Stoner Cats NFTs are ‘fan crowdfunding,’ not securities — SEC’s Peirce, Uyeda

The United States Securities and Exchange Commission’s decision to charge nonfungible token (NFT) project Stoner Cats sparked feedback from Commissioners Hester Peirce and Mark Uyeda, arguing that the project’s activity constitutes fan crowdfunding, which they believe is common for artists. 

On Sept. 13, the SEC charged Stoner Cats 2 LLC, the firm behind the animated series “Stoner Cats,” with conducting an unregistered crypto-securities offering using NFTs. Stoner Cats 2 LLC agreed to a cease-and-desist order and other measures imposed by the commission.

Making its case, the SEC argued that the NFTs were marketed by the company as having potential for secondary sales and implied that their value would rise. In addition, the SEC pointed out that the company receives a 2.5% royalty on every secondary sale. The SEC highlighted that the company sold over 10,000 NFTs for $800 each, with the proceeds used to fund the series. Furthermore, there were at least 10,000 secondary sales, worth over $20 million, according to the SEC.

There has been a lot of talk about cats at the SEC over the past week: and

— Hester Peirce (@HesterPeirce) September 13, 2023

However, not everyone within the SEC agrees with the enforcement action. Peirce and Uyeda published a dissenting statement, arguing that the activity could be considered fan crowdfunding. Pierce and Uyeda argued that this is “a common phenomenon in the world of artists, creators, and entertainers.”

They also noted that instead of the SEC’s approach of bringing actions against NFT projects, it should lay down clear rules. The commissioners wrote:

“Rather than arbitrarily bringing enforcement actions against NFT projects, we ought to lay out some clear guidelines for artists and other creators who want to experiment with NFTs as a way to support their creative efforts and build their fan communities.”

The commissioners also compared the Stoner Cats NFTs to collectibles sold by Star Wars in the 1970s….


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