SEC Faces Internal Criticism Over $750K Flyfish Club NFT Settlement
Two commissioners from the U.S. Securities and Exchange Commission (SEC) have publicly criticized the agency’s recent enforcement action against Flyfish Club, a non-fungible token (NFT) themed restaurant.
The SEC settled with Flyfish for $750,000, alleging the company conducted an unregistered offering by selling 1,600 NFTs to U.S. investors, generating $14.8 million.
In a dissenting letter, SEC commissioners Hester Peirce and Mark Uyeda argued that the Flyfish NFTs merely represented a novel method of selling memberships and should not be classified as securities.
They asserted that the NFTs did not pose a threat to investors and emphasized the need for the SEC to provide clearer guidance for NFT innovators. “Creative people should be able to experiment with NFTs without having to consult a high-priced tea-leaf reader — ahem, lawyer,” they stated.
The SEC's position is that the Flyfish NFTs qualify as investment contracts under the Howey test, which assesses whether certain transactions are securities. According to the SEC, the NFTs would allow holders to dine at a future restaurant set to open in Manhattan.
This enforcement action is part of a broader trend, as the SEC has taken similar actions against other NFT projects, including Impact Theory and Stoner Cats 2, over the past year. Recently, the agency issued a Wells Notice to OpenSea, a major NFT marketplace, indicating potential enforcement action.
Flyfish Club’s founder, entrepreneur Gary Vaynerchuk, has been a prominent figure in the NFT space since its rise in 2021.
As part of the settlement, Flyfish agreed to destroy all remaining NFTs in its possession and refrain from accepting future royalties from NFT sales.
