Legal Action Against SEC Overreach on NFT Regulation
A duo of creatives has mounted a legal offensive against the regulatory practices of the U.S. Securities and Exchange Commission (SEC) concerning their oversight of NFTs as investment instruments. Recording artist Jonathan Mann, also known as “Song a Day Mann,” and jurist-artist professor Brian L. Frye initiated a lawsuit on July 29, 2024. They filed their case in the U.S. District Court for the Eastern District of Louisiana, challenging the SEC’s stance.
Their legal action disputes the SEC’s stance on digital art regulation, particularly critiquing the mandate that artists must “register” their pieces prior to selling them publicly and present a list of “risks” akin to those associated with traditional investments. They contend that these requirements are misaligned with the cultural practices of art production and dissemination. They note the discrepancy by mentioning that historic figures like Jean-Michel Basquiat and Georgia O’Keeffe were never subjected to these types of regulatory demands.
SEC’s Domain Expansion into Digital Art
The plaintiffs have accused the SEC of overstepping its boundaries by including digital artwork under its umbrella of regulated assets. They specifically mention the SEC’s recent enforcement actions taken against NFT collections such as Impact Theory and Stoner Cats. These projects came under fire for marketing crypto assets as unregistered investment instruments. The plaintiffs compare the sale of these digital art pieces to those of physical art created by icons like Andy Warhol, arguing that the SEC’s actions bring about a heightened level of uncertainty for NFT creators and purchasers.
Mann’s contribution to the musical world includes a record-breaking streak of composing a new song daily with themes often touching upon the political landscape, which he markets digitally. Frye is notable for his pieces in the Whitney Museum collection, his perspectives on legal issues, and his avant-garde art, which he also monetizes through NFTs, probing the confluence of law and visual art.
No comments have been issued by the SEC on the current litigation. Still, this confrontation in court could prove pivotal in defining the regulatory body’s views on digital art forms. The artists aim for a declaratory judgment to circumvent a trial, seeking clarification that the SEC’s securities regulations should not govern digital art sales.
