CyberKongz, a gaming-based NFT project, announced on December 16 that it has received a Wells Notice from the U.S. Securities and Exchange Commission (SEC).
The notice raises concerns about the platform’s integration of its ERC-20 token with blockchain games and questions aspects of its activities, including its 2021 contract migration.
The SEC’s Argument
In a post on X, the CyberKongz team expressed their dismay with the agency’s handling of the situation, saying:
“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.”
They disclosed that the issue began two years ago when the regulator first contacted them, during which time they operated quietly and under a lot of pressure.
The post highlighted that the SEC’s main concern appears to center on whether ERC-20 tokens can function alongside blockchain games without being classified as securities.
CyberKongz argued that this implication could have wide-ranging consequences for the Web3 gaming industry. They also said they are determined to contest the financial watchdog’s position and advocate for a clearer regulatory framework.
Another point of contention involves the Genesis Kongz contract migration in April 2021, which the regulator reportedly interpreted as a token sale. The NFT project clarified that the migration was not a primary sale and criticized the SEC’s inability to differentiate between the two, stating:
“If they cannot distinguish between a primary sale and a contract migration, what hope do we currently have for a clear regulatory pathway going forward?”
The Wells Notice gives the platform 30 days to respond before the SEC decides whether to pursue enforcement action. While not a formal allegation of wrongdoing, such a notice shows that the agency is considering further legal steps.
Broader Industry Issue
This latest development adds CyberKongz to a growing list of blockchain and NFT entities under SEC scrutiny, including Coinbase, Consensys, Ripple, OpenSea, Uniswap Labs, and Bittrex, which have faced similar notices in recent years.
Last month, Australian-based gaming company Immutable also reported receiving such a warning. At the time, they expressed frustrations over vague allegations and unclear regulatory guidelines. However, no further action has been taken since then.
Meanwhile, CyberKongz has reassured its community that it remains committed to advancing its work without the burden of silence. It stated that the situation marks a turning point as it continues to advocate for clearer guidelines within the NFT and blockchain industries.
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