The U.S. Securities and Exchange Commission has issued a Wells notice to CyberKongz, a blockchain company deeply rooted in gaming, regarding its alleged failure to register a token as a security. CyberKongz, which announced the action on X, has become the second gaming company in recent months to face regulatory scrutiny. Andrew Balthazor (right) of Holland & Knight in the Am Law 100 firm’s Miami office noted that the social media post was consistent with those of other crypto companies that are subject to potential regulatory actions “that they almost make it like a badge of honor within the industry and publicize that they are nearing the enforcement action ahead of an actual public filing.” “Three years ago, amidst the crypto winter of the FTX and Celsius failures, there was a hard look at virtually every major code-based project that could potentially be harming consumers by violating securities laws, and we’re seeing the fruits of it now,” Balthazor said. “Gaming consumers aren’t typically knowledgeable investors to the extent they are encouraged to purchase something that looks, smells and talks like an investment that violates security laws.” Sylvia Favretto, associate general counsel at Mysten Labs, who is not involved in the matter, said SEC Chair Gary Gensler and his enforcement division are attempting to push forward as much of their “regulation by enforcement” agenda as possible ahead of his resignation on Jan. 20, the day of President-elect Donald J. Trump’s inauguration. “In the absence of claims of fraud, an action against either of these companies has a very low chance of coming to fruition if not initiated before Gensler's departure,” Favretto said. “Even if enforcement actions were to commence, it is likely that the SEC would either later withdraw or settle, in line with what will likely become of the other active matters.” Full story from Michael A. Mora: https://lnkd.in/etnzdDgQ
