The United States Securities and Exchange Commission (SEC) has filed an action against New York-based Flyfish Club for conducting unregistered NFT sales, which the regulator deemed as securities.
Charges and Fines
The SEC said that Flyfish Club raised about $14.8 million by selling around 1,600 NFTs between August 2021 and May 2022. The Flyfish Club NFTs were issued as memberships that provided holders access to an exclusive dining club in New York City. According to the SEC, these NFTs are crypto-asset securities, and the club violated federal securities law by not registering the security offering. The SEC's enforcement order mandates Flyfish to cease acceptance of royalty payments from secondary market NFT trading, destroy any remaining NFTs, and pay a civil penalty of $750,000.
Commissioners' Perspective
Not all SEC members agreed with the decision. Commissioners Hester Peirce and Mark Uyeda opposed it, arguing that Flyfish Club NFTs are utility tokens, not securities. According to them, buyers are interested in unique culinary experiences rather than financial returns.
Recent SEC Actions
In recent months, the SEC has increased its enforcement efforts against NFT projects, including actions against podcast studio Impact Theory and entertainment company Stoner Cats 2. The SEC also issued a Wells Notice to OpenSea, indicating ongoing regulatory scrutiny.
Flyfish Club must comply with the settlement by September 26. Despite the legal challenges, the Flyfish Club restaurant is set to open on September 20.
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