‘Major implications’ for gaming tokens as CyberKongz hit with SEC Wells notice

Gaming tokens could be in for a setback after non-fungible token (NFT) platform CyberKongz was hit with a Wells notice by the United States securities regulator.

The Securities and Exchange Commission (SEC) brought up the “concerning rhetoric” that an ERC-20 token in tandem with a blockchain game cannot be issued without it first being registered as a security, CyberKongz said in a Dec. 16 X post.

Such discourse would have “major implications” for the Web3 gaming industry, CyberKongz explained, adding it would “defend against this stance for the wider space.”

A Wells notice is a formal letter issued by the SEC that informs an entity that the regulator is considering an enforcement action after completing a preliminary investigation. CyberKongz will have 30 days to file a response.

One of the SEC’s issues with CyberKongz stemmed from its “sale” of Genesis Kongz NFTs in April 2021 — however, the NFT firm stressed that it was merely a contract migration, not a primary sale.

CyberKongz said it has also largely been bootstrapped having never raised capital in addition to having a rather small treasury, and had been “suffering in silence” since it was first contacted by the SEC two years ago.

CyberKongz said the enforcement action is a last-minute attempt from the Biden administration to set the industry back, adding:

“We hope that the new administration puts an end to this unjustness on our industry, but until then we will fight for NFT projects on all chains.”

The CyberKongz team has since received words of support from one of Axie Infinity’s founders Jihoz Zirlin, who is “confident that the new administration will end the persecution of our people.”

CyberKongz NFTs are randomly generated two and three-dimensional social avatars that can be used in “play & kollect” and “adventure runs” games on the Ronin blockchain.

Related: NFTs will be ‘even bigger’ than they were in 2021 — Animoca’s Yat Siu

The CyberKongz NFT price wasn’t impacted by the Wells notice and is still up 11.7% over the last 24 hours to an average floor price of 6.69 Ether (ETH) — worth $26,900, according to CoinGecko data.

Cointelegraph reached out to CyberKongz for comment but didn’t receive an immediate response.

Last month, Australian-based NFT and gaming firm Immutable was also served a Wells notice from the SEC on Nov. 1 — however, it hasn’t reported any enforcement action against them since then.

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