- SEC issues Wells notice to CyberKongz, citing concerns about gaming tokens and unregistered securities.
- CyberKongz plans to contest the allegations, warning of implications for the Web3 gaming industry.
- Despite the news, CyberKongz NFT prices remain stable and have risen over the last 24 hours.
The Web3 gaming industry is under growing pressure following a Wells notice issued by the United States Securities and Exchange Commission (SEC) to CyberKongz, a non-fungible token (NFT) platform. The notice suggests that an ERC-20 token tied to a blockchain game may require registration as a security before its issuance.
CyberKongz announced the development through X on December 16, stating that the SEC’s position poses significant risks to blockchain-based gaming projects. The team emphasized that they intend to challenge the regulator’s stance, which they believe could harm the broader Web3 ecosystem.
A Wells notice serves as an official communication from the SEC, signaling that the agency has completed its initial investigation and is considering enforcement action. Entities that receive this notice have 30 days to respond, presenting evidence or arguments against the proposed action.
Legal Dispute and Industry Implications
CyberKongz disclosed that one of the SEC’s concerns relates to its Genesis Kongz NFTs, issued in April 2021. The platform clarified that this event involved a contract migration rather than a primary sale. Additionally, the company asserted that it has not engaged in raising capital, relying primarily on bootstrapped funding with a limited treasury.
The platform described the investigation as a prolonged struggle, revealing it has been under SEC scrutiny for two years. The CyberKongz team criticized the action as an attempt to hinder progress within the Web3 industry, urging for a policy shift under future leadership.
One of Axie Infinity’s co-founders, Jihoz Zirlin, voiced his support for CyberKongz, expressing optimism that new leadership in the United States government will bring relief to blockchain projects. Zirlin’s comments reflect broader frustrations within the Web3 community regarding regulatory hurdles in the United States.
Market Reaction and CyberKongz Ecosystem
CyberKongz is known for its collection of 2D and 3D randomly generated social avatars, which are usable in blockchain-based games such as “Play & Kollect” and “Adventure Runs” on the Ronin network.
Despite the regulatory development, market data shows that CyberKongz NFTs have been largely unaffected. According to CoinGecko, the floor price of CyberKongz NFTs climbed 11.7% within 24 hours, reaching 6.69 Ether (approximately $26,900).
The outcome of the SEC’s enforcement action could set a precedent for similar projects within the NFT and gaming sectors. Analysts suggest that increasing clarity on token classification remains crucial to avoid stalling innovation in Web3 gaming. CyberKongz, meanwhile, continues to stand firm, signaling that it will fight for broader recognition of NFT projects across blockchain platforms.
