SEC issues Wells Notice to CyberKongz, warns Web3 gaming market
The Web3 gaming token market has suffered a new setback after the US Securities and Exchange Commission (SEC) issued a Wells Notice to CyberKongz, a gaming-related NFT platform on the Ronin blockchain. The SEC argues that the presence of an ERC-20 token tied to the game requires registration as a financial security.
CyberKongz has received a Wells Notice from the SEC.
We are extremely disappointed at the approach the SEC has taken towards us, but we are going to stand up and fight for a brighter future that holds more clarity for NFT projects.
We have been suffering in silence for the last… pic.twitter.com/lc6hyzUPb0
— CyberKongz (@CyberKongz) December 16, 2024
In a statement published on X, CyberKongz expressed dissatisfaction with the SEC’s approach, saying it has faced “unfair accusations and inaccurate information” from the regulator since its first contact two years ago. According to the project, the concerns revolve around the sale of Genesis Kongz NFTs in April 2021, which the SEC classified as a primary sale transaction, while the CyberKongz team clarified that it was a contract migration.
CyberKongz also criticized the regulator’s lack of understanding of blockchain technologies, noting that such misinterpretations jeopardize regulatory clarity for the entire NFT and gaming token sector. “If they can’t distinguish between a primary sale and a contract migration, how can we expect clear regulation going forward?” the project questioned.
With a model strongly linked to the gaming universe, CyberKongz uses 2D and 3D NFTs as social avatars in “play kollect” and “adventure runs” games. This format, common in Web3 projects, integrates tokens and NFTs to provide an interactive experience on the blockchain.
A Wells Notice is a formal notification from the SEC indicating the conclusion of a preliminary investigation and the possible recommendation of punitive actions. From the moment of receipt, CyberKongz has 30 days to present its defense.
Axie Infinity founder Jihoz Zirlin has expressed his support for CyberKongz, criticizing the current US administration’s stance and saying he is optimistic about regulatory changes under the new administration. The statement reinforces the sense of solidarity among major blockchain gaming projects.
Despite the regulatory pressure, CyberKongz NFTs saw a 14,4% increase in their minimum price, reaching 8,2 ETH (about $32.800), according to on-chain data. This movement indicates a positive response from investors despite the uncertainty brought by the SEC action.
Other similar projects, such as Immutable, have also recently faced regulatory action, highlighting an increasingly challenging landscape for gaming tokens on Web3.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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