NFT Project Flyfish Club Agrees to $750K Settlement with U.S. SEC

Flyfish Club, a New York-based restaurant, has settled with the United States Securities and Exchange Commission (SEC) regarding its NFT business. The restaurant has agreed to pay $750,000 to resolve the issue. The regulatory move doubled down on the agency’s stringent stance on digital collectibles.

Founded in 2021 by prominent NFT enthusiast and entrepreneur Gary Vaynerchuk, Flyfish Club operates as a private dining club whose membership can be bought as an NFT on the blockchain. NFT owners get access to the restaurant and exclusive culinary, cultural, and social events.

According to the SEC’s investigation, the NFT project sold 1,600 NFTs to U.S.-based investors, making $14.8 million. The fund was meant to finance the construction of an exclusive restaurant and bar under the project’s name. Holders gain access to the eatery and can decide to sell the digital collectible on the secondary market. The Flyfish team did not admit or deny the allegations.

The SEC raised concerns about whether these NFTs were being sold as investment opportunities, which could fall under securities regulations. The financial agency investigated whether Flyfish Club’s NFT offerings complied with federal securities laws. The settlement fee the NFT project agreed to pay includes fines and other costs related to the investigation.

Meanwhile, two SEC commissioners, Hester Peirce and Mark Uyeda, questioned the SEC’s regulatory move. The duo argued that Flyfish NFTs are utility tokens, not securities, as the agency claims.

“While a member potentially could earn a profit by leasing or selling her token, the NFT has a concrete use: you need it to eat at the Flyfish Club,” the duo wrote.

The latest settlement shows the SEC’s continuous efforts to clamp down on NFT operations in the country. The financial watchdog has consistently claimed that digital assets like NFTs and cryptocurrencies are securities, a stance disputed by various entities. Last month, the regulatory agency issued a Wells notice to the NFT marketplace OpenSea regarding its NFT offerings.

These developments highlight the need for clarity on NFT regulations, ensuring the smooth market running without discrepancies.