Two artists have filed a lawsuit against the U.S. securities regulator to clarify whether NFTs fall under the commission’s jurisdiction.
NFTs are regulated by the SEC?
Law professor and filmmaker Brian Frye and songwriter Jonathon Mann, represented by their attorneys, want to know which actions might trigger U.S. securities laws when creating and selling NFT art.
In a new lawsuit against the SEC, they are asking if artists need to register their NFT art before selling it and if they must disclose the risks of buying their art, as shown in a court filing.
Proud to represent my client and friend Jonathan Mann @songadaymann in his brave and unfortunately necessary lawsuit against the SEC.
Art is not a security, and musicians working in a digital medium should not have to hire expensive securities lawyers just to release music. https://t.co/FBYL9FZZfG
— Jason Gottlieb (@ohaiom) July 29, 2024
Not everything is a security
The attorneys compared NFTs to Taylor Swift concert tickets, which are often sold on secondary markets. This doesn’t makes them a security.
They argued it would be also unreasonable for the SEC to consider NFTs as securities. Swift promotes her concert tickets, but it would be utterly nonsensical for the SEC to treat her tickets or collectibles as securities.
Similarly, Frye and Mann, like Swift, are artists wanting to sell their digital art without SEC interference.
NFTs aren’t investments
The lawsuit seeks declaratory and injunctive relief to protect Frye and Mann from unlawful enforcement actions by the SEC on their NFT projects.
The SEC’s first NFT case last August was against Impact Theory, a YouTube channel and podcast, for allegedly encouraging investors to view Founders Key NFTs as investments.
Frye and Mann’s attorneys disagreed with the SEC’s stance, suggesting it would be absurd for the SEC to treat Taylor Swift’s songs or collectibles as securities if released in NFT form.
The attorneys told that the SEC’s approach could harm artists and creators who are exploring new technologies or have chosen NFTs as their medium.
They stressed that such actions threaten the livelihoods of artists simply experimenting with or adopting a rapidly growing technology.
