The US Securities and Exchange Commission (SEC) charge for the non-fungible token (NFT) project Stoner Cats prompted feedback from commissioners Hester Peirce and Mark Uyeda, arguing that the project’s activity constitutes fan crowdfunding, which they say is common for artists.
On September 13, the SEC accused Stoner Cats 2 LLC, the company behind the animated series called “Stoner Cats,” of offering unregistered crypto securities using NFTs. Stoner Cats 2 LLC agreed to a cease and desist order and other measures imposed by the committee.
The SEC argued that the NFTs were marketed by the company because they had potential for secondary sales and suggested their value would increase. Additionally, the SEC pointed out that the company will receive a 2.5% royalty on each secondary sale. The SEC highlighted that the company sold more than 10,000 NFTs for $800 each, and the proceeds were used to fund the series. In addition, according to the SEC, there were at least 10,000 secondary sales, valued at more than $20 million.
There’s been a lot of talk about cats in the SEC this past week: https://t.co/VHFt4CVEV0 and https://t.co/pFXmkGxd2r
— Hester Peirce (@HesterPeirce) September 13, 2023
Not everyone within the SEC agrees with the enforcement action. SEC commissioners Hester Peirce and Mark Uyeda published a dissenting statement, arguing that the activity could be considered crowdfunding by fans. Pierce and Uyeda argued that this is “a common phenomenon in the world of artists, creators and entertainers.”
They also noted that instead of the SEC’s approach to taking action against NFT projects, they should set clear rules. The commissioners wrote:
“Rather than arbitrarily taking enforcement action against NFT projects, we should set clear guidelines for artists and other creators who want to experiment with NFTs as a way to support their creative efforts and build their fan communities.”
The commissioners also compared the Stoner Cats NFTs to collectibles sold by Star Wars in the 1970s. According to Pierce and Uyeda, toy company Kenner sold early bird certificates that are redeemable for future action figures and membership in the Star Wars fan club. The duo argued that, based on the actions against Stoner Cats, the SEC should have “parachuted in” to bail out those buyers in the 1970s.
Related: Crypto lawyer on SEC: ‘Problematic to imply that all NFTs are securities’
In addition to the SEC commissioners, members of the crypto community were also dissatisfied with the SEC’s actions. YouTuber Crypto Tea argued in a post that Stoner Cats was raising money to create and deliver a show. The social influencer said she bought the NFTs for fun and to support the show without expecting any profit.
An artist should always be able to say: “Buy my art, it will be the most expensive art in the world”.
Forbidding an artist from making a flashy claim about the value of his own work would make the world a dull place.
— toly (@aeyakovenko) September 14, 2023
Solana co-founder Anatoly Yakovenko also expressed his thoughts on the topic on X (formerly Twitter). According to Yakovenko, artists should not be prohibited from making statements about the value of their work. Yakovenko believes this would “make the world boring.”
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