The United States Securities and Exchange Commission (SEC) and Unikrn Inc, an esports betting company, settled a pending case over an unregistered Initial Coin Offering (ICO) carried out by Unikrn, SEC announced on Tuesday.

According to SEC, the company has agreed to pay a $6.1 million penalty to the U.S. government, choosing to settle the complaint previously filed by SEC which cited the ICO as a violation of federal securities law.

The regulator explained that the ICO, which took place in 2017, breached law regulating securities in the country. During the ICO, Unikrn managed to raise $31 million selling its own esports utility token, UnikoinGold (UKG), and pitching the token as an investment powered by the Ethereum blockchain.

SEC’s Position in the Case and Fallout

In the official press release, SEC outlined the reasons behind the complaint as well as the settlement. According to the watchdog, Unikrn had promised investors to facilitate a secondary trading market for the tokens in a bid to increase the usage of UKG and that it would, in return, enhance demand for as well as the value of the tokens. Here is what SEC said specifically:

“The order finds that Unikrn offered and sold UKG as investment contracts, which constituted securities, yet failed to register the offering or qualify for an exemption.”

The impact of the settlement is two-fold. First, Unikrn will have to pay the $6.1m penalty and secondly, Unirkn will no longer be traded on the company’s platforms. SEC has also ordered Unikrn to set up a “Fair Fund” to give assets back to investors who may “have been injured” by the move.

In 2018, one John Hastings brought a case against the company for “skirting securities law in relation to the sale of its cryptocurrency,” ESPN reported. Commenting on the present situation, SEC Enforcement Division Cyber Unit Chief, Kristina Littman, had this to add:

“The securities registration and exemption framework is designed to ensure investor protection and access to material information, while also facilitating capital formation. Failure to follow this framework harms investors and our markets.”

She explained that with the settlement, SEC would be able to return all of Unikrn’s assets to “already-harmed investors.” The regulator, Littman explained, has taken steps towards preventing further misunderstandings and has ordered to disable tokens and limit their future sales to retail investors.

Unikrn Remains a Reputable Esports Betting Company

Despite the current snag, Unikrn is one of the most innovative esports companies, paving the way for esports as a whole. Unikrn invested a sizeable amount into Berlin International Gaming, best known for their Counter-Strike: Global Offensive team.

Unikrn inked another partnership data deal with GRID in June and ran a special esports prize raffle with $1.1 million in prize money.