CyberKongz received a Wells Notice from the SEC, signaling potential enforcement action.
The SEC’s concern centers on the project’s combination of ERC-20 tokens with its blockchain game.
CyberKongz, a prominent NFT project, has announced that it has received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), signaling potential enforcement action. The project expressed disappointment in the SEC’s stance, arguing that the regulator’s misunderstanding of blockchain technology has led to unfair accusations.
CyberKongz has received a Wells Notice from the SEC.We are extremely disappointed at the approach the SEC has taken towards us, but we are going to stand up and fight for a brighter future that holds more clarity for NFT projects.We have been suffering in silence for the last… pic.twitter.com/lc6hyzUPb0
— CyberKongz (@CyberKongz) December 16, 2024
CyberKongz has pledged to challenge the SEC’s position, which could have broad implications for the Web3 gaming sector. The SEC’s concern centers on CyberKongz’s pairing of an ERC-20 token with its blockchain game. The regulator believes that this combination may constitute a security that requires registration, similar to the case against Ripple.
However, Cyberkongz argues that the SEC’s approach is misguided. The team believes the SEC’s lack of understanding could set a harmful precedent for the Web3 gaming industry. Furthermore, the project criticized the SEC’s misinterpretation of blockchain contracts. A key point of contention is the SEC’s treatment of the “sale” of Genesis Kongz in April 2021.
Is the SEC Targeting CyberKongz Unfairly?
CyberKongz maintains that this event was a contract migration, not a sale. The team pointed out that if the SEC cannot differentiate between a primary sale and a contract migration, it raises serious concerns about the clarity of digital asset regulations. They argue that this confusion jeopardizes the future of the industry and prevents proper legal clarity.
For over two years, CyberKongz has been in communication with the SEC. During this time, the project has experienced frustration due to the regulator’s lack of knowledge about blockchain technology. Despite these challenges, CyberKongz remains committed to advocating for clearer regulations for NFT projects.
They emphasized that they would continue fighting for the broader Web3 space, even if it means standing up to the SEC’s approach. However, they remain hopeful that future leadership will adopt a more balanced approach. CyberKongz showed solidarity with other industry leaders, such as Brian Armstrong of Coinbase and Devin Finzer of OpenSea, who have also faced regulatory pressure.
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