The U.S. Securities and Exchange Commission (SEC) has issued a Wells notice to CyberKongz, a prominent NFT platform, raising serious concerns for gaming tokens and the broader Web3 gaming industry. CyberKongz revealed the development in a Dec. 16 post on X, highlighting the SEC’s stance that issuing ERC-20 tokens within blockchain games may require security registration.

A Wells notice signals the SEC’s intent to pursue enforcement action after a preliminary investigation, giving CyberKongz 30 days to respond. The NFT platform criticized the move, calling it an unjust regulatory attack on the Web3 space and vowing to fight back for the industry’s future.

The SEC’s allegations partly stem from CyberKongz's Genesis Kongz NFT “sale” in April 2021. However, CyberKongz clarified that the event was merely a contract migration, not a new capital raise. The team also emphasized their bootstrap model, small treasury, and years of quiet compliance with the SEC investigation.

This incident adds to growing scrutiny on blockchain gaming platforms. Immutable, another NFT and gaming firm, received a Wells notice in November but has yet to face formal action. Industry leaders like Jihoz Zirlin, co-founder of Axie Infinity, have expressed support for CyberKongz, voicing hope that future administrations will ease what they view as unfair regulation.

Despite the Wells notice, CyberKongz NFTs saw no price drop. On the contrary, the floor price increased by 11.7% to 6.69 ETH ($26,900), according to CoinGecko.

The SEC’s stance on tokens tied to blockchain gaming could have far-reaching implications, potentially stifling innovation across the Web3 gaming ecosystem. For now, CyberKongz remains firm, promising to defend its position and the industry as a whole.