NFT Gaming Project CyberKongz Receives Wells Notice from SEC

CyberKongz, a game-based NFT project, announced on December 16 that it received a Wells Notice from the US Securities and Exchange Commission (SEC).

The notice raises concerns about the platform’s integration of its ERC-20 token with blockchain games and questions aspects of its activities, including the migration of its 2021 contract.

The SEC’s argument

In a post on X, the CyberKongz team voiced his dismay at the agency’s handling of the situation, saying:

“We are very disappointed by the approach the SEC has taken towards us, but we are going to stand up and fight for a better future that offers more clarity for NFT projects.”

They revealed that the problem began two years ago when the regulator first contacted them, during which time they operated quietly and under a lot of pressure.

The publication highlighted that the SEC’s main concern seems to center on whether ERC-20 tokens can work alongside blockchain games without being classified as securities.

CyberKongz argued that this implication could have far-reaching consequences for the Web3 gaming industry. They also said they are determined to challenge the financial watchdog’s position and advocate for a clearer regulatory framework.

Another point of contention concerns the migration of Genesis Kongz’s contract in April 2021, which the regulator reportedly interpreted as a token sale. The NFT project clarified that the migration was not a primary sale and criticized the SEC’s inability to differentiate between the two, stating:

“If they can’t distinguish between a primary sale and a contract migration, what hope do we currently have for a clear regulatory path in the future?”

Wells’ Notice gives the platform 30 days to respond before the SEC decides whether to take enforcement action. While not a formal allegation of wrongdoing, the notice shows the agency is considering additional legal action.

Broader industry problem

This latest development adds CyberKongz to a growing list of blockchain and NFT entities under SEC scrutiny, including Coinbase, Consensys, Ripple, OpenSea, Uniswap Labs and Bittrex, which have faced similar notices in recent years.

Last month, Australia-based gaming company Immutable also reported receiving such a warning. At the time, they expressed frustration over vague accusations and unclear regulatory guidelines. However, no further action has been taken since then.

Meanwhile, CyberKongz has assured its community that it remains committed to advancing its work without the burden of silence. He stated that the situation marks a turning point as he continues to advocate for clearer guidelines within the NFT and blockchain industries.