Impact Theory produces entertainment and educational podcasts and was “trying to build the next Disney” when it invited investors to purchase its NFTs.
The United States Securities and Exchange Commission (SEC) has charged a media and entertainment company with conducting unregistered securities sales when it sold nonfungible tokens (NFTs) to investors between October and December 2021.
Impact Theory, a Los Angeles-based company that produces entertainment and educational content, including several podcasts, allegedly raised almost $30 million through the sales of NFTs it called Founder’s Keys, which were offered in three tiers.
The company “encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business,” according to the SEC, and:
This was the SEC’s first enforcement action involving an NFT, SEC commissioners Hester Peirce and Mark Uyeda wrote in their dissent of the action. “[T]he NFTs were not shares of a company and did not generate any type of dividend for the purchasers,” they wrote, adding:
“[W]e share our colleagues’ worry about the type of hype that entices people to spend almost $30 million for NFTs seemingly without having a clear idea about how they will use, enjoy, or profit from them. […] This legitimate concern, however, is not a sufficient basis to pull the matter into our jurisdiction.”
The promises made by Impact Theory and cited in the SEC order “are not the kinds of promises that form an investment contract.” The commissioners compared the promises made about the NFTs to statements made by sellers of collectibles. They went on to suggest a list of nine questions the agency should consider before pursuing NFT cases:
“Regardless of what one thinks of the Howey analysis, this matter raises larger questions with which the Commission should grapple before bringing additional NFT cases.”
