Stoner Cats 2 LLC (SC2), known for the “Stoner Cats” animated series, faced legal issues with the SEC. They were charged with selling over 10,000 NFTs at approximately $800 each without proper registration as crypto-asset securities.
This NFT sale happened in just 35 minutes on July 27, 2021, and the funds raised were meant for the series. These NFTs gave buyers access to the show, which featured an elderly woman and her cat companions engaging in cannabis-related activities. The first episode of the series premiered just two days after the NFT sale.
Actress Mila Kunis spearheaded the Stoner Cats project, joined by a star-studded cast including Ashton Kutcher, Chris Rock, Dax Shepard, Gary Vaynerchuk, Jane Fonda, Michael Bublé, Seth MacFarlane, and Vitalik Buterin.
SEC Accuses Stoner Cats of Selling Unregistered NFT Securities
Stoner Cats 2 LLC (SC2), known for the “Stoner Cats” animated series, faced legal trouble with the SEC for selling over 10,000 NFTs at roughly $800 each without proper registration.
The SEC claimed that SC2 marketed these NFTs as potential investments, suggesting that the involvement of famous actors and creators would make them more valuable.
In addition, SC2 earned a 2.5% fee on secondary NFT sales, totaling over $20 million.
In response, SC2 agreed to a cease-and-desist order and a $1 million fine. They will establish a fund to compensate affected investors and destroy all NFTs they possess. It’s important to note that SC2 neither admitted nor denied the allegations.
SEC settled its first enforcement action involving PFP NFTs. SEC alleges each uniquely generated “Stoner Cat” itself to be a “crypto asset security in the form of a non-fungible token.” Mechanics of the offering were similar to most popular PFP projects. Some of my takeaways… /1
— Mike Selig (@MikeSeligEsq) September 13, 2023
SEC Commissioner Criticizes NFT Regulation Approach
Hester Peirce, an SEC Commissioner, has criticized the SEC’s approach to regulating NFTs. She argues that the SEC should define the law clearly before enforcing it, rather than using enforcement actions for education. Peirce highlights the current lack of clarity and ambiguity in NFT regulation and calls for caution in such a regulatory environment.
This case represents a notable development as one of the first instances where the SEC has taken action against an NFT issuer for selling unregistered securities since the Impact Theory case in August.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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