SEC's Deep Impact

Crypto ETFs. Friend Tech Falters. And are NFTs Really Securities?

👋🏽 Hello everyone, gm gm, WELCOME BACK to another edition of the Overpriced JPEGs newsletter, where we’re catching you up on web3, NFTs, and the greater world of emerging tech.

A lot went down this week in web3, but in the world of Overpriced JPEGs, nothing was quite as momentous as our very own Carly tying the knot!

Congrats to the happy couple!!

I also wanna send a virtual hug to the incredibly talented Jonathan Mann (aka Song A Day Mann) who delivered big time when I asked him to create a custom song in honor of the newlyweds. You absolutely nailed it - “Carly & Zach” is such a bop 🎶

And lastly, before we jump in, thank you to everyone who’s been supporting my hometown of Hawaii as we work to rebuild after the fires that devastated Maui. We’ve got a small, but strong web3 community here in the islands and a few locals have teamed up on a low-cost open editi​​on mint benefiting relief efforts. The art is by FOMO MOFO’s Jasper Wong and 100% of the mint will go directly toward recovery efforts. Mahalo nui loa. 💝

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🥊 Feeling the Impact

• The SEC once again came out swinging for crypto, this time taking their biggest shot yet at our precious JPEGs, charging Impact Theory with offering unregistered securities when it sold three tiers of ‘Founder’s Keys’ for ~$30M from Oct. - Dec. 2021

• Impact Theory is founded by Tom Bilyeu, who we had on the pod back in March of last year and earlier this year when Carly interviewed him in person at VeeCon

• There’s a couple things to note here: One is that the SEC is clearly trying to make examples of people and businesses they view as low-hanging fruit in the cryptosphere

  • That includes celebrities like Kim Kardashian, executives at high-profile web3 businesses (see: Nate Chastain), or in the case of Impact Theory, an NFT project that raised tens of millions of dollars in the hopes of building ‘the next Disney’

• The other is that the SEC is giving us a roadmap to identifying potential landmines for NFT projects wanting to avoid a similar fate. It should go without saying, but founders who repeatedly use language implying a return on ‘investment’ by delivering ‘tremendous value’ will draw a bigger target on their backs. What we didn’t see coming, though, is that collecting royalties may also trigger heightened scrutiny.

• The bad news is, under these guidelines, a lot of projects fit the bill. The good news is, the SEC has their hands full and likely lacks the resources to go after each and every one.

• In the meantime, Impact Theory has settled the charges and now owes $6.1M in fines, refunds to “investors,” and must destroy the NFTs under their control and disable royalties on the remaining collection

• Two of the five SEC commissioners issued this dissent, highlighting the agency’s premature overreach into an area in which they’ve otherwise refused to provide guidance

“The handful of company and purchaser statements cited by the order are not the kinds of promises that form an investment contract. We do not routinely bring enforcement actions against people that sell watches, paintings, or collectibles along with vague promises to build the brand and thus increase the resale value of those tangible items.”

- Commissioners Hester M. Peirce and Mark T. Uyeda

🤑 Tipping the (Gray)scales

• The SEC won the round against Impact Theory, but they also took one on the chin this week when a Washington appellate court called the commission’s review of Grayscale’s spot Bitcoin ETF app ‘arbitrary and capricious,’ and ordered a review of the application 

• Crypto markets rallied 5 to 10% on the news and short sellers were squeezed to the tune of $120 million in liquidations 

• Ohio Congressman Warren Davidson - who recently introduced legislation to remove Gensler from office and restructure power in the embattled agency -  jumped on the opportunity to renew the call to #FireGaryGensler

• So how will the ruling impact the outlook for the stack of spot Bitcoin ETF applications piling up on Gary’s desk? Well, it depends on who you ask.

  • Bloomberg analysts are optimistic, raising their estimated odds of an approval by year-end from 65% to 75% 

  • Columnist Aaron Brown thinks it’s good news for large traditional asset managers, but not necessarily Grayscale 

  • And Financial Times’ Brooke Masters says the crypto community should curb its enthusiasm: ‘The story of the watchdog’s efforts to tame what it sees as a financial wild west still has some room to run’

• The clock is ticking on a number of these applications - six apps have deadlines beginning this weekend - so stay tuned, we should be getting some clarity soon

• In the meantime, we’ll just have this catchy Song A Day Mann track commemorating the moment stuck on repeat

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🕹 And in non-SEC Related News …

• Ben ‘BitBoy Crypto’ was fired from his namesake company, which is obviously terrific news for the space, but all we want to know is who’s going to replace him in the crypto ‘Apprentice meets Shark Tank’ reality show?!

• Global film & TV studio Miramax is leaning heavily into web3 with a couple of projects that span blockchain, metaverse, and content creation

  • Keepers are NFT avatars that give holders commercial rights to their Keeper across film and media, AAA video games, and metaverse environments 

  • Memory Palaces is a short film shot in UnrealEngine being billed as ‘a new way to secure your digital identity in mixed reality and a vision for an open metaverse’

• After a couple weeks of up only, activity on Friend Tech is down a lot and the team is clearly feeling the heat. In a decidedly non-crypto move, Friend Tech tweeted out that they’d be penalizing disloyal users by taking points away from users who flock to competitor or copycat apps. 

  • The backlash from CT was swift, as was co-founder Racer’s since-deleted apology note, which we’ve preserved for you below 👇🏾

• Yuga Labs keeps stacking its A-team: Former Nike, Adidas, and Coach exec Michael Ghory joins as VP of Apparel and Lifestyle; and Ape holder / dev Coffee joins the engineering team

• Polygon released a toolkit for devs to build customizable chains using the company’s ZK tech; every chain would be interoperable and together would form a ‘Value Layer’

• Hashdex is the latest to file an application for a spot Bitcoin ETF, but with a unique twist

• Consensys unveils ‘Builder Nights’ initiative, aimed at cultivating collaboration, innovation, and growth in web3 by spotlighting builders and their contributions to the space 

• Robinhood enables in-app swaps on Ethereum; extends wallet support for BTC and DOGE

• X acquired a license to integrate crypto payments into the platform

• Popular meme coin PEPE tanked after some of the devs went rogue and sent $16M worth to exchanges and reduced the number required on the multisig from 5 to 2

🌐 web3 + NFTs

• Animoca Brands issued its end-of-year investor update for 2022 including key financial highlights, capital raises, acquisitions and leadership changes

• Today’s the deadline for ApeCoin holders to vote on a proposal supporting an AR-powered social media scavenger hunt with bigtime $APE rewards

• Foundation launched Moments, a new way for creators to host solo shows, exhibitions, or seasonal collections within Worlds

• Decentralized social app Farcaster moved from the Goerli Ethereum testnet to the Optimism mainnet

• FirstMate unveiled the beta launch of its marketplace website builder aimed at NFT creators seeking to build their own digital storefronts; also raises $3.75M round

• Doodles gets a brand refresh with a new hand-drawn logo and introduces a Crocs collab bundle that comes with a pair of Classic Clogs, Doodles-themed Jibbitz charms, and a redeemable ‘Crocs Box’ NFT

• VeeFriends’ Burn Island Eruption 9 is now live

• Beeple extends invite to Punks event at his Charleston studio to non-holders ‘interested’ in one day holding a Punk

• OpenSea introduced new ERC standards and published a roadmap for redeemable NFTs

• Cryptoys launches Mickeys and Friends collection; teases new physical merch

📈 Brands + Biz

• Courtyard.io launched the tokenized Pokemon collection, Grails That Got Away, on Polygon: Each $49.99 pack gets you a single graded Pokemon card from the late 90s, which is physically vaulted at Brink’s

• Walmart partners with People of Crypto Lab to launch Cultureverse, an immersive experience in Spatial that pays tribute to hip hop’s early visionaries

• Limewire is launching a creator studio on Polygon where users can create AI-generated music with Limewire- and partner-owned content

• Accessories brand Claire’s teamed up with metaverse game publisher Super League to create user-generated content avatar wearables on Roblox

• ALTS by Adidas is giving holders who used their Vending Machine a chance to enhance their traits at no additional cost

• Dropbox is killing its unlimited storage plan, in part blaming crypto mining

🤖 AI + Metaverse

• US Copyright Office is seeking public input on 3 AI and copyright issues: How AI models should use copyrighted data; whether AI-generated material can be copyrighted w/o a human; and how copyright liability would work with AI

• Google created SynthID, a AI-detection watermark tool that’s imperceptible to the human eye

• AI could prove to be more energy intensive than cryptocurrency, here’s how to mitigate the impact

• Gemini, the new flagship AI model from Google, boasts 5x the computing power and is a serious threat to ChatGPT

• Jasmine Maietta is a former professional athlete and the founder of Round21, a modern sports brand with an emphasis on arts and culture. She’s had high-profile collabs with Britney Griner and the U.S. Women’s National Team and web3 partnerships with the likes of BAYC and Nouns. She and Carly discuss the new creator economy, how she views the role of NFTs and web3 in marketing, and why sports merch is in dire need of a rebrand. Plus, find out how she fared as the first NFT company ever to pitch on Shark Tank!

• Carly and Gavin rewind the week with another meaty recap. They’re revisiting the royalties convo after OpenSea’s latest set of announcements, chiming in on Nate Chastain’s conviction, and Carly bites the bullet on Friend Tech. Catch it all here!

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Got something to share with our readers? Leave a comment below or connect with me @hawaiianft on Twitter or @sparkitysparkz on Threads 🤙🏾

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