Stoner Cats 2 LLC (SC2), the company behind the “Stoner Cats” animated series, has faced legal action from the United States Securities and Exchange Commission (SEC). They were charged with selling over 10,000 NFTs for about $800 each without proper registration as crypto-asset securities.
This sale, which happened in just 35 minutes on July 27, 2021, raised funds for the series. These NFTs granted purchasers access to the show, which centered around an elderly woman and her feline companions partaking in cannabis-related activities. The first episode of the six-part series premiered just two days after the NFT sale.
Actress Mila Kunis was at the helm of the Stoner Cats project, collaborating with established NFT creators. The cast included notable names such as Ashton Kutcher, Chris Rock, Dax Shepard, Gary Vaynerchuk, Jane Fonda, Michael Bublé, Seth MacFarlane, and Vitalik Buterin.
The SEC alleged that SC2 promoted these NFTs as potential investments, insinuating that the involvement of renowned actors and creators would increase their value. To compound matters, SC2 received a 2.5% royalty on secondary NFT sales, resulting in a total of over $20 million in secondary transactions.
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In response to the SEC’s charges, SC2 has agreed to a cease-and-desist order and will pay a $1 million civil penalty. They will also establish a fair fund to reimburse affected investors and undertake the destruction of all NFTs in their possession or control. Importantly, SC2 has neither admitted nor denied the allegations.
Earlier in a report by Todayq News on October 29, 2023, Hester Peirce, SEC Commissioner, criticizes the SEC’s approach to NFT regulation. She believes the SEC should clearly define the law first and then enforce it, rather than using enforcement actions to educate the public.
Peirce also notes the lack of clarity and ambiguity in current NFT regulation, emphasizing the need for caution in such a regulatory environment. Now, this case marks a significant development as one of the first instances where the SEC has taken action against an NFT issuer for selling unregistered securities since the Impact Theory case in August.