Stoner Cats NFT faced a $1 million fine from the SEC for selling special digital cat images without the right permissions.
Stoner Cats NFT makers fined by SEC. The company behind the Stoner Cats non-fungible tokens (NFT) was fined after raising over US$8 million. They sold NFTs without proper permissions. They've accepted the fine and will pay US$1 million.
The project sold 10,320 cat-themed NFTs on July 21, 2021, for US$800 each. This money was for a web series starring famous actors like Mila Kunis. The SEC said these NFTs were like financial products.
Gurbir S. Grewal, from the SEC, said: “The real nature of the offering, not just names or things involved, determines if it's a security.”
Before this, the SEC charged another company, Impact Theory, for similar reasons. The SEC has also looked into big crypto firms like Binance and Coinbase. Now, the NFT world is watching closely. Recently, a measure of the NFT market's health dropped by 1.63%.
Two SEC members disagreed with this action. They said the Stoner Cats NFTs were like Star Wars toys from the 1970s. They think the SEC needs to be clearer before charging companies.
The SEC uses the "Howey Test" to decide if something is a financial product. The test looks at four things: investment of money, a shared business, hope for profit, and work done by others. While Stoner Cats did raise a lot of money, the other parts of the test aren't so clear with NFTs. The SEC believes Stoner Cats NFTs promised profits, but why people buy NFTs can vary. The value of an NFT might also come from its uniqueness or the whole community, not just one company.