SEC Commissioners Peirce and Uyeda Disagree on Impact Theory Enforcement Action

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The U.S. Securities and Exchange Commission (SEC) launched its first enforcement action targeting a non-fungible token (NFT) provider, Impact Theory, LLC. This unprecedented step by the SEC has not only set a new legal benchmark but also ignited internal discussions within the Commission. This internal divergence is highlighted by a recent statement, “NFTs & the SEC: Statement on Impact Theory, LLC,” issued by Commissioners Hester M. Peirce and Mark T. Uyeda.

The SEC’s Charge: A Brief Overview

The SEC charged Impact Theory for conducting an unregistered offering of crypto asset securities disguised as NFTs. The Los Angeles-based company raised approximately $30 million between October and December 2021 through the sale of NFTs termed as “Founder’s Keys.” The SEC determined that these NFTs were, in essence, investment contracts and thus classified as securities. The company has consented to a cease-and-desist order and is required to pay over $6.1 million, including disgorgement, prejudgment interest, and a civil penalty.

Commissioners’ Response: A Call for Regulatory Clarity

In their statement dated August 28, 2023, Commissioners Peirce and Uyeda expressed dissent over the SEC’s application of the Howey analysis to NFTs. They argued that the Commission should have grappled with the larger questions surrounding NFTs before taking such a significant enforcement action.

The Commissioners pointed out that Impact Theory’s NFTs did not offer dividends or represent shares in the company. They questioned whether the promises made by Impact Theory were sufficient to classify the NFTs as investment contracts. “We do not routinely bring enforcement actions against people that sell watches, paintings, or collectibles along with vague promises to build the brand and thus increase the resale value of those tangible items,” they noted.

Financial and Regulatory Implications

The dissenting statement raises several critical questions that could shape the future of NFT regulation:

Classification of NFTs: The internal disagreement within the SEC highlights the complexity of classifying NFTs as securities, potentially affecting other NFT projects.

Investor Protection: While the SEC emphasizes the importance of registration for investor protection, the Commissioners’ statement calls for a nuanced approach, questioning what kind of information is truly necessary for NFT purchasers.

Legislative Framework: The statement urges the Commission to consider how recent legislative efforts in the crypto space should inform the application of securities laws to NFTs.

Secondary Market Sales: The settlement includes a clause to waive any royalties from future secondary market transactions involving the Founder’s Keys, a point that the Commissioners believe sets a concerning precedent for the NFT market.


The SEC’s action against Impact Theory is a watershed moment, but the dissenting statement from Commissioners Peirce and Uyeda underscores the need for clear regulatory guidelines. As the crypto and NFT landscapes continue to evolve, this case serves as both a cautionary tale and a call to action for regulatory bodies to provide more explicit guidance.

Image source: Shutterstock

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