CyberKongz Fights Back for NFT Industry

CyberKongz, a gaming-based NFT project, has been issued a Wells Notice by the US Securities and Exchange Commission, raising concerns about ERC-20 token and blockchain gaming integration and indicating that a possible legal battle may be on the way.

The team stated in its Dec. 16 They also vowed to fight back, arguing that the outcome could have major ramifications for the web3 gaming and NFT industries.

The SEC expressed some concerns about CyberKongz pairing its ERC-20 token with its blockchain-based game. The SEC’s Enforcement Division argues in the CyberKongz case that this setup constitutes a security that should be registered, just like its stance against Ripple. The project argued that this position highlights a failure to understand blockchain technologies and would set a dangerous precedent across the entire web3 gaming industry.

CyberKongz has received a Wells Notice from the SEC.

We are extremely disappointed in the SEC’s approach towards us, but we will stand up and fight for a brighter future that provides greater clarity for NFT projects.

We have been suffering in silence lately… pic.twitter.com/lc6hyzUPb0

— CyberKongz (@CyberKongz) December 16, 2024

The SEC’s concerns relate to its view that the 2021 Genesis Kongz contract transition is a primary sale. CyberKongz said this was a confusing interpretation of smart contracts and accused the regulator of not distinguishing between technical processes and actual token sales.

CyberKongz stated that his team has been under the spotlight for the last 2 years and has suffered in silence during this period. With a small team and without any prior capital raises or huge treasuries, the project will now seek to challenge the SEC’s position to set clearer rules in the digital asset space.

The statement also sought to blame the current administration, claiming that its “anti-crypto agenda” has harmed the entire blockchain industry, and expressed hope for a new direction under the next administration. CyberKongz also expressed solidarity with industry leaders, including Coinbase’s Brian Armstrong, OpenSea’s Devin Finzer, and Uniswap Labs’ Hayden Adams, who are facing regulatory pressure from the SEC.

“It has become increasingly apparent that the current administration is trying to push its anti-crypto agenda at the last minute. “We hope the new administration will put an end to this injustice,” he said.

CyberKongz on X.

By treating tokens as securities, the SEC aims to subject them to stricter regulatory scrutiny and comply with existing financial regulations, requiring projects to register and provide disclosures similar to traditional financial instruments. Critics say this approach stifles innovation and overlooks the decentralized nature of blockchain technologies.