Non-fungible token (NFT) project CyberKongz has disclosed that it received a Wells notice from the U.S. Securities and Exchange Commission (SEC), signaling an investigation into potential violations of securities laws.
CyberKongz shared the news on December 16 through a post on X (Twitter). The team expressed frustration with the SEC’s stance, stating, “We are extremely disappointed at the approach the SEC has taken towards us, but we are going to stand up and fight.”
The SEC’s Division of Enforcement reportedly raised concerns over the project’s use of tokens in connection with blockchain gaming. According to CyberKongz, the agency has communicated that “you can not have a token (ERC-20) in tandem with a blockchain game without registering it as a security.”
Another point of contention is the ‘sale’ of Genesis Kongz in April 2021. CyberKongz maintains that the event was a contract migration, not a token sale.
The project began in March 2021 as a collection of pixelated gorilla profile pictures and describes itself as a small community-driven initiative. In the post, the team emphasized it has never raised capital or held a large treasury.
CyberKongz framed the SEC notice as a turning point for its community. “This is the start of a new beginning,” the post stated. “One without the burden of us suffering in silence and working in fear. It is time for CyberKongz to push forward without this holding us back.”
This development places CyberKongz among a growing list of Web3 projects under regulatory scrutiny. In recent months, the SEC has intensified its focus on NFTs, arguing that some could qualify as securities.
In August, NFT marketplace OpenSea received a Wells notice from the SEC. CEO Devin Finzer criticized the move and pledged $5 million to assist affected creators. Immutable received a similar notice last month, potentially tied to its IMX token.
The SEC has pursued legal action against several NFT-related projects. The Flyfish Club, an NFT-based dining venture, settled for $750,000 in September after being accused of offering unregistered securities.
Impact Theory, a media company, was fined $6.1 million last year for its “Founder’s Keys” NFT series. Other cases include Stoner Cats, which paid a $1 million penalty, and Dapper Labs, which resolved a lawsuit over NBA Top Shot NFTs for $4 million.
The wave of enforcement has reignited calls for clearer regulations. In July, two artists filed a lawsuit against the SEC, seeking clarification on whether NFTs should be classified as securities. The Digital Chamber, a blockchain advocacy group, has also urged Congress to consider defining certain NFTs as consumer goods instead of securities.
