Web3 gaming platform Immutable has received a “Wells notice” from the U.S. Securities and Exchange Commission (SEC) — signaling that the SEC may be preparing a lawsuit against the company.
In a statement published Friday, Immutable noted that the SEC’s notice includes “non-specific allegations” related to securities law violations and alleged misrepresentations by the company.
Although the exact reasons for the SEC’s action remain unclear, Immutable believes the issue may relate to the 2021 listing and private sales of its IMX token — an ERC-20 utility token central to the Immutable ecosystem. The SEC may consider IMX a security.
The Wells notice was not limited to the company itself; the SEC also issued notices to the CEO of Immutable and the Digital Worlds Foundation, the organization that issued the IMX token.
Immutable expressed disappointment over the timing of the SEC’s actions, particularly as the Web3 sector continues to seek regulatory clarity in the United States.
The company noted that the SEC’s approach to Web3 has been inconsistent and has often lacked clear communication. “It appears that some elements of the SEC do not want to engage in a constructive dialogue,” Immutable stated.
Concerns grow over SEC’s approach to Web3
Immutable criticized what it sees as a lack of transparency from the SEC, a sentiment shared by many in the industry who feel that the agency’s actions have hindered the growth of blockchain technology and Web3 initiatives.
Immutable’s statement referenced previous SEC actions within the Web3 space, drawing parallels to cases like the one involving Ripple, a blockchain-based payment platform. Last year, a U.S. judge ruled that Ripple’s XRP token was not a security.
The SEC later investigated Ethereum as a potential security, only to drop the case after blockchain technology firm ConsenSys filed a lawsuit to protect the Ethereum ecosystem.
The SEC has taken similar steps against other companies, particularly those operating in the non-fungible token (NFT) space. In one recent instance, the SEC issued a Wells notice to OpenSea, stating that NFTs traded on its platform are securities.
Other notable cases include actions against the Flyfish Club, an NFT-based restaurant, which agreed to a $750,000 settlement in September over claims of offering unregistered securities.
Similarly, the SEC penalized media company Impact Theory $6.1 million last year for issuing unregistered NFT securities called “Founder’s Keys.” The Stoner Cats NFT project faced similar allegations and paid a $1 million penalty, while Dapper Labs recently settled a lawsuit related to its NBA Top Shot NFTs for $4 million.
Industry leaders and community call for clarity and support
These legal actions have led to widespread concern within the Web3 community, with many creators and companies calling for greater regulatory clarity. In July, two artists took legal action against the SEC, seeking guidance on whether NFTs should be considered securities.
The uncertainty around NFT classification has also led some organizations to advocate for more defined regulations. The Digital Chamber, a U.S.-based blockchain advocacy group, recently urged Congress to classify certain NFTs as consumer goods rather than securities, following the SEC’s enforcement action against OpenSea.
To support NFT creators and provide legal protection against the rising regulatory challenges, Coinbase launched a $6 million legal defense fund in September. The initiative, a collaboration with OpenSea, a16zcrypto, and several law firms, aims to offer free legal assistance to those facing SEC actions related to NFTs.
