Impact Theory’s NFT Settlement With SEC: Attorney’s Three Key Observations

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The SEC has made its first move against NFTs. They settled with Impact Theory, the ones who made the NFTs. The SEC said these NFTs were like unapproved securities. Impact Theory agreed to stop, paid a fine of $6.1 million, and will get rid of the NFTs they had. 

Attorney Fred Rispoli has commented on the SEC’s order for Impact Theory’s NFT sales. He highlighted three key points. Firstly, the dispute occurred in the now-questioned SEC court, facing a potential Supreme Court showdown in 2024 that could limit the SEC’s power. 

Rispoli pointed out that Impact Theory began repurchasing its NFTs between December 2021 and August 2022 as a form of “remedial acts.” He raised the question of whether this period coincided with the SEC’s initiation of its investigation and whether there was any public disclosure by either the SEC or Impact Theory. 

He said, “I got the feeling SEC desperately wanted to say it, considering it ordered IT’s NFTs in its possession to be destroyed AND the smart contract re-written to prevent IT getting royalties from secondary sales.”

Thirdly, the order’s mention of secondary market transactions raised questions about their classification as securities. The SEC’s order required destroying NFTs and altering smart contracts. Rispoli wondered about the value and implications of these actions.

He wondered if the NFTs might become collectibles because of the SEC’s attention, or if they’d lose value. Rispoli also thought about whether Impact Theory could change the contract for royalties and what that means. This situation is something to watch closely.

In May 2022, the SEC strengthened its crypto assets and cyber enforcement team, showing interest in NFTs. NFTs were also involved in the insider trading case of OpenSea’s Nathaniel Chastain. It’s not clear if this action means the SEC sees all NFTs as securities. The complaint talks about how the NFTs were promoted and what the money would be used for.