The SEC continues to engage in ‘strategic ambiguity,’ lawyer says
Two NFT artists filed a suit against the SEC earlier this week to push back on the unclear regulatory approach to the environment
WhataWin/Shutterstock modified by Blockworks
Earlier this week, two NFT artists decided to take the lack of regulatory clarity over their medium to court.
Jonathan Mann and Brian Frye sued the Securities and Exchange Commission. In a Louisiana court filing, they argue that artists like Andy Warhol and Georgia O’Keeffe never had to worry about regulators claiming their art constituted investment contracts.
“It would be crazy to think that Bob Dylan, Janis Joplin, the Rolling Stones, Ray Charles, Jimi Hendrix, Madonna or Louisiana’s own Louis Armstrong should have retained attorneys to examine the SEC’s Form S-1 to see how to register their music for sale to the general public,” the complaint said.
Mann told Blockworks that the suit was borne from “deep frustration” with the lack of clarity. The regulatory agency’s anti-crypto parade has already targeted two NFT projects, Stoner Cats and Impact Theory, and Mann felt that his NFT collection could follow in Stoner Cat’s footsteps.
Read more from our opinion section: It’s time to end the SEC’s war on crypto
The goal for the artists is simple: Get some answers from the SEC and act before the agency can take action against the two of them for their projects.
Mann, the artist behind A Song A Day Mann, writes and releases a song a day, and has done so for 16 years. He told Blockworks that he has been involved in the NFT space since 2017 — way before the 2021 boom that probably put such things on the SEC’s radar.
His project has penned multiple songs about the SEC — including one earlier this week detailing his plans to sue the SEC — and one from September of last year about the SEC’s actions against Stoner Cats. Last year, the Mila Kunis and Ashton Kutcher-backed project paid $1 million to settle with the SEC and destroyed NFTs in its possession.
“As I looked at what they said Stoner Cats had done, and I looked at what I continually do on a daily basis, [I realized] there’s no daylight here between what they’re accusing them of and what I do and what basically everyone that I know in the space, artists and creators of all kinds, are doing all the time,” Mann told Blockworks.
Read more: SEC’s first NFT prosecution may set unsettling precedent
Mann said that the SEC’s actions could deter artists from seeking a “direct relationship” with clientele.
“It’s very ironic to me because in a lot of ways, I think of NFTs as the most…direct relationship that I can have with people who enjoy my music. Any other way that I could sell songs to folks would be mediated in one way or another by either a giant tech company or a payment processor who would take a cut,” he said.
“I would have to interact with these huge multinational corporations. [But] when I’m selling NFTs, it’s literally just me and them mediated by the blockchain which belongs to no one … I find it ironic like this way of interacting with my fans is somehow deemed more harmful by the SEC than you know what Spotify does to artists or YouTube does to creators, or Tiktok, or any of these things where creators are just screwed at every turn. And yet, that’s just deemed normal,” Mann continued.
Jason Gottlieb, who also represented Debt Box in its now-infamous case, was brought on to help Frye and Mann argue their case against the securities regulator.
Read more: SEC faces big court bill after sanctions
“The SEC has been engaged in strategic ambiguity,” Gottlieb said, leaving artists with two options: take action against the agency itself after it didn’t respond to requests for clarity on its regulatory stance or “produce their art and risk that they wake up needing to hire very expensive securities lawyers.”
“Of course, the easy way not to cower in fear of getting sued by the SEC is just to follow all the securities laws, but those laws apply to people who are in the securities or investments business, and not it should apply to musicians and artists,” Gottlieb continued.
Read more from our opinion section: The music industry could learn a few lessons from blockchain
He noted that there have been a number of cases brought against the SEC due to the mounting frustration within crypto. Indeed, it’s a heavily discussed topic — even going so far as being an important talking point in Coinbase’s earnings call late Thursday.
“As we go [into] this new digital era where most assets with value are digital — and most assets that don’t have intrinsic value but have artistic value or digital — there’s a question of how, if at all, they should be regulated,” Gottlieb told Blockworks.
“So my interest in digital assets and the SEC and securities law is intersecting here, along with … protecting the next generation of creators, designers, musicians and artists to help them make digital art free from concerns that all of a sudden, some random federal agency tasked with regulating securities and exchanges is going to show up and say, ‘Hey, that song that you’re trying to sell, that’s a security,” he explained.
An earlier version of this article appeared in the Empire newsletter. Sign up here to get it in your inbox every morning.
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