The U.S. Securities and Exchange Commission (SEC) has issued a Wells Notice to NFT gaming project CyberKongz, signaling the latest regulatory scrutiny targeting blockchain gaming entities.
“The SEC’s Division of Enforcement have approached us with very concerning rhetoric that you cannot have a token (ERC-20) in tandem with a blockchain game without registering it as a security.”
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.
A Wells Notice serves as a formal warning from the SEC, indicating that the regulator is considering enforcement action based on its preliminary investigation. Recipients typically have 30 days to respond before the SEC decides whether to proceed with charges.
CyberKongz warned that the investigation could carry “major implications” for the entire blockchain gaming industry, particularly for projects combining NFTs with utility tokens.
The platform emphasized its intention to challenge the SEC’s stance:
“We will defend against this stance for the wider space.”
CyberKongz Rejects SEC Allegations
The SEC’s scrutiny reportedly stems from CyberKongz’s April 2021 Genesis Kongz contract migration, which regulators interpreted as a token sale. CyberKongz refuted this, stating it was merely a technical upgrade, not a securities offering:
“If they cannot distinguish between a primary sale and a contract migration, what hope do we currently have for a clear regulatory pathway going forward?”
CyberKongz, which operates without venture funding or significant treasury reserves, also criticized the regulator’s understanding of blockchain technologies:
“We have been suffering in silence for the last two years… The SEC’s complete lack of understanding has resulted in unjust accusations and information inaccuracies.”
Industry Leaders Voice Support
The notice comes amid increasing regulatory focus on blockchain gaming. In November, NFT platform Immutable faced similar scrutiny regarding token sales.
Prominent figures in the space have rallied in support of CyberKongz. Jihoz Zirlin, co-founder of Axie Infinity, commented on X:
“You know you’re part of a revolution when you start to become persecuted. I stand with CyberKongz.”
Market Reaction and Project Resilience
Despite the regulatory pressure, CyberKongz’s market performance remains resilient. According to CoinGecko, the project’s floor price climbed to 8.2 ETH ($32,800), marking a 14.4% increase over the past 24 hours.
The SEC’s Wells Notice to CyberKongz highlights ongoing challenges for NFT and gaming projects navigating the regulatory landscape. While the SEC examines the intersection of utility tokens and NFTs, CyberKongz’s willingness to defend its position could have significant implications for the blockchain gaming industry as a whole.
The case raises broader concerns about the need for regulatory clarity, as innovative projects face growing legal scrutiny amid evolving technologies.
This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Bullish Times is a marketing agency committed to providing corporate-grade press coverage and shall not be liable for any loss or damage arising from reliance on this information. Readers should perform their own research and due diligence before engaging in any financial activities.
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