<a target="_blank" href="https://x.com/CyberKongz” target=”_blank” rel=”noopener”>cyberkongz, one of the pioneering PFP nft collections with deep ties to blockchain gaming, has publicly revealed that it received a Wells Notice from the US Securities and Exchange Commission (SEC).
The notice notes the SEC's intention to recommend legal action against CyberKongz, alleging that the project may have violated securities laws. Specifically, the regulator's concerns center around the integration of an ERC-20 token within the CyberKongz ecosystem and a technical event involving Genesis Kongz nfts in 2021.
CyberKongz has criticized the SEC's approach, claiming that it reflects a misunderstanding of blockchain technology and creates uncertainty for other blockchain-based gaming projects.
Source: CyberKongzWhat was the notice about?
The SEC's main concern centers on CyberKongz's use of an ERC-20 token as part of its blockchain gaming platform. According to CyberKongz, the SEC claims that holding a token alongside a game constitutes the offering of a security, a stance that CyberKongz says could disrupt innovation in web3 gaming.
In addition to the token, the SEC is examining an April 2021 event involving Genesis Kongz nfts. CyberKongz clarified that this event was a smart contract migration (a routine blockchain process) rather than a token sale. The team has expressed concern that the SEC's interpretation could blur the line between standard technical operations and financial transactions, creating ambiguity for developers across the industry.
“If they can't distinguish between a primary sale and a contract migration, what hope do we currently have for a clear regulatory path in the future?” CyberKongz said.
Source: CyberKongzWhy is this important for blockchain games?
The CyberKongz case comes at a time of increased regulatory scrutiny on blockchain projects, including nfts, decentralized platforms and gaming ecosystems. The SEC also recently issued Wells notices to other major players in the space, including nft marketplace OpenSea and blockchain gaming platform Immutable.
The SEC's position, if upheld, could set a precedent for how tokens are integrated into blockchain games, raising questions about compliance requirements for developers and projects using similar models.
CyberKongz has positioned its response as a defense not only of its own operations but also of the broader web3 space. The project argues that clear regulatory guidelines are needed to support innovation while addressing compliance issues.
“This speech would have significant implications for the entire web3 gaming industry, and we will defend this stance in the broader space,” CyberKongz stated, vowing to challenge the SEC's stance.
