The SEC has once again spoken out in force in the crypto industry. The publishers of the Stoner Cats NFT collection, including actress Mila Kunis, have been sued for unlawful securities trading. According to the SEC, the NFTs are said to have been sold with the promise of profits and $20 million were collected from royalties alone. After the all-round blows in the altcoin sector, NFT projects now also seem to be caught in the crossfire of the authorities. Criticism of this also comes from within our own ranks.
SEC sues NFT project
The crypto sector has been under general suspicion from the SEC for some time now, at least as a result of the proceedings against Ripple. A common accusation: unregistered securities trading. The authorities apparently don’t have any fun with the NFT project Stoner Cats, co-founded by Mila Kunis. The sale of the token collection consisting of 10,000 different cartoon cats, for which a separate animated series is also being produced, is said to have violated securities laws.
According to the SEC The NFTs were advertised with the expectation of profit, “including the opportunity for owners to resell their NFTs on the secondary market.” The prominent cast is also said to have contributed to the high-profile marketing: Ashton Kutcher, Jane Fonda, Seth MacFarlane, Chris Rock and Vitalik Buterin also lent their voices to the stoned cartoon kittens in the series.
The NFTs came onto the market in 2021 and were sold out within a very short time. SC2 is said to have earned eight million US dollars from the sale, and another twenty from licensing fees.
Investors should be compensated
The Stoner Cats publishers have already accepted a cease-and-desist order and a fine of one million US dollars, according to the SEC. The money will flow into a fund “from which injured investors will receive back monies they paid to purchase the NFTs.” The authority left more specific details open. In addition, SC2 must “destroy all NFTs in its possession or control.”
It is unclear what will happen next with the project. The “Stoner Cats website and content will be permanently available via the decentralized hosting and archiving service Arweave,” it says Stoner Cats site. And further: “We have no control over the content and the content can never be removed”.
SC2 has committed to withdrawing the NFTs from trading, but according to Opensea there are over 5,000 NFT owners. Their tokens can continue to be traded. As data shows, the prices that had recently fallen have actually increased after the SEC scam. Possibly with the intention of making a profit after the media hype, with the hope of compensation, or simply out of spite.
Criticism from our own ranks
In one joint declaration SEC Commissioners Hester Peirce and Mark Uyeda criticized the agency’s actions as excessive. The fact that NFTs are now treated like securities lacks “any meaningful limiting principles”. If securities laws were also applied “to physical collectibles,” “artists’ creativity would wither in the shadow of legal ambiguity.”
Peirce and Uyeda emphasize that the NFT market “doesn’t have a free pass,” but projects like the Stoner Cats tend to fall under “fan crowdfunding.” Essentially, the NFTs would not differ significantly from Star Wars collectible figures. Instead of “arbitrary enforcement measures”, “clear guidelines for artists and other creative people” should now be established.
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