Opinion: How the SEC’s latest regulatory swipe could impact the NFT space

The SEC took another swipe at the token space this week as it announced charges against Impact Theory. At the height of NFT mania in late 2021, Tom Bilyeu’s project raised $30 million by selling tokens called Founder’s Keys, promising collectors “tremendous value.” The SEC argues that the Founder’s Keys were illegal securities. The implications here could be big. 

Why the SEC targeted Impact Theory ⚠

The SEC ordered Impact Theory to destroy Founder’s Keys it held and pay $6.1 million. But the regulatory action may not stop there. Many 2021-era NFT projects had similar business models to Impact Theory, so we could see more lawsuits drop in the future. Impact Theory effectively promised collectors a return on their NFTs when it promised “tremendous value,” and that’s why the SEC is putting its foot down. I can imagine many projects that offered utility with their NFTs read the lawsuit nervously. 

“Many 2021-era NFT projects had similar business models to Impact Theory, so we could see more lawsuits drop in the future.”

How will digital art NFTs fare? 🖼

Of course, many NFT projects will be exempt from such regulations. When digital artists sell their work as tokens, they don’t offer any “utility” other than the art itself. So you’d hope they’ll be fine. Art can be sold on and treated as an investment, but I think it would be difficult for the SEC to argue that an Art Blocks collection can be classed as a security. 

“It would be difficult for the SEC to argue that an Art Blocks collection or XCOPY piece can be classed as a security.”

All of this could have a big impact on the future of NFTs. How securities laws apply to NFTs is still unclear, but I wouldn’t be surprised to see fewer projects like Impact Theory offering “utility NFTs” in the future. Maybe this will lead to a new wave of innovation and use cases in disciplines like art, live entertainment, and gaming. It’s hard to say right now, but either way, I’m pretty sure that the technology is here to stay. 

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