CyberKongz, one of the pioneering PFP NFT series with strong ties to blockchain gaming, publicly revealed that it received a Wells Notice from the U.S. Securities and Exchange Commission (SEC).
The notice indicates that the SEC intends to recommend legal action against CyberKongz, alleging that the project may have violated securities laws. Specifically, the regulator’s focus is on the integration of ERC-20 tokens in the CyberKongz ecosystem and technical events involving Genesis Kongz NFTs in 2021.
CyberKongz criticized the SEC’s approach, claiming that it reflected a misunderstanding of blockchain technology and created uncertainty for other blockchain-based gaming projects.
Source: CyberKongzWhat is the content of the notification?
The SEC’s main concern is CyberKongz’s use of ERC-20 tokens as part of its blockchain gaming platform. According to CyberKongz, the U.S. Securities and Exchange Commission (SEC) claims that combining tokens with games constitutes the offer of a security, a stance that CyberKongz says could undermine innovation in web3 games.
In addition to the token, the SEC is also reviewing events from April 2021 involving the Genesis Kongz NFT. CyberKongz clarified that this event is a smart contract migration (regular blockchain process), not a token sale. The team expressed concern that the SEC’s interpretation could blur the lines between standard technical operations and financial transactions, creating ambiguity for developers across the industry.
CyberKongz said: “If they can’t differentiate between major sales and contract migration, what hope do we currently have for a clear regulatory path forward?”
Source: CyberKongzWhy is this important for blockchain gaming?
The CyberKongz case comes as blockchain projects, including NFTs, decentralized platforms and gaming ecosystems, come under increasing regulatory scrutiny. The SEC has also recently issued Wells notices to other major players in the space, including NFT marketplace OpenSea and blockchain gaming platform Immutable.
The SEC’s stance, if upheld, could set a precedent for how tokens can be integrated into blockchain games, raising questions about compliance requirements for developers and projects using similar models.
CyberKongz positioned its response to defend not only its own operations, but the wider web3 space. The plan recognizes the need for clear regulatory guidance to support innovation while addressing compliance issues.
“This statement will have a significant impact on the entire web3 gaming industry, and we will defend this position in the broader field,” CyberKongz said, vowing to challenge the SEC’s position.
