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17/09/24
19
SEC’s Enforcement Against Flyfish Club: A Blow to NFT Innovation?
Two commissioners from the U.S. Securities and Exchange Commission (SEC) have expressed strong criticism regarding the agency’s recent actions against Flyfish Club, a restaurant venture tied to non-fungible tokens (NFTs). The SEC imposed a significant settlement of $750,000 on Flyfish, claiming that the restaurant conducted an unregistered offering of crypto asset securities. According to a cease and desist order issued on September 16, Flyfish raised $14.8 million by selling 1,600 NFTs to U.S. investors.
Commissioners Hester Peirce and Mark Uyeda argued against the enforcement action, stating that the Flyfish NFTs functioned merely as a new method for selling memberships rather than triggering securities laws. They emphasized that these NFTs posed no genuine risk to investors and advocated for a regulatory framework that allows NFT innovators more latitude for experimentation. The commissioners suggested that creators should not have to navigate complex legal interpretations before experimenting with NFTs.
The enforcement action has raised concerns anew about the SEC’s approach to emerging digital asset markets. According to the commissioners, it undermines public trust in the agency and impairs the growth potential of creative industries tied to NFTs. This sentiment echoes protests that the SEC needs to clarify its stance on NFT regulation, providing clearer guidance for creators to work without fear of onerous legal entanglements.
The Flyfish NFTs, designed to grant members access to the yet-to-open Manhattan restaurant, were supposed to enable customers to dine at the establishment upon its launch later this month. While Flyfish did not admit or deny the SEC’s allegations, the restaurant agreed to dissolve any remaining NFTs and forego future royalty earnings from NFT sales. The SEC has pursued similar actions with various NFT projects in recent months, signaling an ongoing scrutiny of the rapidly evolving digital asset landscape.
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