Artists are taking legal action against the SEC to halt nonfungible token regulations.
Should artists be required to file paperwork with the Securities and Exchange Commission (SEC) in order to sell their own creations? Should they have to notify buyers about potential fluctuations in art values? Should the SEC have the authority to determine if art sales are considered an “investment”? The SEC appears to believe it does, particularly when it comes to nonfungible tokens (NFTs).
According to a federal lawsuit against the SEC, NFTs are digital tokens stored on a blockchain that provide owners with various digital and/or physical rights. These NFTs are like digital collector’s items, intended to be unique.
Two individuals, musician Jonathan Mann (known as songadaymann) and conceptual artist Brian L. Frye, filed a lawsuit against the SEC in the U.S. District Court for the Eastern District of Louisiana. They aim to continue selling NFTs but are concerned about potential interference from the SEC under Chairman Gary Gensler. They fear the SEC may view their sales as unregistered securities offerings and are seeking an injunction against future enforcement actions.
The SEC’s definition of a security under the Securities Act of 1933 has raised concerns among artists like Mann and Frye. Recent SEC actions against NFT artists have resulted in hefty settlements, raising questions about the agency’s jurisdiction over art sales.
In their lawsuit, Mann and Frye argue that their NFT sales should not be considered securities offerings as they do not involve shares of a company or profit commitments to purchasers. They believe that their art, despite being digital, is no different from traditional art and should not be subject to SEC regulation.
The SEC’s enforcement actions against companies selling digital art have prompted criticism from some commissioners who question the agency’s approach. They warn that such actions could negatively impact artists and innovators who rely on art sales to fund new projects and increase the value of their work.
As the SEC seeks to dismiss the lawsuit, Mann and Frye continue to seek clarity on their ability to sell art without facing regulatory challenges. They are hoping for federal court intervention to protect their right to offer and sell art projects without fear of SEC intervention.
While the SEC has not made any specific demands on Mann and Frye thus far, the artists remain uncertain about their future sales and the potential risks of SEC involvement.
This article originally appeared in print under the headline …
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