Seattle e-sports platform Unikrn has agreed to pay more than $6 million to settle a complaint by the Securities and Exchange Commission alleging that the gambling site, initially backed by celebrities including Ashton Kutcher and Mark Cuban, raised $31 million by selling unregistered securities.

The $6.1 million, substantially all of the company’s current assets, will go to investors who purchased the cryptocurrency UnikoinGold, issued by Unikrn in June 2017.

The company promised investors UnikoinGold would become more valuable as Unikrn developed cryptocurrency-enabled gambling features for its platform and listed UnikoinGold on cryptocurrency exchanges, according to a cease-and-desist order filed Tuesday by the SEC.

Those promises implied UnikoinGold was, in effect, a security similar to a share of company stock, the SEC alleged, meaning Unikrn was in violation of regulations requiring companies to register initial public offerings with the federal government.

Unikrn did not admit or deny wrongdoing. In a statement, the company noted that the SEC’s guidelines for cryptocurrency launches, called Initial Coin Offerings, were published after it started selling UnikoinGold. In those guidelines, the SEC rejected the industry’s position that cryptocurrencies were not securities, and pledged to regulate them as such.

The SEC, however, has moved gingerly with regards to the cryptocurrency sector, which comprises a vast number of digitally traded “tokens” — including more-or-less household names like Bitcoin and Ether.


The settlement with Unikrn is notable for being relatively larger — compared to the size of the offering — than other recent penalties leveled against firms allegedly engaged in similar behavior, said Mitchell Moos, the Seattle-based managing editor of industry magazine Crypto Briefing.

Blockchain-enabled app developer, for instance, settled an SEC investigation for just $24 million — $6 million less than the company spent on a domain name — last September after raising nearly $4 billion in an allegedly unregistered securities offering.

An SEC spokesperson did not immediately respond to a question about why the Unikrn settlement was so high by comparison.

The size of the fee raised eyebrows even within the commission.

In a dissent letter, SEC Commissioner Hester Peirce, known by some in blockchain communities as “Crypto Mom” for her full-throated support of blockchain-based currencies like Bitcoin, argued that the $6.1 million settlement is improper because it effectively forces Unikrn to go out of business.

“Registration violations, even standing alone, are serious, and our enforcement actions can serve to deter such violations and protect harmed investors,” she wrote. “We should strive to avoid enforcement actions and sanctions, however, that enervate innovation and stifle the economic growth that innovation brings. I believe that this action and its accompanying sanctions will have such consequences.”

Unikrn CEO Rahul Sood said in an email he had no plans to shut Unikrn down. The company will “move forward” and “continue growing our business,” he said.

Unikrn is also in settlement negotiations with the Washington Department of Financial Institutions over an investigation into whether the company violated state securities laws, said Bill Beatty, DFI’s securities division head, in an email.