The Securities and Exchange Commission continues to not pussyfoot around crypto enforcement as it charges yet another non-fungible token project with selling unregistered securities.
The federal agency on Wednesday announced that it had charged the creators of Stoner Cats, an animated web series about “a woman who uses medical marijuana to alleviate her early Alzheimer’s symptoms and her beautiful family of cats,” according to the website, for raising approximately $8 million through the sale of more than 10,000 NFTs for about $800 each.
The SEC claims that this sale, which sold out in about 35 minutes, was essentially an unregistered securities offering, as the show’s creators and producers, most notably the actress Mila Kunis, allegedly led NFT purchasers to believe that their investment in a Stoner Cats NFT would lead to a profitable resale via a secondary market.
The web series included a who’s who of Hollywood, counting Ashton Kutcher, Chris Rock, Jane Fonda, Michael Buble, and Ethereum founder Vitalik Buterin as cast members, per the show’s website.
Sound Ventures, an Ashton Kutcher-led venture capital outfit whose team members were listed as members of the project, did not immediately respond to a request for comment from Fortune. Maaria Bajwa, a principal at Sound Ventures and member of Stoner Cats’s listed staff, did not immediately respond to a request for comment on LinkedIn.
Stoner Cats 2 LLC, the legal entity behind the NFT sale, agreed to a cease-and-desist order from the SEC and a fine of $1 million, per a statement from the agency.
“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 S. Grewal, director of the SEC’s Division of Enforcement, said in the statement.
The enforcement against Stoner Cats follows a year of accelerating litigation from the SEC against crypto founders, exchanges, and now NFT projects.
After charging a series of well-known crypto personalities toward the beginning of the year, including Do Kwon, founder of the so-called stablecoin TerraUSD, and Justin Sun, founder of TRON, the SEC targeted some of the biggest companies in crypto, most notably the exchanges Binance and Coinbase.
In late August, the SEC then set its sights on NFTs, charging the Los Angeles-based entertainment company Impact Theory for raising approximately $30 million through NFT sales, what the agency alleged was an unregistered securities offering.
There has been a lot of talk about cats at the SEC over the past week: https://t.co/VHFt4CVEV0 and https://t.co/pFXmkGxd2r
— Hester Peirce (@HesterPeirce) September 13, 2023
In its most recent litigation against Stoner Cats, the agency made a very similar case, but two commissioners—Hester Pierce and Mark Uyeda—dissented in a statement: “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.”
