The gaming token industry could be facing significant challenges after CyberKongz, a non-fungible token (NFT) platform, was issued a Wells notice by the U.S. Securities and Exchange Commission (SEC). The SEC notice indicated possible enforcement action against the company after a preliminary investigation, expressing concerns over the issuance of an ERC-20 token associated with a blockchain game without security registration. CyberKongz foresees this development as having “major implications” for the Web3 gaming sector and has pledged to challenge this regulatory stance.
The SEC’s problems with CyberKongz primarily centered around the organization’s “sale” of Genesis Kongz NFTs in April 2021. However, the company asserts that this was not a primary sale but a mere contract migration. Furthermore, CyberKongz, which never raised capital and operates with a small treasury, emphasized it had been dealing with the SEC’s probe quietly for two years.
The company likewise speculated that this enforcement action against them is a last-ditch effort by the Biden administration to stifle growth in the industry, with a hope expressed for the pending administration to put a stop to this perceived injustice. Regardless, CyberKongz is determined to fight for the rights of NFT projects across all networks.
CyberKongz’s NFTs are unique two and three-dimensional social avatars used in games such as “play & kollect” and “adventure runs” on the Ronin blockchain. Interestingly, the recent SEC notice hasn’t impacted CyberKongz’s NFT pricing, with values witnessing an 11.7% increase over the past 24 hours. It is worth mentioning that last month, Australian-based NFT and gaming company Immutable also received a Wells notice from the SEC. However, no enforcement action has been reported since.