CyberKongz NFT Collection Faces SEC Action Over Alleged Violations

The CyberKongz NFT collection is facing legal action from the U.S. Securities and Exchange Commission (SEC) over alleged violations related to its ERC-20 token. The SEC issued a Wells Notice to the project, signaling the regulator’s intent to pursue charges for operating the token without registering it as a security in connection with its blockchain-based game.

CyberKongz, which gained popularity with its pixelated gorilla-themed NFTs, responded with disappointment, arguing that the SEC’s stance reflects a lack of understanding of blockchain technology. The project also expressed concern that this case could set a troubling precedent for the broader Web3 gaming industry. They criticized the SEC for misinterpreting their smart contracts and for claiming that the Genesis Kongz sale in April 2021 was an “illegal sale,” when it was actually a contract migration.

The project emphasized that the SEC’s inability to distinguish between a primary sale and contract migration creates uncertainty for the regulatory environment surrounding blockchain projects. They also expressed frustration with what they described as the SEC’s “anti-crypto agenda,” hoping that the incoming SEC leadership, potentially under Paul Atkins, would bring a more favorable stance toward digital assets.

CyberKongz, launched in March 2021 by artist Myoo, consists of 1,000 unique, pixelated NFTs known as Genesis Kongz. The collection was one of the first to gain attention for using NFTs as profile pictures (PFPs), a novel concept at the time. Despite the legal challenges, CyberKongz remains committed to fighting for clarity in the regulatory framework for NFTs and blockchain technology.

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