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SEC Initiates First Enforcement Action on NFTs; Impact Theory Faces Cease-and-Desist Order
The Securities and Exchange Commission (SEC) has launched its inaugural enforcement action against Impact Theory over unregistered securities related to NFT sales. The move, resulting in a cease-and-desist order, signals the SEC's growing concern with the burgeoning NFT market.
According to the SEC order, Impact Theory sold various tiers of NFTs to finance its operations and promised significant value to purchasers. The company assured investors it would deliver abundant value and enable communities to capture economic benefits from its growth.
The SEC's allegations revolve around Impact Theory's sale of NFTs, which it declared as mechanisms for economic participation in the company. As a result, the company managed to raise approximately $30 million from NFT purchasers.
As part of the enforcement action, Impact Theory has agreed to repurchase all NFTs and destroy them, eliminate any royalties associated with existing NFTs, and develop a plan to return funds to investors. This move aims to rectify the potential violations of securities laws.
The SEC's decision to take action against Impact Theory signifies its entry into the lucrative NFT market and may herald further efforts to regulate NFTs moving forward. In a statement, Commissioner Hester Peirce and Commissioner Mark Uyeda expressed their reservations about the enforcement action, questioning whether the facts of the case warranted such intervention.
The commissioners emphasized that the SEC does not ordinarily pursue enforcement actions against sellers of tangible items such as watches, paintings, or collectibles, who make vague promises to enhance the resale value of those items by building their brands. This case raises questions about the selective nature of SEC enforcement concerning NFTs.
concerningcial statement released on Monday highlighted the significance of this non-fungible token enforcement action. By taking a stand against Impact Theory, the SEC aims to assert its jurisdiction over the NFT market and convey its readiness to address potential securities violations associated with NFT offerings.
While Impact Theory has agreed to comply with the SEC's orders, questions remain about the future regulation of NFTs and the potential impact on other market participants. This case is pivotal in the SEC's engagement with the evolving NFT landscape, signaling potential future actions.
Photo: Bermix Studio/Unsplash
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