NFT Gaming’s CyberKongz Project Receives SEC Wells Notice

CyberKongz, a game-based NFT project, announced on December 16 that it had received a Wells notice from the US Securities and Exchange Commission (SEC).

The notice raises concerns about the integration of its ERC-20 token platform with blockchain games and questions aspects of its activities, including its migration from the 2021 contract.

The SEC’s argument

In a post on X, the CyberKongz team expressed dismay at the agency’s handling of the situation, saying:

“We are extremely disappointed by the approach the SEC has taken toward us, but we will stand up and fight for a brighter future that has more clarity for NFT projects.”

They revealed that the problem began two years ago when the regulator first contacted them, during which time they operated quietly and under a lot of pressure.

The publication noted that the SEC’s main concern appears to center on whether ERC-20 tokens can work alongside blockchain games without being classified as securities.

CyberKongz argued that this involvement could have far-reaching consequences for the Web3 game industry. They also said they are determined to challenge the position of the financial watchdog and advocate for a clearer regulatory framework.

Another point of contention includes the migration of the Genesis Kongz contract in April 2021, which the regulator interpreted as a token sale. The NFT Project clarified that migration was not a primary sale and criticized the SEC’s inability to differentiate between the two, stating:

“If they can’t distinguish between a primary sale and a contract migration, what hope do we currently have of a clear regulatory path for the future?”

Wells’ notice gives the platform 30 days to respond before the SEC decides whether to take enforcement action. While not a formal allegation of wrongdoing, this notice shows that the agency is considering further legal steps.

Broader aspect of the industry

This latest development adds CyberKongz to a growing list of blockchain and NFT entities under SEC scrutiny, including Coinbase, Consensys, Ripple, OpenSea, Uniswap Labs and Bittrex, which have faced similar warnings in recent years .

Last month, Australia-based gaming company Immutable also reported that it had received such a notice. At the time, they expressed frustrations over vague allegations and unclear regulatory guidelines. However, no further action has been taken since then.

In the meantime, CyberKongz has assured its community that it remains committed to advancing its work without the burden of silence. He stated that the situation marks a turning point as he continues to advocate for clearer guidelines in the NFT and blockchain industries.

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