SEC Doubles Down On Enforcement Against Unregistered Offerings Of NFTs

In the past two weeks, the U.S. Securities and Exchange Commission ("SEC") announced two enforcement actions against non-fungible token ("NFT") platforms Impact Theory, LLC ("Impact Theory") and Stoner Cats 2, LLC ("SC2"), in connection with their unregistered offering of cryptocurrency asset securities. In both enforcement actions, the SEC determined that the NFTs were securities under the Howey Test.

On August 28, 2023, the SEC charged Impact Theory, a media and entertainment company based in Los Angeles, with conducting an unregistered offering of NFTs, in violation of the federal securities laws. According to the SEC, Impact Theory marketed these NFTs as investments, implying that investors would profit if Impact Theory succeeded in its endeavors. The SEC concluded that these NFTs were investment contracts and, thus, securities under the Howey test. Impact Theory and the SEC entered into a consent decree settling the allegations for an aggregate payment