Artist and Musician Sue SEC Over Its NFT Regulatory Jurisdiction (decrypt.co) 32
"Five years ago, Brian Frye set an elaborate trap," writes Decrypt.co. "Now the law professor is teaming up with a singer-songwriter to finally spring it" on America's Security and Exchange Commission "in a novel lawsuit — and in the process, prevent the regulator from ever coming after NFT art projects again."
Over and again, the SEC has sued cherry-picked NFT projects it says qualify as unregistered securities — but never once has the regulator defined what types of NFT projects are legal and which are not, casting a chill over the nascent industry... [In 2019] Frye, an expert in securities law and a fan of novel technologies, minted an NFT of a letter he sent to the SEC in which he declared his art project to constitute an illegal, unregistered security. If the conceptual art project wasn't a security, Frye challenged the agency, then it needed to say so. The SEC never responded to Frye — not then, and not after several more self-incriminating correspondences from the professor. But in due time, the agency began vigorously pursuing, and suing, NFT projects.
So 10 months ago, Jonathan Mann — who writes a new song every day and shares it online — crafted a song titled "This Song is A Security." As a seller of NFTs himself, Mann wrote the song "to fight back against the SEC, and defend his right — plus the rights of other artists like him — to earn revenue," according to the article: Frye, who'd practically been salivating for such an opportunity for half a decade, was a natural fit.... In the lawsuit filed against the SEC in Louisiana earlier this week, they challenged the SEC's standing to regulate their NFT-backed artworks as securities, and demanded the agency declare that their respective art projects do not constitute illegal, unregistered securities offerings.
More from the International Business Times: The complaint asked the court to clarify whether the SEC should regulate art and whether artists were supposed to "register" their artworks before selling the pieces to the general public. The complaint also asked whether artists should be "forced to make public disclosures about the 'risks' of buying their art," and whether artists should be "required to comply" with federal securities laws...
The Blockchain Association, a collective crypto group that includes some of the biggest digital asset firms, asserted that the SEC has no authority over NFT art. "We support the plaintiffs in their quest for legal clarity," the group said.
In an interview with Slashdot, Mann says he started his "Song a Day" project almost 17 years ago (when he was 26 years old) — and his interest in NFTs is sincere: "Over the years, I've always sought a way to make Song A Day sustainable financially, through video contests, conference gigs, ad revenue, royalties, Patreon and more.
"When I came across NFTs in 2017, they didn't have a name. We just called them 'digital collectibles'. For the last 2+ years, NFTs have become that self-sustaining model for my work.
"I know most people believe NFTs are a joke at best and actively harmful at worst. Even most people in the crypto community have given up on them. Despite all that, I still believe they're worth pursuing.
"Collecting an NFT from an artist you love is the most direct way to support them. There's no multinational corporation, no payment processor, and no venture capitalists between you and the artist you want to support."
Slashdot also tracked down the SEC's Office of Public Affairs, and got an official response from SEC public affairs specialist Ryan White.
Slashdot: The suit argues that the SEC's approach "threatens the livelihoods of artists and creators that are simply experimenting with a novel, fast-growing technology," and seeks guidance in the face of a "credible threat of enforcement". Is the SEC going to respond to this lawsuit? And if you don't have an answer at this time, can you give me a general comment on the issues and concerns being raised?
SEC Public Affairs Specialist Ryan White: We would decline comment.
Decrypt.co points out that the lawsuit "has no guarantee of offering some conclusive end to the NFT regulation question... That may only come with concrete legislation or a judgment by the Supreme Court."
But Mann's song still makes a very public show out of their concerns — with Mann even releasing a follow-up song titled "I'm Suing the SEC." (Its music video mixes together wacky clips of Mila Kunis's Stoner Cats and Fonzie jumping a shark with footage of NFT critics like Elizabeth Warren and SEC chairman Gary Gensler.)
And an earlier song also used auto-tune to transform Gensler's remarks about cryptocurrencies into the chorus of a song titled "Hucksters, Fraudsters, Scam Artists, Ponzi Schemes".
Mann later auctioned an NFT of the song — for over $3,000 in Ethereum.
So 10 months ago, Jonathan Mann — who writes a new song every day and shares it online — crafted a song titled "This Song is A Security." As a seller of NFTs himself, Mann wrote the song "to fight back against the SEC, and defend his right — plus the rights of other artists like him — to earn revenue," according to the article: Frye, who'd practically been salivating for such an opportunity for half a decade, was a natural fit.... In the lawsuit filed against the SEC in Louisiana earlier this week, they challenged the SEC's standing to regulate their NFT-backed artworks as securities, and demanded the agency declare that their respective art projects do not constitute illegal, unregistered securities offerings.
More from the International Business Times: The complaint asked the court to clarify whether the SEC should regulate art and whether artists were supposed to "register" their artworks before selling the pieces to the general public. The complaint also asked whether artists should be "forced to make public disclosures about the 'risks' of buying their art," and whether artists should be "required to comply" with federal securities laws...
The Blockchain Association, a collective crypto group that includes some of the biggest digital asset firms, asserted that the SEC has no authority over NFT art. "We support the plaintiffs in their quest for legal clarity," the group said.
In an interview with Slashdot, Mann says he started his "Song a Day" project almost 17 years ago (when he was 26 years old) — and his interest in NFTs is sincere: "Over the years, I've always sought a way to make Song A Day sustainable financially, through video contests, conference gigs, ad revenue, royalties, Patreon and more.
"When I came across NFTs in 2017, they didn't have a name. We just called them 'digital collectibles'. For the last 2+ years, NFTs have become that self-sustaining model for my work.
"I know most people believe NFTs are a joke at best and actively harmful at worst. Even most people in the crypto community have given up on them. Despite all that, I still believe they're worth pursuing.
"Collecting an NFT from an artist you love is the most direct way to support them. There's no multinational corporation, no payment processor, and no venture capitalists between you and the artist you want to support."
Slashdot also tracked down the SEC's Office of Public Affairs, and got an official response from SEC public affairs specialist Ryan White.
Slashdot: The suit argues that the SEC's approach "threatens the livelihoods of artists and creators that are simply experimenting with a novel, fast-growing technology," and seeks guidance in the face of a "credible threat of enforcement". Is the SEC going to respond to this lawsuit? And if you don't have an answer at this time, can you give me a general comment on the issues and concerns being raised?
SEC Public Affairs Specialist Ryan White: We would decline comment.
Decrypt.co points out that the lawsuit "has no guarantee of offering some conclusive end to the NFT regulation question... That may only come with concrete legislation or a judgment by the Supreme Court."
But Mann's song still makes a very public show out of their concerns — with Mann even releasing a follow-up song titled "I'm Suing the SEC." (Its music video mixes together wacky clips of Mila Kunis's Stoner Cats and Fonzie jumping a shark with footage of NFT critics like Elizabeth Warren and SEC chairman Gary Gensler.)
And an earlier song also used auto-tune to transform Gensler's remarks about cryptocurrencies into the chorus of a song titled "Hucksters, Fraudsters, Scam Artists, Ponzi Schemes".
Mann later auctioned an NFT of the song — for over $3,000 in Ethereum.
1st (Score:2)
the 21st century "weaponized" version of NOFX's "Please Play This Song On The Radio" [youtube.com]
He’ll probably win (Score:4, Interesting)
Whatever. The SEC has a thousand more important things to do than pursue NFT regulation. I find it hard to see any difference between
1. Paying an artist for “ownership” of a “unique” NFT. Eyeroll.
2. Buying a “limited edition” single LP. Same eyeroll.
3. Sending $ to an artist over Patreon.
As long as the income is declared and taxes are paid, who the hell cares? Now, if anyone has deluded themselves into thinking this is a way to avoid taxes, they’re gonna get a nasty surprise. You do NOT f&*k with the IRS. That will never change.
Re: He’ll probably win (Score:2)
Re: (Score:1)
Well, the difference in #2 is that with a limited edition album you actually own a physical thing that you can use that comes with certain rights. With an NFT you don't get any utility or rights to anything other than a ledger entry.
The difference with #3 is that a patreon donation is a gift. Someone who buys an NFT is making a purchase of an ostensibly valuable asset, which is why asset market regulators take an interest in them.
My problem is, none of this is a secret, so it's hard to argue that it's frau
Hmm (Score:5, Insightful)
No, a song isn't a security.
But some supposed digital asset that is bought and sold, that is supposedly linked to a song, could be.
Re: Hmm (Score:3)
True. The underlying song is not the security. But like stocks and bonds, the creators of NFTs claim that they are certificates of ownership of that underlying IP. We'll see if those ownership claims hold water when someone makes a copy of a bored ape without one.
If NFTs are in fact securities, then I would expect the gov't and courts to step up and defend the ownership that they claim to represent. As well as that title certificate I bought for a square yard of property on the Moon back when I was a kid.
Re: (Score:2, Interesting)
So we agree that the premise of this stunt is a red herring to give cover to a more technical argument.
Why are so many "tech" innovations just fucking lies?
Re: (Score:2)
the premise of this stunt is a red herring to give cover to a more technical argument.
Maybe. An NFT that represents a JPG of some cartoon ape is relatively unimportant in the grand scheme of things. But if a similar NFT could represent a share of Apple stock (for example), be tracked with a blockchain and traded electronically without an exchange, very powerful people are about to shit themselves.
Caveat Emptor (Score:1, Insightful)
Its not the government's job to babysit and prevent every dumb investment that some degenerate might want to make.
Even if they have been heavily marketed to by other degenerates like Matt Damon, Kevin Hart, et al.
If you invest in those schemes, you deserve to lose it all.
Its actually a good idea to sue SEC to prevent them from preventing dumb people from making these investments.
The rest of us will come in, buy your assets on discounts, and laugh all the way to the bank.
Re: (Score:2)
Sounds all well and good until it's your grandmother they're scamming and liquidating.
Re: (Score:2)
Stupid people don't deserve to lose. The people who con them deserve to be locked up.
Re: (Score:2)
> If you invest in those schemes, you deserve to lose it all.
Victim-blaming bullshit - the most obvious way to say "I'm an American" without actually saying "I'm an American".
Remember: "caveat emptor" is a warning, not a business model, con-men are NOT clever businessmen, they're fucking thieves.
Fraud is a crime. A fraud victim does not deserve it, any more than a burglary victim deserves to be burgled. The fraudster is a fucking criminal, and THEY deserve to be in jail.
> The rest of us will come in
Re: (Score:1)
i want the scammers collected and strung up, just me though
He's about to get a lesson in American economics (Score:1, Interesting)
This is why when the consumer financial protection bureau was on the chopping block it was spared to everyone's surprise. The CFPB protects rich people's assets too so it didn't get knocked out.
The SEC protects the ultra wealthy. They are the white collar law enforcement that makes sure rich people don't lose money to
Re: (Score:1)
The SEC protects the ultra wealthy...They are the white collar law enforcement that makes sure rich people don't lose money to crooks
what are you, 16?
Re: (Score:2)
You're the next Bell Delphine [businessinsider.com]?
An NFT is not a security. (Score:5, Interesting)
It's like selling hyperlinks to an image on a website. Who the fuck would buy that?
If this guy wants to be supported but not actually sell his art, put up a donation link. This is doing the same thing but with publicity around a hyped and now dying form of donation: the NFT. He made the news, I guess that is profitable too. Good for this starving artist.
Re: (Score:1)
It's like selling hyperlinks to an image on a website. Who the fuck would buy that?
buffoons... largely americans. probably the thickest population in the first world, by a long shot.
Unpatreonic. (Score:2)
I get it that such a thing would backfire immediately, but this kind of douchebaggery is irksome. Look, Mann, if your no-doubt-awesome daily productions are so worthwhile that you can live off them, do that. You don't need to involve digital fraud. If the percentage that a payment processor would charge is the difference between solvency and insolvency, we
Re: (Score:2)
Go for it (Score:3)
Let us hope this plans out for him so others can experience this joy [imgur.com].
NFT's crypto, all hot air. (Score:3)
Obligatory reminder (Score:3)
The NFT is the receipt, not the object named in the receipt.
Re:Obligatory reminder (Score:4, Informative)
It's worse, An NFT does not declare ownership of the "thing" it represents.
An NFT carries no control over the digital asset it claims to be tied to.
The rights owner of the actual asset has full control over the asset despite who owns the NFT of the same asset.
So it's not even a receipt of the object/asset. An NFT is literally nothing except a unique digital cert. A certificate to nothing.
The rapid rise and fall of the NFT scam pyramid was amazing to watch. I did everything I could to protect friends and relatives from being caught up in it. I largely succeeded. But a few still fell victim to it, losing 100% of the cash put in.
One associate of mine did lose a decent chunk of coin because he believed he owned the rights to the asset on NFT purchase. He thought he would be able to collect all this Youtube cash for it. Assuming he now owned the original and all derivative works that played on youtube. It took a lawyer to explain to him he owned zilch. Others and myself spent considerable time trying to convince him not to buy it, and secondly that it did not give him the rights to the thing. We failed. He once declared something like this. "What is an NFT good for if anyone can just create one against things they don't even own?" It's not something he likes to talk about he's very bitter about it.
My securities fraud is actually art (Score:2)
That's a new one.
Wu Tang - Once Upon a Time in Shaolin (Score:1)
Scams away? (Score:2)
I thought NFTs and Crypto was all scams anyways?
non-article (Score:1)
Slashdot also tracked down the SEC's Office of Public Affairs, and got an official response from SEC public affairs specialist Ryan White.
Slashdot: The suit argues that the SEC's approach "threatens the livelihoods of artists and creators that are simply experimenting with a novel, fast-growing technology," and seeks guidance in the face of a "credible threat of enforcement". Is the SEC going to respond to this lawsuit? And if you don't have an answer at this time, can you give me a general comment on the issues and concerns being raised?
SEC Public Affairs Specialist Ryan White: We would decline comment.
is this cunt being paid by the letter or something?