It has been a tumultuous week for Hollywood power couple Mila Kunis and Ashton Kutcher as their NFT-based web series, “Stoner Cats,” has come under fire from the U.S. Securities and Exchange Commission (SEC). The SEC has charged the couple’s NFT project, alleging that the NFTs associated with the series are unregistered securities.
Key Takeaway
Hollywood celebrities Mila Kunis and Ashton Kutcher find themselves in hot water as the SEC charges their NFT-based web series, “Stoner Cats,” for selling unregistered securities. This incident highlights the SEC’s increasing scrutiny of celebrity-endorsed crypto projects and its focus on the economic nature of offerings, regardless of labeling or underlying assets.
The SEC’s Allegations
The SEC claims that “Stoner Cats” is an adult animated television show featuring house cats that gain sentience after being exposed to their owner’s medical marijuana. The series offered fans the opportunity to purchase one of the 10,000 NFTs, which were priced at approximately $800 each. These NFTs would grant exclusive access to the six-episode animated series, featuring notable celebrities like Jane Fonda, Chris Rock, Seth MacFarlane, and even Ethereum co-founder Vitalik Buterin.
Furthermore, the original NFT owners were promised a 2.5% royalty every time one of the NFTs was resold. The marketing strategy behind “Stoner Cats” heavily emphasized that the NFTs had the potential for significant value appreciation, as the success of the show would directly correlate to the value of the NFTs.
The SEC’s Conclusion
Due to the ongoing promotion of the NFTs’ resale and the strong suggestion of potential returns on investment, the SEC deemed the “Stoner Cats” NFTs to be unregistered securities. In a formal document, the SEC cited a tweet from the official @StonerCatsTV account, where a meme suggested purchasing more Ethereum during a dip in the crypto markets and sweeping the “Stoner Cats floor.”
As a result of the SEC’s charges, “Stoner Cats” has settled with the regulatory agency and will pay a $1 million fine. Additionally, a Fair Fund will be established to compensate individuals who suffered financial harm from purchasing the NFTs. In an effort to comply with the settlement, the company is required to destroy all NFTs currently in its possession.
The SEC’s Stance on Celebrity-Endorsed Crypto Projects
This incident is not an isolated case, as the SEC has been actively targeting celebrity-endorsed crypto projects. In a similar instance, reality TV star Kim Kardashian reached a $1.26 million settlement with the SEC last year for failing to disclose her financial compensation for promoting a crypto asset security sold by EthereumMax.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “Regardless of whether your offering involves beavers, chinchillas, or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security.”
