, to determine if assets are securities. This has caused controversy in the NFT world, and many people say that this approach does not give clear guidance.
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