SEC Faces Criticism from Commissioners Over FlyFish NFT Case

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Hassan, a Cryptonews.com journalist with 6+ years of experience in Web3 journalism, brings deep knowledge across Crypto, Web3 Gaming, NFTs, and Play-to-Earn sectors. His work has appeared in...

The U.S. Securities and Exchange Commission (SEC) has initiated a heated debate following its enforcement action against Flyfish Club, LLC, for the unregistered sale of non-fungible tokens (NFTs) used as memberships to an exclusive dining experience.

The SEC’s decision revolves around the argument that Flyfish’s sale of NFTs, used to grant access to a luxury restaurant, violated securities laws because buyers could potentially earn profits through resale or leasing.

However, dissenting commissioners Hester Peirce and Mark T. Uyeda argued that these NFTs are utility tokens designed for access rather than investment, emphasizing that the SEC’s overreach could stifle innovation in the NFT space.

The SEC charged Flyfish Club for raising approximately $14.8 million by selling 1,600 NFTs between August 2021 and May 2022.

The NFTs functioned as memberships to an upcoming high-end dining club in New York, granting holders exclusive dining privileges upon the restaurant’s opening.

The sale garnered widespread attention, not only due to its unique integration of NFTs into a traditional membership model but also because of its resale potential.

According to the SEC, this resale potential and Flyfish’s public statements about building a large business model with future clubs and events positioned the NFTs as security offerings under U.S. law.

The regulatory agency argued that Flyfish violated Sections 5(a) and 5(c) of the Securities Act of 1933 by failing to register these NFTs as securities before offering them to the public.

Flyfish’s