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The federal government's latest foray into crypto regulation has Hollywood in its crosshairs, taking aim at an all-star, Web3 animated series known as Stoner Cats. The show, featuring the vocal talents of Ashton Kutcher, Mila Kunis, Chris Rock, Jane Fonda, Seth MacFarlane, and more, has become the latest target of the Securities and Exchange Commission (SEC).
The SEC filed charges against Stoner Cats 2 LLC, the entity behind the NFT-fueled cartoon series, for conducting an unregistered offering of NFTs. While Kunis and Kutcher not only contributed their voices to the project but also actively promoted it, the charges did not single them out, nor did they admit wrongdoing.
In response to the charges, Stoner Cats 2 LLC has agreed to pay a hefty $1 million civil penalty and establish a fund to reimburse NFT buyers. The animated series, financed by selling NFTs, follows the zany escapades of cats who acquire the gift of speech after a dose of medical marijuana. The NFT sale, which raked in over $8 million, offered buyers exclusive access to the series, personalized "Stoned Cat" avatars, and promises of future animated endeavors.
Stoner Cats was conceived by Ash Brannon, Chris Cartagena, and Sarah Cole, based on Cole's personal experiences. Kunis and her Orchard Farm Productions joined the creative team, forming a collaborative powerhouse that combined voice talent, animators, and NFT experts, including CryptoKitties' creators.
What are the consequences?
Over 10,000 unique NFTs were minted, granting exclusive access to the six-episode series and the creators themselves. The SEC alleges that the funds acquired from NFT sales were used to compensate the voice cast, animators, writers, and other contributors.
Gurbir S. Grewal, director of the SEC's Division of Enforcement, clarified, "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...that guides the determination of what's an investment contract and therefore a security." Stoner Cats' marketing strategies and price projections convinced investors they would profit from reselling the NFTs, ultimately leading to a swift $8 million sale within just 35 minutes.
While the SEC's order does not name individuals, it leaves Hollywood on edge, with no official comments from Kunis and Kutcher, who recently faced backlash for supporting a former colleague in a court case. The federal government's crypto crackdown has reverberated through Tinseltown, with Stoner Cats becoming its latest casualty.