SEC Commissioners Hester M. Pierce and Mark T. Ovida criticized Regulatory enforcement action against Flyfish Club's non-fungible token (NFT) suite.
In the Sept. 16 letter, the commissioners argued that the securities laws did not apply in this case.
Flyfish Club, a dining establishment, sold NFT as exclusive access to the upcoming restaurant and bar. The club created about 3,000 NFTs, more than half of which sold for $8,400 for regular NFTs and $14,300 for Omakase NFTs, raising $14.8 million. It also earned $2.7 million in royalties from secondary sales.
Consequently, SEC charged Flyfish Club settled the case with a civil penalty of $750,000 and an undertaking to comply with a cease-and-desist order for making an unregistered offering of NFT-format cryptoasset securities.
The commissioners stated:
Omakase dining inherently requires a deep level of trust. Americans should be able to extend the same trust in our regulators. Today's settlement with Flyfish Club for the sale of non-fungible tokens (“NFT”) is just the latest to undermine SEC's confidence in Chef. Accordingly, we disagree.”
Furthermore, Pearce and Ovida argued that these NFTs are utility tokens, not securities.
They asserted that the Howey test, which is used to determine whether an asset is a security, is not appropriate for Flyfish NFTs because their holders have a reasonable expectation of obtaining “amazing culinary experiences” and other exclusive membership experiences associated with Flyfish. had
The commissioners warned that applying the securities laws in this case could harm both current and future filings and called on the SEC to provide guidance to non-securities NFT originators to allow testing without legal uncertainty. slow
SEC crackdown on NFT
SEC threatened OpenSea NFT Market with Wells' announcement on August 28 to offer securities on its platform.
It is an action by the US regulator that precedes enforcement efforts if the company complies and ceases activities deemed illegal.
Devin Finzer, CEO of OpenSea; claimed that the regulator's move would affect creators and artists, and announced that the company would “stand and fight.”
Following Finzer's remarks, Coinbase-backed organization Stand With Crypto Alliance was launched Creator's Defense Fund, which is $6 million and aims to protect artists affected by the SEC's enforcement action.
