I've studied the regulatory orders so you don’t have to. Here's what you need to know.

PS: Catch a list of top reads on NFT regulation at the bottom.

The Two Cases

Impact Theory 🖼️

On Aug 28, the SEC charged Impact Theory, an LA-based media company, for selling unregistered securities via NFTs, raising about $30 million. The company agreed to a $6.1 million fine. Link to case

Key SEC Claims:

  • Profit Expectation: Impact Theory promised NFT buyers “tremendous value,” insinuating profit.

    • Quote from the order: “If you’re paying 1.5 [ETH], you’re going to get some massive amount more than that. So no one is going to walk away saying, ‘Oh man, I don’t think I got value here.’” 

    • “Its like investing 10k with a 300k upside, for a small risk.”

  • Business Funding: The firm used sale proceeds to finance operations.

  • Resale Royalties: It enabled NFT trading on secondary markets, collecting a 10% royalty.

Stoner Cats 🐱

On Sep 13, the SEC charged Stoner Cats, backed by Mila Kunis and Aston Kutcher, for the same violation. Link to case

Key SEC Claims:

  • Profit Expectation and Business Funding: Stoner Cats led buyers to expect rising NFT values if the related web series succeeded.

  • Unlimited Purchasing: No limit existed on how many NFTs one could buy, although one sufficed for project access.

  • Resale Royalties: It enabled trading of NFTs on secondary markets, earning royalty fees (2.5%), and therefore profiting of the value appreciation of its NFTs.