Stoner Cats agrees to pay $1M fine to settle SEC charges

Hollywood superstar-backed Stoner Cats has neither admitted nor denied the SEC’s allegations that it issued an unregistered security

article-image

Nils Jacobi/Shutterstock modified by Blockworks

share

The US Securities and Exchange Commission has charged and settled with NFT issuer Stoner Cats 2 for allegedly offering an unregistered security. 

Without denying or admitting to the SEC’s allegations, Stoner Cats 2 (SC2) has agreed to cease and desist from offering the NFTs and pay a $1 million fine. SC2 also agreed to destroy all NFTs in its possession and issue a notice of the order on its website and social media channels, the SEC said.

“Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement Wednesday. 

Stoner Cats, which was backed by actors Ashton Kutcher and Mila Kunis, released 10,000 NFTs in a highly-anticipated drop in July 2021. The drop raised $8 million. 

The collection was a launch for the animated show featuring Kutcher, Kunis alongside other heavy-weights like Chris Rock and Vitalik Buterin, which, the SEC says, led investors to reasonably expect profit. 

“As part of the marketing campaign, the SC2 team emphasized its expertise as Hollywood producers, its knowledge of crypto projects, and the well-known actors involved in the web series, leading investors to expect profits because a successful web series could cause the resale value of the Stoner Cats NFTs in the secondary market to rise,” the SEC said in Wednesday’s statement. 

SEC Commissioners Hester Peirce and Mark Uyeda issued a dissenting opinion Wednesday, arguing that the Howey test cannot be met. 

Analyzing investment contracts in this way “carries implications for creators of all kinds,” Peirce and Uyeda wrote. “Were we to apply the securities laws to physical collectibles in the same way we apply them to NFTs, artists’ creativity would wither in the shadow of legal ambiguity.” 

Stoner Cats said in a December 2022 statement that the collection would be coming to an end “soon,” and noted that the project had been successful in bringing Hollywood talent into Web3. 

It’s not the first time the SEC has targeted NFT issuers for alleged securities laws violations. In August 2023, the agency charged and settled with Impact Theory, an issuer the SEC said earned $30 million from the offering. 

“Registration of securities, including crypto asset securities, protects investors by providing them with disclosures so they can make informed investing decisions,” Carolyn Welshhans, associate director of the SEC’s Home Office, said in the statement. “Stoner Cats wanted all the benefits of offering and selling a security to the public but ignored the legal responsibilities that come with doing so.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495B in value locked, doubling Uniswap's Base deployment.

article-image

If we tokenize all assets in a speculative rush, the risk of creating illiquid markets and trapped value will manifest on a large scale

article-image

Plus, Trump is headed to the heart of Bitcoinlandia with a speaking appearance at the Bitcoin 2024 conference

article-image

Meanwhile, stocks rally after Jerome Powell finishes his Capitol Hill tour

article-image

Plus, Blinks have reshaped many people’s understanding of what blockchains are capable of

article-image

Franklin Templeton has the lowest intended ETH fund fee so far, though a similar advantage did not help it win the race for bitcoin ETF assets

article-image

It’s now time for the entire Bitcoin community to recognize that Satoshi’s design transcends the confines of a single chain