The Backlash Faced by “Stoner Cats” NFTs
Creators of the animated show “Stoner Cats,” featuring Mila Kunis and Ashton Kutcher, are receiving criticism for their foray into non-fungible tokens (NFTs). The US Securities and Exchange Commission (SEC) has charged Stoner Cats 2 LLC (SC2), the company behind the show, for conducting an unregistered digital asset offering.
Mandatory NFTs for Show Access
SC2 is accused of selling NFTs related to the “Stoner Cats” series without proper registration as securities. As a resolution, SC2 has agreed to a cease-and-desist order and will pay a $1 million penalty.
In July, SC2 sold over 10,000 NFTs for approximately $800 each. These NFTs provided access to episodes of “Stoner Cats,” an exclusive NFT series featuring five medicinally-altered feline characters and produced by Mila Kunis’ Orchard Farm Productions. The entire batch of NFTs sold out within 35 minutes, generating $8 million. However, the SEC alleges that SC2 violated securities regulations by not registering the NFTs as investment contracts.
Insinuations of Investment Returns
The SEC’s order suggests that SC2 emphasized the involvement of Hollywood celebrities in its promotional efforts. Investors believed that the NFTs would appreciate in value similar to stocks, given the star power behind the project.
Additionally, SC2 imposed a 2.5% royalty fee on secondary sales, resulting in over $20 million in transactions. While SC2 argues that the NFTs were collectibles rather than investments, the SEC argues that their potential for profit makes them securities.
SEC Targets Prominent Crypto and NFT Projects
The SEC accuses SC2 of avoiding mandatory registration, denying investors crucial project details and disclosures necessary for informed decision-making. This move by the SEC appears to be a strategic effort to establish a precedent using high-profile projects, similar to its fine against Kim Kardashian for unlawfully promoting crypto securities last year.
A Cautionary Tale for NFT Projects
The SEC’s actions against “Stoner Cats” serve as a warning for NFT projects targeting US audiences. It highlights the importance of celebrities ensuring compliance with securities laws as cryptocurrencies gain popularity in Hollywood.
Hot Take: The Risks of Celebrity-Backed NFTs
Celebrities venturing into the world of NFTs can attract attention and generate significant sales. However, as seen with “Stoner Cats,” they also face risks, including legal consequences if they fail to comply with securities regulations. While the allure of celebrity involvement may boost initial interest, it is essential for both celebrities and investors to understand the legal implications and obligations surrounding NFT offerings. As the SEC cracks down on high-profile crypto projects, it sends a message that no one is exempt from regulatory scrutiny in the evolving landscape of digital assets.
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