Stoner Cats 2 Faces SEC Charges Over NFTs
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The SEC has accused Stoner Cats 2 LLC of illegally offering nonfungible tokens (NFTs) which amassed $8 million. This action mirrors last month's charges against Impact Theory.
Gurbir S. Grewal, the SEC's Enforcement Division Director, clarified that federal securities laws are primarily concerned with the economic essence of an offering, not its superficial labeling or nature. He emphasized that regardless of the offering type, if it's considered an investment contract, it is a security.
SC2 rapidly sold over 10,000 NFTs, priced around $800 each. The firm highlighted advantages like NFT resale potential, which the SEC alleges fueled investor beliefs of potential profitability from secondary market sales. Grewal observed that Stoner Cats 2 capitalized on its crypto expertise to promote its NFTs, hinting at the potential for their value to rise.
Stoner Cats, a cartoon about cats that become sentient due to their owner's cannabis, generated a 2.5% royalty from each NFT transaction on secondary platforms. The SEC remarked that these royalties reassured NFT holders of SC2's commitment to the series, insinuating that NFT prices could escalate alongside the show's success.
While not admitting guilt, SC2 settled by agreeing to pay $1 million and forfeit all held NFTs.
Interestingly, Stoner Cats was a pioneering NFT-funded TV show with a star-studded voice cast including Ashton Kutcher, Jane Fonda, Chris Rock, and Ethereum's Vitalik Buterin. Only NFT holders could access its first six episodes.
Various celebrities, like Kim Kardashian, Floyd Mayweather Jr., and DJ Khaled, have previously faced regulatory challenges tied to cryptocurrency promotions.
Highlighting the controversy, SEC Commissioners Hester Peirce and Mark Uyeda drew parallels between Stoner Cats NFTs and 1970s Star Wars collectibles. They questioned if, by current standards, Star Wars collectibles would be deemed investment contracts. The commissioners stressed that while artists shouldn't bypass securities laws, the SEC must also support artists' endeavors without stifling their creativity and fan engagement.
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