CyberKongz, One of the pioneer PFP NFT collections with deep links with blockchain game, publicly disclosed that it had received Wells' notice from the US Securities and Exchange Commission (SEC).
The announcement indicates the SEC's intention to recommend legal action against CyberKongz, alleging that the project may have violated securities laws. Specifically, the regulator's concerns are focused on the integration of an ERC-20 token into the CyberKongz ecosystem and a technical event involving Genesis Kongz NFTs in 2021.
CyberKongz has criticized the SEC's approach, claiming that it shows a misunderstanding of blockchain technology and creates uncertainty for other blockchain-based gaming projects.
Source: CyberKongzWhat was this announcement about?
The SEC's main concern centers on CyberKongz's use of an ERC-20 token as part of a blockchain gaming platform. According to CyberKongz, the SEC claims that having a token bundled with a game constitutes providing a security, a position that CyberKongz says could stifle innovation in Web 3 games.
In addition to this token, the SEC is investigating an event from April 2021 involving Genesis Kongz NFTs. CyberKongz It explained that the event was a smart contract transfer — a typical blockchain process — rather than a token sale. The team expressed concern that the SEC's interpretation could blur the line between standard technical operations and financial transactions, creating confusion for developers across the industry.
CyberKongz commented, “If they can't distinguish between an initial sale and a contract transfer, what hope do we currently have for a clear regulatory path in the future?”
Source: CyberKongzWhy is this important for blockchain games?
The CyberKongz case comes at a time of increased regulatory scrutiny of blockchain projects, including NFTs, Decentralized platforms and gaming ecosystems. The SEC has also recently issued Wells notices to other major players in the space, including OpenSea NFT Market and Immutable blockchain gaming platform.
The SEC's stance — if upheld — could set a precedent for how tokens can be integrated into blockchain games and raise questions about compliance requirements for developers and projects that use similar models.
CyberKongz has positioned its response as a defense not only of its own operations but also of the wider Web 3 space. The project argues that clear regulatory guidelines are needed to support innovation while addressing compliance concerns.
CyberKongz said, promising to challenge the SEC's position, “This discourse will have important implications for the entire web 3 gaming industry, and we will defend this position for the broader space.”
