There’s a lot happening in web3 this week, and the WGMI newsletter is your filter to make sure you’re up to date with all the juicy news. Here’s what we’ll be talking about today:
- Yuga Labs faces SEC investigation… we break down what it means for NFT holders
- Google now accepts crypto
- Did CNN really just rug its NFT project?
- Some other bits and bobs you should probably know about…
It should take about five minutes to read this email. If, during those five minutes, you learn something new or even crack a 25% smile, then consider sharing with a fellow degen. It would mean the world!
YUGA FACES SEC INVESTIGATION:
ARE BORED APES ILLEGAL?
Yuga Labs, the company that owns Bored Ape Yacht Club and CryptoPunks, is being investigated by the SEC. But before you book in your face transplant and flee to El Salvador under a new alias, read this first.
The SEC has been investigating NFTs since March. It was only a matter of time before they went after the NFT market kingpin.
The pivotal question is whether the NFTs in Yuga’s portfolio are securities.
A very quick ‘securities’ class (that may or may not be correct)
Security laws are designed to protect investors. If something is deemed to be a security, then there are lots of complex rules that it must comply with.
For example, shares in a company are securities. To sell them to the public (e.g. on a stock exchange), the company must disclose LOTS of information to potential investors.
The legal definition of a security is long, complex and uncertain. In overly simplified terms, my (entirely untrained and unqualified) impression is that an asset can be a security when the ‘investor’ is led to expect to profit from it. Profit can be a capital appreciation of the investment, or participating in earnings.
The SEC will, therefore, be taking a close look at how Yuga has marketed their NFTs. If there is evidence that Yuga has promised holders some kind of financial return from owning their NFTs, Yuga could be in trouble.
If Bored Apes are considered securities, then Yuga will almost certainly not have complied with security regulations… meaning Yuga will have broken Federal law. The fear is that many NFT projects could suffer the same fate.
But there is reason to be bullish…
Reasons to welcome the SEC investigation
- Yuga is our best bet: From every project the SEC could have investigated, Yuga is the one NFT fanatics would choose. Yuga Labs is backed by a16z and various other heavyweights. They have huge resources and their legal team would have been sure to dot their i’s and cross their t’s.
- Legal clarity: Whatever the outcome, we will have more clarity on how the SEC perceives NFTs. The legal uncertainty around NFTs has prevented many people from investing and many companies from entering the space. Legal clarity will provide people the confidence they need to feel safe in the NFT space.
- More protection for NFT holders: Security laws literally exist to prevent fraudulent companies from disappearing with your money. Unless you enjoy rugging others and/or being rugged, then more protections for investors should be welcomed.
If the SEC does find Yuga’s NFTs to be securities, I suspect Yuga will put up one helluva legal fight. So this is unlikely to be settled any time soon. Hold on to your hats, degens.
GOOGLE ACCEPTS CRYPTO
Google has partnered with Coinbase to enable some customers to pay for cloud services with cryptocurrencies, starting in 2023.
Google Cloud makes up about 9% of Alphabet’s revenue (that’s a lot).
Apparently, Google is also considering adding digital currencies to its balance sheets through Coinbase Prime.
One of the biggest companies in the world recognizing the importance of cryptocurrency. How can you not be bullish?
ARE YOU RUGGING ME, CNN?
CNN just pulled the plug on their NFT project, the Vault. In a press release, CNN said it was “time to say goodbye to Vault by CNN”.
For those that are interested, the Vault is like NBA Top Shots but for major news events. Some ‘Moments’ you can buy on its marketplace include Obama winning the US election and the fall of the Berlin Wall.
The marketplace will still exist, but CNN will “no longer be developing or maintaining this community”.
If it looks like a rug, and smells like a rug…
CNN’s press release led many to accuse it of orchestrating a ‘rug pull’.
There’s no real definition of a rug pull, but I would define it as promising something, financially gaining, then deliberately not fulfiling your promise.
Well, as recently as last month, CNN was pushing community members to buy more tokens in order to access an upcoming Art of Voting NFT Series. Holders were also promised various utility including “Exclusive CNN Perks” and “Vault Merch”. These promises will not be delivered.
I’ll let you be the judge. Is this just a failed business, or a textbook rug pull? Reply to this email and let me know your thoughts. I’ll respond to every single response!