In a First for NFT Sector, SEC Charges Impact Theory Over Unregistered Securities

In a First for NFT Sector, SEC Charges Impact Theory Over Unregistered Securities

The United States Securities and Exchange Commission (SEC) brought its first enforcement action against a player in the non-fungible token (NFT) space charging Impact Theory of engaging in an unregistered securities offering.

The financial regulator claimed that Impact Theory –  a Los Angeles-based media and entertainment – sold approximately $30 million of NFTs while also vouching for their value appreciation. Nonetheless, the NFTs did not represent company shares and did not yield any form of dividend to the buyers.

SEC Charges NFT Issuer Over Unregistered Securities

The SEC’s charges center around Impact Theory’s three tiers of NFTs called “Founder’s Keys” – “Legendary,” “Heroic,” and “Relentless.”

According to Impact Theory, purchasing a Founder’s Key equated to a form of investment in the company itself. It asserts any individuals who become “investors” by obtaining these keys stand to reap substantial rewards from their initial investment if the company achieves significant success.


The SEC found that Impact Theory frequently drew comparisons to their ambitions of mirroring the trajectory of Disney, Call of Duty, and YouTube and managed to raise $30 million from investors. The regulator alleged that the NFTs offered by Impact Theory are security investment contracts, subsequently implicating the company in conducting the sale of unregistered securities through the offering of these NFTs.

“Today we charged Impact Theory LLC, a media and entertainment company headquartered in Los Angeles, with conducting an unregistered offering of crypto asset securities in the form of purported NFTs. Impact Theory raised approximately $30 million from hundreds of investors.”

Disgorgement, prejudgment interest, and a civil penalty have been included in the settlement. Additionally, a Fair Fund will be established to compensate the affected investors. The company is also required to destroy all Founder’s Keys in its possession, promote the order on its website and online platforms, and eliminate any future secondary market transaction royalties.

On-chain crypto investigator ZachXBT warned users about Impact Theory back in October 2021 and accused it of running a growth mindset pyramid scheme. He even called it “the worst NFT cash grabs yet.”

Issue Resolved

Impact Theory’s CEO Tom Bilyeu announced reaching a settlement with the SEC, thereby resolving the investigation.

In the latest statement, the exec expressed disappointment over the SEC’s decision to broadly question the “technical innovations that make digital assets possible through the lens of the securities laws” but added that the company remains optimistic about the future of this industry in the country.

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