CyberKongz Receives SEC Wells Notice: Significant Implications for Gaming Tokens

CyberKongz claimed the SEC first contacted it two years ago and has been "suffering in silence" since then.

Gaming tokens may face a setback after the US securities regulator issued a Wells notice to CyberKongz, a non-fungible token (NFT) firm.

The Securities and Exchange Commission (SEC) conveyed "concerning rhetoric" that an ERC-20 token in conjunction with a blockchain game cannot be launched without first being registered as a security, CyberKongz stated in a Dec. 16 X post.

According to CyberKongz, this would have "major implications" for the Web3 game sector, and the company would "defend against this stance for the wider space."

A Wells notice is a formal letter from the SEC telling an entity that it has conducted a preliminary inquiry and is considering enforcement action. CyberKongz will have 30 days to submit a response.

One of the SEC's concerns about CyberKongz resulted from its "sale" of Genesis Kongz NFTs in April 2021. The NFT business stated that it was a contract migration, not a primary sale.

CyberKongz stated that the company has never sought funds and has been primarily bootstrapped, resulting in a small treasury and that it has been "suffering in silence" since being contacted by the SEC two years ago.

CyberKongz stated that the enforcement action was a last-minute attempt by the Biden administration to set the sector back, adding:

"We hope that the new administration puts an end to this unjustness in our industry, but until then we will fight for NFT projects on all chains.”

Jihoz Zirlin, one of the founders of Axie Infinity, has expressed support for the CyberKongz team, stating that he is "confident that the new administration will end the persecution of our people."

CyberKongz NFTs are two- and three-dimensional social avatars created at random and utilized in "play & Kollect" and "adventure runs" games on the Ronin blockchain.