Two U.S. Securities and Exchange Commission (SEC) commissioners, Hester Peirce and Mark Uyeda, have publicly criticized the agency’s recent enforcement action against Flyfish Club, an NFT-themed restaurant. The SEC had settled with Flyfish Club for $750,000, alleging that the company conducted an unregistered securities offering by selling 1,600 NFTs to U.S. investors, raising $14.8 million.
In a dissenting letter, Peirce and Uyeda argued that the Flyfish NFTs, which represented a unique approach to selling memberships, should not be categorized as securities. They contended that these NFTs did not pose a risk to investors and stressed the need for clearer SEC guidance for NFT innovators. “Creative people should be able to experiment with NFTs without having to consult a high-priced tea-leaf reader — ahem, lawyer,” they remarked.
The SEC’s position is that the Flyfish NFTs qualify as investment contracts under the Howey test, which determines whether certain transactions are considered securities. The SEC contends that the NFTs would grant holders access to a future restaurant in Manhattan.
This enforcement action reflects a broader trend, with the SEC taking similar actions against other NFT projects, including Impact Theory and Stoner Cats 2, over the past year. Recently, the agency also issued a Wells Notice to OpenSea, a leading NFT marketplace, signaling potential future enforcement.
Flyfish Club’s founder, entrepreneur Gary Vaynerchuk, has been a notable figure in the NFT space since its emergence in 2021.
As part of the settlement, Flyfish Club has agreed to destroy all remaining NFTs in its possession and will not accept future royalties from NFT sales.
Related Topics:
