The SEC, Gaming Tokens, and Web3: What Now?
The Securities and Exchange Commission (SEC) has intensified its regulatory scrutiny on Web3 gaming. In a June 5 lawsuit filed against Binance, the world’s largest cryptocurrency exchange, it identified three individual gaming and metaverse tokens that it believes to be securities. Axie Infinity (AXS), The Sandbox Game (SAND), and Decentraland (MANA) were among the tokens named.
The lawsuit accuses Binance of mismanagement of customer funds and deception towards regulators and investors about its operations. Several major tokens were also deemed potential securities, including SOL, MATIC, ADA, BNB, and BUSD.
Web3 gaming community leaders respond
The Web3 gaming community has reacted to these regulatory developments, sparking speculation about the implications they may have for the future of gaming.
Jonah Blake, a thought leader in Web3 gaming and a GP at Game Fund Partners, expressed his perspective on the SEC’s suggested classification of the three tokens in a tweet (shown below). According to Blake, the tokens in question consist of “two metaverse tokens and one game token.” However, he noted that the SEC does not appear to “discern the difference.” The two metaverse tokens he referred to are Decentraland (MANA) and The Sandbox (SAND), which are recognized as leading metaverse platforms within the Web3 ecosystem.
They will probably come down on many more. There are just the biggest players web3 gaming has had from a metaverse token perspective over the last few years.
— Brycent (@brycent_) June 5, 2023
Brycent, a popular Web3 gamer and community leader, responded to Blake’s tweet, signaling that this is likely just the beginning, suggesting that more tokens in the Web3 gaming space could potentially face similar scrutiny from the regulatory body.
“They will probably come down on many more. There are just the biggest players Web3 gaming has had from a metaverse token perspective over the last few years.”
In an interview with nft now, Blake says he can still see Web3 gaming grow without crypto tokens, as tradable NFTs have different offerings. He cited EA and Nike’s recent announcement as an example of this.
“Big businesses like EA and Nike are still moving ahead on digital assets, both operating as public companies. I don’t know how the U.S. will regulate gaming crypto tokens, but the world has already opened Pandora’s box. It’s hard to shut it down when other countries support it. I am in favor of proper regulations for gaming tokens where players and holders are protected. I do not know what that looks like yet.”
Brycent echoed a similar sentiment about the uncertain fate of other tokens.
“No one knows how the SEC will operate, but it will for sure stifle the growth of token models in the U.S. until more clarity is provided around what’s legal and what is not,” Brycent said in a statement to nft now. “So the games and tokens referenced are temporarily screwed from operating in the States until more legal remedies are created or provided.”
Awaiting clarity
The outcome of the lawsuit, and the specific implications for the tokens and Binance, are yet to be determined. The SEC’s intensified regulatory scrutiny on Web3 gaming and its goal to classify these tokens as securities highlight the growing attention that regulatory bodies are paying to the intersection of cryptocurrencies, blockchain technology, and virtual worlds. In fact, just one day after charging Binance, the SEC set its sights on Coinbase, announcing that it was suing the exchange.
While these developments may potentially lead to further crackdowns on other gaming and metaverse-related tokens, the outcome is currently unknown. These developments also reflect the broader trend of regulators worldwide seeking to establish clear guidelines and oversight for the rapidly evolving crypto and gaming spaces.
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