The world of NFTs is colliding with the world of finance. Two artists are asking a federal court to draw the line.
Two artists are challenging the US Securities and Exchange Commission in court to clarify whether NFTs are subject to securities regulations.
The plaintiffs, law professor and filmmaker Brian Frye and songwriter Jonathon Mann, are seeking clarification on which actions related to creating and selling NFT art might trigger US securities laws.
Their attorneys have asked whether artists need to “register” their NFT art before selling it to the public and whether they must disclose the “risks” associated with buying their art, according to a court filing on July 29.
Using Taylor Swift concert tickets as an example, Frye and Mann’s attorneys argued that it would be unreasonable for the Securities and Exchange Commission (SEC) to classify NFTs as securities. They pointed out that while Swift sells concert tickets, which are resold on secondary markets, and makes promotional statements about her events, it would be absurd for the SEC to treat her tickets or collectibles as securities.
The attorneys emphasized that, although Frye and Mann differ from Taylor Swift in many ways, they share the same position in this context. They are artists who want to create and sell their digital art without SEC interference or legal action.
The lawsuit seeks declaratory and injunctive relief against what they view as “unlawful enforcement actions” by the SEC on NFT projects launched by Frye and Mann.
The SEC brought its first NFT case against the YouTube channel and podcast Impact Theory last August, claiming it encouraged potential investors to view the purchase of Founders Key NFTs as an investment with the expectation of profit.
Frye and Mann’s lawyers strongly disagreed with the SEC’s allegations, likening it to the SEC deeming Taylor Swift’s songs or collectibles as securities if released in NFT form and ordering their destruction. They argued that the SEC’s approach threatens the livelihoods of artists and creators experimenting with this novel technology or choosing it as their medium.
