After raising $30 million from investors and generating $5.4 million selling NFTs on marketplace OpenSea, Los Angeles-based entertainment firm Impact Theory LLC has agreed to pay the Securities and Exchange Commission a $6 million settlement in what has been reported as the SEC’s first NFT enforcement action. Impact Theory was accused of selling “unregistered asset securities in the form of purported non-fungible tokens.” Purported, because the SEC claims the NFTs “sold to investors were investment contracts and therefore securities” and as such, are required by law to be registered.

The Verge reports that the investigation, which dates from 2021, describes Impact Theory selling NFTs, branded “Founder’s Keys,” in three tiers: “Legendary,” “Heroic” and “Relentless.”

The agency found Impact Theory “encouraged potential investors to view the purchase of a Founder’s Key as an investment in [its] business,” stating investors would profit from their NFT purchases and Impact Theory’s success.

That language constituted an “investment contract,” per the SEC. “Accordingly, Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration,” the SEC said in a statement.

“Absent a valid exemption, offerings of securities, in whatever form, must be registered,” explained SEC New York Regional Office Director Antonia Apps. “Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.”

As per the  settlement, Impact Theory is responsible for “disgorgement, prejudgment interest, and a civil penalty” and must set up a Fair Fund to return monies to investors, some of whom are U.S. citizens,” Decrypt writes, explaining that “the company is also required to destroy all Founder’s Keys under their control” and “waive any future secondary market transaction royalties linked to the Founder’s Keys.”

Cointelegraph describes Impact Theory as “a Los Angeles-based company that produces entertainment and educational content, including several podcasts.”