NFTs
Artists sue SEC to say NFTs are not securities
Brian Frye and Jonathan Mann are suing the Commission to determine whether the art is a title.
Two artists are processing the Securities and Exchange Commission (SEC) to pressure the agency to declare that non-fungible tokens (NFTs) tied to their creations are not securities.
“Plaintiffs therefore seek a declaratory judgment that their proposed NFT projects do not
violate U.S. securities laws, namely that they would not be engaging in the offer and sale of securities by merely publicly offering and selling their art as NFTs, attaching royalties to the NFTs, and/or marketing the NFTs and their personal artistic efforts to the public,” the lawsuit says.
The two plaintiffs are law professor and filmmaker Brian Frye, and composer Jonathan Mann (aka Songadaymann). They are represented by one of the leading cryptocurrency litigation attorneys, Jason Gottlieb, who, according to archived lawsuits July 29th opened the process with a series of questions.
“Should art be regulated by the Securities and Exchange Commission? Should artists have to “register” their artwork before selling it to the general public? Should artists be forced to make public disclosures about the “risks” of purchasing their artwork?”
Source: Image included in the process
The lawsuit argues that an artist selling NFTs is not meaningfully different from an artist selling different mediums of art, and therefore NFTs should not constitute investment contracts.
The result can have lasting effects, providing clarity for NFT artists and also providing a pathway for a larger group of creators who may have avoided tokenizing their creations due to regulatory risk.
The court filings referenced several historic artists and musicians from all time, such as Jackson Pollock, Andy Warhol, Bob Dylan, Janis Joplin, and whether they would have to file their S-1 filings with the SEC to sell their creations.
“None of this would make any sense whatsoever,” the lawyers said. “And imposing such absurd barriers would have strangled the production of some of America’s greatest artists, and of America’s greatest art.”
Regulation by application
Under the supervision of Chairman Gary Gensler, there has been a regulation by application tactic, which pushed innovation overseas and created a risky situation in the United States. That said, his tenure may be getting to the end if Donald Trump is elected in the upcoming November elections.
With or without Trump, this lawsuit could be a potential game-changer for how the SEC regulates cryptocurrencies going forward.
“The lawsuits will continue until the policy improves,” said Jake Chervinsky, general counsel at Variant Fund. His words resonate with those of Austin Campbell, founder of Zero Knowledge Consulting, who told The Defiant that he sees this lawsuit as what the SEC needs to understand crypto beyond just tokens, and that it’s interesting to note how the agency will have to “confront” concept art in this way.
Most in the cryptocurrency community are supporting the two artists’ lawsuit, hoping it signals a possible change in policy from the SEC soon — and that art can live on-chain without fear of repercussions.