Two artists have filed a lawsuit against the United States Securities and Exchange Commission (SEC), seeking clarity on whether nonfungible tokens (NFTs) fall under the regulator’s jurisdiction. The plaintiffs, law professor and filmmaker Brian Frye and songwriter Jonathon Mann, are represented by attorneys who argue that the SEC’s stance on NFTs is unclear and potentially harmful to artists.
Key Concerns Raised
The lawsuit questions whether artists need to register their NFT art with the SEC before selling it and whether they must disclose the risks associated with purchasing NFT art. The artists’ attorneys drew parallels to Taylor Swift concert tickets, which are sold on the secondary market. They argued that it would be “utterly nonsensical” for the SEC to classify NFTs as securities, just as it would be unreasonable to consider Swift’s concert tickets or collectibles as such.
The attorneys emphasized that Frye and Mann, like Swift, are simply artists who want to create and sell their work without fearing SEC investigations or lawsuits. They are seeking declaratory and injunctive relief to prevent “unlawful enforcement actions” by the SEC on NFT projects.
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Background and Implications
This legal action comes after the SEC’s first NFT-related case against the YouTube channel and podcast Impact Theory last August. The SEC claimed that Impact Theory encouraged potential investors to view the purchase of Founders Key NFTs as an investment with the expectation of profit. Frye and Mann’s lawyers argue that the SEC’s approach threatens artists’ livelihoods, especially those exploring new technologies like NFTs.
The attorneys likened the situation to the SEC potentially classifying Taylor Swift’s songs or collectibles as securities if released in NFT form, which they argue would be an absurd overreach. They believe the SEC’s current stance poses a risk to creators experimenting with this burgeoning technology.
