Stoner Cats 2 LLC (SC2), the entity behind the animated series “Stoner Cats,” has agreed to a cease-and-desist order and a $1 million fine following charges by the U.S. Securities and Exchange Commission (SEC) for the unregistered sale of securities, specifically non-fungible tokens (NFTs) called “Stoner Cats NFTs.”
“Stoner Cats” is an adult animated series centered around house cats that gain sentience after exposure to medical marijuana. The show was led by Hollywood actor Mila Kunis and released six episodes between July 2021 and December 2022. SC2, the company behind the series, financed the show by selling 10,330 Stoner Cats NFTs, each priced at 0.35 ETH (approximately $800).
The NFTs provided exclusive access to watch the series online, and investors were informed that the more successful the show, the more valuable their NFTs would become.
The SEC found that the creators described the NFTs as “tickets” granting access to the content creators and a behind-the-scenes look at the animated series, with the option to sell the NFTs if desired. However, the SEC viewed these NFTs differently, considering them securities.
In its announcement, the SEC stated, “Today we charged Stoner Cats 2 LLC with conducting an unregistered offering of crypto asset securities in the form of purported non-fungible tokens (NFTs) that raised approximately $8 million from investors to finance an animated web series called Stoner Cats.”
Without admitting or denying the SEC’s findings, SC2 agreed to a cease-and-desist order, the destruction of all NFTs in its possession, and a $1 million civil penalty. A Fair Fund will be established to return funds to injured investors who purchased the NFTs.
Dissenting opinions within the SEC argued that the activity could be viewed as fan crowdfunding and suggested the need for clear guidelines for artists and creators using NFTs to support their creative efforts. However, the majority of the SEC considered the Stoner Cats NFTs as securities based on their characteristics.
The case illustrates the regulatory challenges surrounding NFTs and the importance of distinguishing between digital collectibles and securities.
