Two SEC Commissioners Push Back Against Impact Theory Lawsuit

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SEC Doesn’t Regulate Crypto
  • SEC commissioners Hester Peirce and Mark Uyeda have expressed dissent from the SEC’s lawsuit against Impact Theory.
  • The SEC recently sued Impact Theory for raising nearly $30 million through an alleged unregistered securities offering.
  • The commissioners believe that Impact Theory’s business activities did not fall under the SEC’s jurisdiction.

Two of the Securities and Exchange Commission’s (SEC) five commissioners have publicly expressed their disagreement with the agency’s first-ever NFT-related enforcement action. Commissioners Hester Peirce and Mark Uyeda have dissented from the securities regulator’s decision to charge Impact Theory for allegedly raising millions through an unregistered offering of crypto securities.

The SEC sued Los Angeles-based entertainment firm Impact Theory for raising $30 million from investors by selling NFTs called Founder’s Keys. The company allegedly encouraged investors to view the purchase of a Founder’s Key as an investment in its business, which would eventually net them a considerable profit.

The SEC found that the NFTs sold by Impact Theory were investment contracts and therefore securities, and subsequently charged the company for violating federal securities laws by offering securities without registering them with the agency. The entertainment firm has since agreed to pay a civil penalty of over $6 million to settle the enforcement action.

However, commissioner Peirce and commissioner Uyeda of the SEC believe that Impact Theory’s case did not fall under their jurisdiction. According to them, the concerns surrounding investors buying the company’s NFTs based on hype were legitimate but did not warrant an enforcement action from the country’s top securities regulator.

“We do not routinely bring enforcement actions against people that sell watches, paintings, or collectibles along with vague promises to build the brand and thus increase the resale value of those tangible items,” the Commissioners added in a statement published earlier today.

Both the commissioners believe that the agency needs to have a discussion about how to approach NFT regulation. They also questioned the decision to apply securities laws to protect NFT buyers, regardless of the fulfillment of the Howey Test.