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SEC charges Impact Theory for unregistered offering of NFTs

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Re: SEC charges Impact Theory for unregistered offering of NFTs

#11

Post by cscheid »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

> At what point does a thing you buy or sell become a security? Are baseball cards a security?

I don’t know about baseball cards, but the way Wizards of the Coast handles their policy around rare Magic: the Gathering cards makes me think their lawyers are definitely concerned about this kind of stuff.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#12

Post by bonestamp2 »

lukev wrote: post #8
yieldcrv wrote: post #3

Its great to see commissioner Mark T Uyeda also dissenting, because for some time it was only Hester Pierce that would take these views on digital assets, and for her views to be elevated to head commissioner it requires a Republican President to make that nomination, as she is Republican. There are many people that are not Republican that would aim to get her appointed and do whatever it takes. Which means casting a…

I agree that the dissenters bring up a lot of good questions that need answering. However, if you believe their fundamental argument that NFTs aren't really securities... what regulatory body should prevent this kind of behavior? Or should rug-pulls effectively be legal, and buyer beware?

If NFTs are not securities, then I believe it would fall on the FTC, like most other consumer protections.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#13

Post by jurynulifcation »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

I am not a financial person. This is speculation on my part. Please correct me where applicable.

It seems to me the operative difference between crypto assets and other collectibles is the market-making aspects and the original promises. Full-stop, the vast majority of NFTs and crypto assets are being hyped as investments. This covers the original promise. The market-making aspect is in how these collectibles accrue value. Most collectibles rely on a secondary market, whereas crypto assets don't seem to have an appreciable difference in secondary vs primary markets. This means the same asset is meant to accrue value in the venue it is originally purchased, among the same conceptual group of purchasers. I also wouldn't be surprised to find out that the utter uselessness of most crypto assets plays into their status as securities (or not).

Re: SEC charges Impact Theory for unregistered offering of NFTs

#14

Post by namdnay »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

The test for “is it a security” revolves around the idea of investing in a common enterprise with the expectation of returns. Sellers of TF2 skins or Football cards at no point advertise that they are an investment and that buyers should expect returns

Re: SEC charges Impact Theory for unregistered offering of NFTs

#15

Post by solardev »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

The two dissenting commissioners (linked in the OP) have the same questions.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#16

Post by wonderwonder »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

I think the issue in this case was the marketing. They seemed to be pitching a guaranteed increase in price. Which you just cant do.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#17

Post by pdabbadabba »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

> At what point does a thing you buy or sell become a security? Are baseball cards a security? Should my local baseball card shop be closed down as an unregistered securities broker?

The SEC's legal theory is specific to this case, and does not seem to apply generally to all NFTs. Here's the SEC's explanation:

> According to the SEC’s order, from October to December 2021, Impact Theory offered and sold three tiers of NFTs, known as Founder’s Keys, which Impact Theory called “Legendary,” “Heroic,” and “Relentless.” The order finds that Impact Theory encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts. Among other things, Impact Theory emphasized that it was “trying to build the next Disney,” and, if successful, it would deliver “tremendous value” to Founder’s Key purchasers. The order finds that the NFTs offered and sold to investors were investment contracts and therefore securities. Accordingly, Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#18

Post by RC_ITR »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

This comes back to the core problem of crypto though - I agree that transferring skins would be cool or whatever, but distributed consensus does almost nothing to accomplish that.

A game developer already has to opt-in to the NFT system and then maintain indefinite support for the NFT system, so if you trust them to do that why don’t you also trust them to maintain the ownership ledger?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#19

Post by solardev »

slapshot wrote: post #5
endianswap wrote: post #2

Here's a link to the actual SEC press release, not the dissent over the action by two of the commissioners: https://www.sec.gov/news/press-release/2023-163

@dang

FWIW both are worth reading. Can we make it a text post with both the main PR and the dissent?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#20

Post by evilantnie »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

From what I'm reading here, the company misled "investors" by attaching the NFT to ownership in the company, which would be considered a security.

"The order finds that Impact Theory encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts."

When I purchase a baseball card, I do not have the expectation that there is any additional value attached to the baseball card beyond what the collector's market will pay.

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