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CyberKongz Gaming Tokens Hit with SEC Wells Notice: Major Implications for Cryptocurrency Market

December 26, 2024June 18, 2025 EquityExplained

Table of Contents

Introduction

The Web3 gaming industry may be in for a setback after non-fungible token (NFT) platform CyberKongz received a Wells notice from the United States securities regulator, the Securities and Exchange Commission (SEC). This development has major implications for the Web3 gaming industry, with potential consequences for gaming tokens.

Background

CyberKongz is an NFT platform that has been issuing its own ERC-20 token in conjunction with blockchain games. However, the SEC has taken issue with this practice, suggesting that any token issued in tandem with a game cannot be issued without first being registered as a security. This would have significant implications for the Web3 gaming industry.

The SEC’s Concerns

According to CyberKongz, the SEC’s concerns stem from its sale of Genesis Kongz NFTs in April 2021. The NFT firm has maintained that this was not a primary sale but rather a contract migration. Despite this, the SEC has continued to investigate and has now issued a Wells notice.

Consequences for CyberKongz

The consequences of receiving a Wells notice are serious. CyberKongz will have 30 days to file a response, which could potentially lead to an enforcement action by the SEC. This would be a significant setback for the company, which has been bootstrapped and has a small treasury.

Support from the Community

However, CyberKongz is not going down without a fight. The company’s team has received words of support from one of Axie Infinity’s founders, Jihoz Zirlin, who is confident that the new administration will end the persecution of NFT projects. This sentiment has been echoed by others in the industry.

The Impact on Gaming Tokens

If the SEC’s stance is upheld, it could have significant implications for gaming tokens. Any token issued in conjunction with a game may be considered a security and would require registration with the SEC before being issued. This could lead to increased regulation of the Web3 gaming industry.

The Future of NFTs

Despite the challenges posed by the SEC’s stance, CyberKongz is confident that NFT projects will continue to thrive. The company has stated that it hopes the new administration will put an end to this "unjustness" on the industry and allow NFT projects to flourish.

The Current State of the Market

Despite the uncertainty surrounding the SEC’s stance, the market remains optimistic about the future of NFTs. CyberKongz NFTs have seen a price increase of 11.7% over the last 24 hours, with an average floor price of 6.69 Ether (ETH) or $26,900.

Conclusion

The receipt of a Wells notice by CyberKongz is a significant development in the world of Web3 gaming. The potential implications for gaming tokens and NFT projects are far-reaching, and it remains to be seen how the SEC’s stance will impact the industry. However, one thing is certain: this will not be the last we hear of CyberKongz and its fight against the SEC’s regulations.