- NFT project CyberKongz has received a Wells Notice from the SEC, signaling potential enforcement action
- The project has accused the SEC of misunderstanding blockchain technologies and making unjust claims
- CyberKongz vows to fight for clearer regulatory pathways, citing broader implications for the web3 gaming industry
CyberKongz, a prominent NFT and blockchain gaming project, has announced it received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), marking a significant escalation in the regulatory scrutiny of NFT projects. In announcing the receipt of the notice, the CyberKongz team expressed frustration with the SEC’s approach, accusing the regulator of failing to understand blockchain technologies and making inaccurate claims. CyberKongz remains determined to fight any action that may result from the notice, echoing the experience of other NFT entities such as OpenSea.
CyberKongz Critical of SEC Interpretation
CyberKongz revealed its receipt of the Wells Notice on X, becoming the latest blockchain project to face potential prosecution over securities issues:
CyberKongz has received a Wells Notice from the SEC.
We are extremely disappointed at the approach the SEC has taken towards us, but we are going to stand up and fight for a brighter future that holds more clarity for NFT projects.
We have been suffering in silence for the last… pic.twitter.com/lc6hyzUPb0
— CyberKongz (@CyberKongz) December 16, 2024
The SEC’s Division of Enforcement raised concerns about the project’s use of ERC-20 tokens alongside its blockchain game, suggesting that such integration requires securities registration. In response, CyberKongz argues this stance is deeply flawed and dangerous for the industry:
The SEC’s rhetoric that a token in tandem with a blockchain game must be registered as a security has major implications for the entire web3 gaming space. We will defend against this stance for the wider space.
SEC Critical of Key Event
The SEC reportedly focused on a key event in April 2021, which CyberKongz says the regulator misinterpreted as a primary sale of NFTs. CyberKongz clarified that the event was a contract migration, not a sale, calling out the regulator’s confusion over smart contracts:
If they cannot distinguish between a primary sale and a contract migration, what hope do we currently have for a clear regulatory pathway going forward?
CyberKongz emphasized that it is a small team with a lack of significant funding, but remained resolute in taking on the fight to the regulator, noting, “We have always believed in pushing this space forward. Our vision has always been about innovation and pushing boundaries in web3.” The project ended its post on a hopeful note, describing the announcement as a relief after two years of “suffering in silence.”
CyberKongz joins a growing chorus of web3 leaders speaking out against the SEC’s actions, aligning itself with Coinbase CEO Brian Armstrong, OpenSea founder Devin Finzer, and Uniswap’s Hayden Adams. “We stand with others who are leading this fight for our industry,” CyberKongz stated, adding that the current administration’s “anti-crypto agenda” is harming innovation.
