Mila Kunis & Ashton Kutcher’s Stoner Cats NFTs Are Securities: SEC

Credit: That 70s Show

After its failed attempts at corralling the cryptocurrency industry, the U.S. Securities and Exchange Commission (SEC) seems to be taking aim at NFTs. Last week, it was Impact Theory. This week, it is Mila Kunis’ and Ashton Kutcher’s Stoner Cats NFT collection.

Yesterday, the SEC charged Stoner Cats LLC with the offering of unregistered securities, claiming that the company encouraged buyers to purchase its NFTs with the promise of selling the assets on secondary markets for higher prices later. The U.S. civil regulatory agency fined Stoner Cats $1 million for the violation.

Stoner Cats has agreed to pay the $1 million fine without admitting wrongdoing. Like the case levied against Impact Theory, Stoner Cats LLC must now destroy NFTs related to the collection and establish a fund to reimburse “injured investors” who paid to purchase the NFTs.

Gurbir Grewal, Director of the SEC’s Division of Enforcement, remarked in the agency’s press release that regardless of whether the NFTs involved “beavers, chinchillas,” or are animal-based, it’s the economic reality of the offering that determines whether it is an investment contract and a security. He noted that most of the Stoner Cats NFTs were sold on the secondary market within months rather than held as collectibles.

Two SEC Commissioners, Hester Peirce and Mark Uyeda, dissented, likening the Stoner Cats NFTs to 1970s Star Wars collectibles. They said that rather than take harsh action against NFT companies, a set of guidelines needs to be established so that artists can create without excessive legal constraints.

The Stoner Cats collection launched in the summer of 2021 with each NFT costing 0.35 ETH or around $800 at the time. The team raised roughly $8 million from mint, reinvesting the funds to create a Web TV series about an elderly woman who uses medical marijuana to treat early Alzheimer’s symptoms. When she does so, her cats “become sentient” and comedy ensues.

The series attracted some big-name Hollywood actors, including Chris Rock and Jane Fonda. The episodes are only available for viewing if you hold a Stoner Cats NFT in your wallet.

NFT Community Reacts to the SEC’s Action

After the news of the SEC’s action against Stoner Cats broke yesterday, the NFT community reacted — and with some harsh criticism towards the regulatory agency.

Many criticized the vagueness of the SEC’s language and stated that, under the SEC’s paradigm, all collectibles sold on secondary markets must then be securities. These include limited edition sneakers, Pokémon cards, and other items bought to be later sold for a profit.

One blockchain lawyer, Preston Byrne, wrote, “Does the SEC have nothing better to do,” such as bring regulatory clarity to the cryptocurrency industry or pursue obvious frauds, than “picking on a bunch of Web3 cartoonists” selling cards of films cells portraying cats.

Adam Cochran, a cryptocurrency analyst, said that the SEC’s language stating that the Stoner Cats mint constituted an offering of “unregistered” securities is absurd considering that there is currently no such “registration” involving NFTs that aren’t securities.

It is important to note that the SEC’s two targets — Impact Theory and Stoner Cats — have not admitted any wrongdoing when settling their cases. Paying the fine just means they won’t challenge the accusations in court, which could cost a great deal more money.

Since the announcement of the fine, the Stoner Cats NFT collection has more than doubled its floor price. Many may be buying the NFTs for the notoriety or trying to take advantage of the refund when it’s available.

Rarity Sniper will pay attention to the story and update this article with any future developments.

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