Two SEC commissioners have criticized their agency for pressuring the NFT-themed restaurant Flyfish Club into a $750,000 settlement. According to a cease and desist order, the Security and Exchange Commission accused Flyfish of holding unregistered crypto asset securities offering by selling 1,600 NFTs to US investors and generating $14.8 million from two different price points.
However, SEC commissioners Hester Peirce and Mark Uyeda pushed back against the enforcement action, saying the Flyfish NFTs were a new way to sell memberships and shouldn’t fall under securities laws. In a dissenting letter, the two commissioners argued that Flyfish NFTs didn’t endanger investors and emphasized that the SEC should allow NFT creators more room to innovate.
They said:
Creative minds should be able to explore NFTs without consulting an expensive lawyer. The Commission could offer clearer guidance, giving NFT creators more freedom to experiment without treating their ideas as securities.
SEC cracks down on Flyfish
The securities commissioners said that this enforcement action weakens the trust of the Chef SEC. The NFTs would have allowed customers to eat and drink at a restaurant still under construction in Manhattan, New York. The restaurant’s website states that it will open this month. The SEC said that Flyfish NFTs should be registered because they functioned like investment contracts, meeting all four criteria of the Howey test.
Although Flyfish didn’t admit or deny the allegations, it agreed to destroy any remaining NFTs it had and to stop accepting royalties from future NFT sales. Under Gary Gensler’s leadership, the SEC has recently taken action against NFT projects like Impact Theory and Stoner Cats 2 over the past year.
On Aug. 28, they also sent a Wells Notice to one of the biggest NFT marketplaces, OpenSea, signaling that there might be upcoming enforcement actions in the next few weeks or months. Gary Vaynerchuk, an entrepreneur who gained considerable attention during the NFT boom in the summer of 2021, launched the Flyfish NFTs. Gary is also competent in investing, particularly in the hospitality industry.
