Web3 gaming firm Immutable is facing the possibility of legal action from the U.S. Securities and Exchange Commission (SEC) regarding its sale of the IMX token.
**Regulatory Actions by Enforcement**
On November 1, Immutable revealed that it had received a Wells notice from the SEC. This notice suggests potential violations of securities laws and misrepresentations, although specific details have not been disclosed. Immutable believes these allegations are related to the listing and private sales of IMX tokens that occurred in 2021.
The company regards the notice as indicative of what it calls the SEC’s “de facto policy of regulation-by-enforcement,” which implies that a lawsuit could be forthcoming. Despite this challenging situation, Immutable is committed to continuing its development of products and services for gamers, although it expressed concern over the disruptions caused by the SEC's approach to regulation.
As previously reported by Bitcoin.com News, the SEC has employed this enforcement-based regulatory strategy against various blockchain and Web3 enterprises over the last year. Nevertheless, courts have occasionally countered these actions, with one U.S. judge labeling a particular SEC ruling as “arbitrary and capricious.” Despite these judicial challenges, the SEC has persisted with its strategy, most recently targeting Opensea in late August.
The Wells Notice issued to Immutable marks a significant shift, as it is the first instance of the SEC targeting a gaming company in this manner.
“With this latest action against Immutable, the SEC’s overreach is now extending into the gaming sector. We are also aware of related inquiries from the DOJ, though no legal actions have been formally proposed. Like many in the crypto space, Immutable has invested millions in legal and governance efforts to ensure compliance. We are in favor of regulatory clarity; however, it seems that certain factions within the SEC are reluctant to engage in a constructive dialogue,” Immutable stated.
**Confusion from SEC’s Regulatory Approach**
Immutable pointed out that the SEC's vague and inconsistent regulatory framework regarding cryptocurrencies is creating confusion among industry players, which ultimately stifles innovation and complicates compliance initiatives.
The Wells Notice was reportedly issued just hours after the company’s counsel had their initial discussions with the SEC. The U.S. regulator has taken a broad stance, issuing Wells notices not only to Immutable’s CEO but also to the Digital Worlds Foundation.
In its statement, Immutable called upon the SEC to establish “clear and fit-for-purpose” regulations that the industry can adhere to. The company urged the regulator to adopt a fair process and engage in substantial discussions before enforcing any actions. Immutable cautioned that the industry would continue to resist any approaches perceived as unfavorable.