Mila Kunis-Backed Web Series Faces SEC Enforcement Action for “Unregistered” NFT Offerings

Non-fungible tokens tied to an animated web series starring Mila Kunis and Ashton Kutcher were illegally offered, according to a Securities and Exchange Commission (SEC) order on Wednesday that said the royalty-generating NFTs used to finance the series were unregistered securities.

The order alleges that Stoner Cats 2 (SC2) reaped at least $8 million in sales from 100,000 Stoner Cat NFTs representing characters from its eponymous animated web show concept in July 2021. The company’s public promotions of the digital art collectibles before and after the collection’s initial sale “tied the success of the show to the value of the NFTs,” fueling investors’ expectations to profit off them, the SEC’s filing shows.

“SC2 engaged in an extensive media campaign to promote the Stoner Cats NFTs both before and after the offering when the NFTs traded in the secondary market, the SEC said in the order. “[It] engaged in this conduct without registering the offering of the Stoner Cats NFTs.”

Stoner Cats NFT holders were also incentivized to trade the NFTs, receiving a 2.5% royalty for each secondary-market transaction involving the collectibles, the SEC alleges. That encouraged individuals to buy and sell the NFTs in at least 10,000 secondary transactions worth more than $20 million, according to regulators. In addition, at least 20% were resold before the first episode of the Stoner Cats web series had even aired, the order shows.

SC2 will pay a $1 million fine and destroy all remaining NFTs in its possession, according to the order. It has also agreed to establish a fund to reimburse individuals who invested in the tokens.

This isn’t the first time regulators have zeroed in on alleged securities offerings from NFT makers. Last month, the SEC brought an enforcement action against NFT maker Impact Theory.