The U.S. Securities and Exchange Commission (SEC) has taken legal action against the creators of Stoner Cats, alleging that they conducted an unregistered offering of crypto asset securities in the form of NFTs. These NFTs were meant to fund the production of the animated web series called “Stoner Cats.”

“Stoner Cats” is not your typical animated series; it features cats that use cannabis and boasts a star-studded cast including Mila Kunis, Seth MacFarlane, Ashton Kutcher, Jane Fonda, Vitalik Buterin, and Chris Rock. The show gained rapid attention, and its first episode was released as 10,420 NFTs on July 28, 2021, which were sold out in just 30 minutes, generating around $8 million in sales.

Additionally, the creators of “Stoner Cats” implemented a 2.5% royalty fee for each NFT transaction on the secondary market. This strategy resulted in over 10,000 transactions, with a total expenditure exceeding $20 million.

The SEC’s involvement arises from its belief that “Stoner Cats” violated the Securities Act of 1933. The SEC argues that the sale of the NFTs essentially constituted securities transactions, but these transactions were carried out without the necessary registration.

In response, the creators of “Stoner Cats” have cooperated with the SEC and have consented to a cease-and-desist order. Besides discontinuing any further unregistered offerings, they will also be required to pay a civil penalty of $1 million.

To protect the interests of investors, a Fair Fund will be established. This fund will provide refunds to investors who may have been negatively affected by the unregistered NFT offering.

In summary, the SEC’s action against “Stoner Cats” highlights its commitment to ensuring that all securities offerings, whether traditional or within the emerging domain of NFTs, comply with established laws. It serves as a reminder to both creators and investors to be vigilant and well-informed about the legal ramifications of their activities in the rapidly expanding realm of digital assets.