NFTs
Law professor sues SEC in Los Angeles court over NFT art regulation
Brian L. Frye, a law professor and conceptual artist, has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) in a Los Angeles court.
Frye’s lawsuit challenges the SEC’s decision to classify non-fungible tokens (NFTs) as securities, arguing that such classification limits artistic freedom and creates unnecessary obstacles for digital artists.
Today, @songadaymann and I processed the @SECGov in federal court in Louisiana, seeking a declaration that the SEC cannot regulate the sale of NFT art. I’ve argued that the SEC is abusing its authority for years, and now I’m testing my theory. Here’s the complaint. https://t.co/AD8xYpV0kC
—Brian L. Frye (@brianlfrye) July 29, 2024
The lawsuit comes as debate over how to categorize digital art assets is heating up. Frye, known for his unconventional approach to legal issues, believes the SEC’s broad interpretation of securities laws is unsupportive of artists using NFTs.
He cites his project, the SEC No-Action Letter Request, as a conceptual piece of art that questioned the application of the Howey Test, a measure used to define securities. Frye never received a response from the SEC, which prompted his current lawsuit.
Frye’s lawsuit highlights the broader implications of NFT regulation on the art market. NFTs have surged in popularity, with digital artworks fetching high prices at auction. However, the regulatory framework for NFTs remains unclear. Frye argues that digital art sold as NFTs should not be treated as securities, opposing the SEC’s application of the Howey Test, which was originally designed for traditional investment contracts.
Jason Gottlieb, Frye’s attorney, said the case is aimed at protecting the rights of digital artists and ensuring that the SEC remains within its regulatory boundaries. Gottlieb’s involvement has drawn significant attention due to his previous role in exposing controversial SEC practices in the DEBT BOX case in Utah, which led to several resignations within the SEC.
Proud to represent my client and friend Brian Frye @brianlfrye in their courageous and unfortunately necessary lawsuit against the SEC.
Art is not a title, and artists working in a digital medium should not have to hire expensive securities lawyers just to market their art. https://t.co/EHm91didK9
— Jason Gottlieb (@ohaiom) July 29, 2024
Additionally, the lawsuit has also drawn political attention. Former President Donald Trump has criticized the SEC’s heavy-handed approach to regulating the crypto space. Trump has swore to remove SEC Chairman Gary Gensler from office if he is re-elected, promising to end what he calls the “anti-crypto crusade” and the “persecution and weaponization” of digital assets.
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