Two artists have sued the US Securities and Exchange Commission in a bid to get clarity around the classification of NFTs and whether they fall under the agency’s regulatory ambit.
Law professor and film-maker Brian Frye and ‘Song a Day Mann’ songwriter Jonathan Mann have lodged a suit against the apex securities agency and its five commissioners.
Specifically, they want details regarding the acts that would be a part of the equation when they create and sell NFTs.
In the filing, lawyers representing the plaintiffs have outrightly questioned the agency if NFTs need to be registered first before being offered to the public. Furthermore, they also want to know if artists ought to give disclosures to investors about the “risks” involved with NFT purchases.
Around a year back, the SEC officially filed charges against the YouTube channel and podcast studio Impact Theory. It alleged that the NFTs offered and sold to investors were “investment contracts and therefore securities."
Right after, it charged Stoner Cats 2 for fostering an unregistered NFT offering whereby it raked in $8 million. Both the aforementioned suits were put to bed via settlements.
The lawyers representing the latest case drew parallels between Taylor Swift’s tickets and questioned if they were securities too.
The filing underlined that while Jonathan Mann and Brian Frye differ from Taylor Swift in many ways, in the context of this lawsuit, they are in exactly the same position. They are artists and they want to create and sell their digital art, without the SEC investigating them or filing a lawsuit, the lawyers asserted.
The plaintiffs further made their case by bringing to light that Swift often makes marketing statements, releases new music, and promotes aspects of her ecosystem. Meanwhile, people who buy the music artist’s tickets and music from secondary markets could end up monetarily benefiting from it.
They contended that it would be “utterly nonsensical” for the agency to treat Swift tickets or collectibles as securities. In turn, the lawyers questioned,
"Imagine if the SEC found that Taylor Swift songs or collectibles were securities (or were securities if merely released in NFT form), and ordered them to be destroyed. It sounds farfetched. But that is exactly what has happened to Impact Theory and SC2.”
Several community members took to social platforms to express their support.
Uniswap’s CLO Katherine Minarik said that we have now reached a point where the SEC’s application of securities laws is so arbitrary and unlawful that artists are “compelled” to sue the SEC directly to “protect their livelihoods.” She exclaimed, “The SEC is broken.”
Mann, meanwhile, released a song “I’m suing the SEC,” with 7 investors already bidding on the NFT version of the song.
As of press time, the highest offering for the song NFT was 2 ETH or $6,605.34. The auction ends on Tuesday, Aug 6th at 4:44 EST.
