Comm’rs Peirce & Uyeda Disagree With SEC’s Action Against Stoner Cats NFTs
The United States Securities and Exchange Commission has charged Stoner Cats 2 LLC with conducting an unregistered offering of non-fungible tokens that brought in $8 million from investors. The punitive action has attracted a slight divide within the regulatory commission.
Wow! SEC commissioners Peirce and Uyeda just released a statement saying they DISAGREE with the SEC’s actions against Stoner Cats nfts
Comparing nfts to 1970s Star Wars collectables, and stating the need to protect artists’ ability to create without excessive legal constraints🤯 pic.twitter.com/w7xOCI0grv
— OKHotshot (@NFTherder) September 13, 2023
SEC Fines Stoner Cats Creator $1M For Offering NFTs
In a September 13 blog post, the United States Securities and Exchange Commission confirmed tabling charges against the creator of the popular Stoner Cats for offering unregistered securities. In a short statement, Gurbir S. Grewal, the SEC’s director of its enforcement division, explained:
“Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security.”
Launched in July 2021, Stoner Cats was a non-fungible token collection featuring a limited set of 10,000 NFTs hosted on Ethereum, the largest blockchain network for NFTs. The NFT collection was one of the most successful projects in the short history of crypto, selling for less than 35 minutes.
The SEC’s order has found that the Stoner Cats team marketed its knowledge of crypto projects to pump the price of their NFTs and took other steps that led investors to believe they would profit from selling the NFTs in the secondary market.
SEC charged the Mila Kunis led nft project ‘Stoner Cats’ for offering unregistered securities
Project has immediately setttled and agreed to pay a $1,000,000 fine and to DESTROY ALL NFTs in its possession or control pic.twitter.com/9qOqxWeqoy
— OKHotshot (@NFTherder) September 13, 2023
The stoner cats received a 2.5 percent royalty from the NFTs for each transaction on a secondary market platform. The royalties also helped to assure owners of the NFTs that Stoner Cats would remain committed to the animated show after receiving the Stoner Cats NFTs offering proceeds.
The team behind the Stoner Cat NFTs used the proceeds to start Stoner Cats, a cartoon show about house cats. The show features a family of cats voiced by several well-known names, including Ashton Kutcher, Jane Fonda, Chris Rock, and even Ethereum co-founder Vitalik Buterin.
The United States Securities and Exchange Commission findings found that Stoner Cats creator conducted an unregistered offering of crypto asset securities by selling non-fungible tokens. The creator of the popular Stoner Cats animated web series will have to pay a $1 million civil fine to settle the lawsuit.
Comm’rs Peirce & Uyeda Disagree With SEC’s Action
The United States Securities and Exchange Commissioners Hester Pierce and Mark Uyeda have distanced themselves from the commission decision, criticizing that the Stoner Cats NFTs are “not that different” from Star Wars collectibles that were sold in the 1970s. In a statement, the Republican commissioners wrote:
“The sales of these certificates helped to build a die-hard community of Star Wars fans. Would those IOU. certificates, which could be re-sold, constitute investment contracts? Using the analysis of today’s enforcement action, the SEC should have parachuted in to save those kids from Star Wars mania.”
Before summarizing, the commissioners noted that the Commission must preserve artists’ ability to sell their work, build a fan base, and involve that fan base in future creative endeavors. Stoner Cats’ creator defense team did not admit or deny wrongdoing.
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