On August 28, 2023, the SEC issued a cease-and-desist order settling charges against Impact Theory, LLC, a media and entertainment company, for the unregistered offering of certain non-fungible tokens (NFTs) the SEC found to be crypto asset securities. This marks the SEC's first NFT crypto-asset securities enforcement action. The order states that Impact offered and sold NFTs known as Founder's Keys, raising approximately $29.9 million in ether (ETH) from hundreds of investors, including investors across the US.

According to the order, Impact violated Sections 5(a) and 5(c) of the Securities Act of 1933, as amended (Securities Act) by offering and selling securities without having a registration statement filed or in effect with the SEC or qualifying for an exemption from SEC registration. Founder's Keys were offered and sold as investment contracts and therefore as securities under the Howey test, established in SEC v. W.J. Howey Co., 328 U.S. 293 (1946) (see Practice Note, Regulation of Crypto-Asset Securities in USA and Howey Test Flowchart).

According to the order, the Founder's Keys purchasers had a reasonable expectation of obtaining a future profit based on Impact's managerial and entrepreneurial efforts with respect to the NFTs. For example, prior to the Founder's Keys offering, Impact invited investors to view the purchase of a Founder's Key as an investment in Impact's business, stating that investors would profit from their purchases if Impact was successful in its efforts. Among other things, Impact emphasized that:

According to the order, Impact made numerous statements that resulted in prospective and actual purchasers of Founder's Key NFTs, stating on Impact online platform that they viewed Founder's Keys as investments into the company and understood Impact’s statements to mean that the company’s development of its projects could translate to appreciation in value of the Founder's Keys over time.

The order further states that Impact also traded the Founder's Keys on various secondary market crypto-asset trading platforms, and Impact stated on its website and social media channels that Founder's Keys could be purchased and sold on two secondary market platforms. Impact also programmed the smart contract for the Founder's Keys traded on secondary market platforms so that Impact received a 10% royalty on each secondary market sale, which generated approximately $978,000 worth of ether in royalties for Impact.

According to the order, Impact did not admit or deny the findings of the SEC but consented to the entry of the order to settle the proceedings. The settlement requires Impact to, among other things:

SEC Commissioners Hester M. Peirce and Mark T. Uyeda issued a dissenting statement, noting that the typical cure for a registration violation is a rescission offer and that the order and settlement raise difficult questions regarding NFTs and the US securities laws.