SEC commissioners Hester Peirce and Mark Uyeda didnāt believe any US securities laws were triggered and urged the commission to give NFT firms more room to experiment.
Two commissioners from the United States Securities and Exchange Commission have slammed their agency for seemingly cornering non-fungible token-themed restaurant Flyfish Club into a $750,000 settlement.
The SECsaidFlyfish āconducted an unregistered offering of crypto asset securitiesā by selling 1,600 NFTs to US investors and making $14.8 million from two price points, according to a Sept. 16 cease and desist order.
However, SEC commissioners Hester Peirce and Mark Uyedacriticizedthe enforcement action, arguing the Flyfish NFTs were āsimply a different way to sell membershipsā and thus didnāt trigger securities laws.
In a dissenting letter, the two commissioners said the Flyfish NFTs didnāt pose a āthreatā to investors and stressed the SEC must provide NFT innovators with more freedom to experiment:
āCreative people should be able to experiment with NFTs without having to consult a high-priced tea-leaf reader ā ahem, lawyer. The Commission can change its menu to include a healthy serving of guidance to give non-securities NFT creators the freedom to experiment.ā
This enforcement action āundermines trust in Chef SEC,ā the securities commissioners added.
The NFTs would have allowed customers to eat and drink in their yet-to-be-built restaurant in Manhattan, New York. According to the restaurantās website, it issetto open this month.
Preview of one of Flyfish Clubās lounge areas. Source: Flyfish Club on Instagram
The SEC claimed that registration was necessary as the Flyfish NFTs were treated as investment contracts and thus satisfied the Howey testās four prongs.
While Flyfish didnāt admit or deny the agencyās accusations, it agreed to destroy all remaining Flyfish NFTs in its possession and not accept future royalties from the sales of NFTs.
The Gary Gensler-led SEC pressed similar charges againstNFT projects Impact TheoryandStoner Cats 2over the past 13 months andissued a Wells Noticeagainst one of the largest NFT marketplaces, OpenSea, on Aug. 28, suggesting potential enforcement action in the coming weeks or months.
The Flyfish NFTs were spearheaded byentrepreneur Gary Vaynerchuk, who became a prominent figure in the 2021 NFT summer and has extensive experience in the investment side of hospitality.
https://cointelegraph.com/news/two-sec-commissioners-slam-agencies-nft-settlement-flyfish-club