SEC commissioners Hester Peirce and Mark Uyeda described the NFT sales as a "common phenomenon" in the world of creators.
The United States Securities and Exchange Commission (SEC) charging nonfungible token (NFT) project Stoner Cats sparked feedback from commissioners Hester Peirce and Mark Uyeda, arguing that the project’s activity constitutes fan crowdfunding, which they believe is common for artists.
On Sept. 13, the SEC charged Stoner Cats 2 LLC, the firm behind the animated series dubbed “Stoner Cats,” with conducting an unregistered crypto-securities offering using NFTs. Stoner Cats 2 LLC agreed to a cease-and-desist order and other imposed measures by the commission.
Making its case, the SEC argued that the NFTs were marketed by the company as having potential for secondary sales and implied that their value would rise. In addition, the SEC pointed out that the company will receive a 2.5% royalty on every secondary sale. The SEC highlighted that the company sold over 10,000 NFTs for $800 each, and the proceeds were used to fund the series. Furthermore, there were at least 10,000 secondary sales, worth over $20 million, according to the SEC.
There has been a lot of talk about cats at the SEC over the past week: https://t.co/VHFt4CVEV0 and https://t.co/pFXmkGxd2r
— Hester Peirce (@HesterPeirce) September 13, 2023
Not everyone within the SEC agrees with the enforcement action. SEC commissioners Hester Peirce and Mark Uyeda published a dissenting statement, arguing that the activity could be considered fan crowdfunding. Pierce and Uyeda argued that this is "a common phenomenon in the world of artists, creators, and entertainers."
They also noted that instead of the SEC’s approach of bringing actions against NFT projects, they should lay down clear rules. The commissioners wrote:
“Rather than arbitrarily bringing enforcement actions against NFT projects, we ought to lay out some clear guidelines for artists and other creators who want to experiment with NFTs as a way to support their creative efforts and build their fan communities.”
The commissioners also compared the Stoner Cats NFTs to collectibles sold by Star Wars in the 1970s. According to Pierce and Uyeda, toy company Kenner sold early bird certificates that are redeemable for future action figures and membership to the Star Wars fan club. The duo argued that based on the actions against Stoner Cats, the SEC should’ve “parachuted in” to save those buyers back in the 70s.
Related: Crypto lawyer about SEC: ‘Problematic to imply all NFTs are securities’
Apart from the SEC commissioners, members of the crypto community were also unhappy with the SEC’s actions. YouTuber Crypto Tea argued in a post that Stoner Cats raised money to make a show and delivered. The social influencer said that she bought the NFTs for fun and to support the show without expecting any profits.
An artist should always be able to say “buy my art, it will become the most expensive art in the Universe”.
— toly (@aeyakovenko) September 14, 2023
To forbid an artist from making an ostentatious claim about the value of their own work would dull the world.
Solana co-founder Anatoly Yakovenko also expressed his opinion about the topic on X (formerly Twitter). According to Yakovenko, artists should not be forbidden to make claims about the value of their work. Yakovenko believes that doing this would "dull the world."
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