Artists sue SEC over confusing security status of NFTs

Two artists have filed legal action against the US Securities and Exchange Commission to establish if non-fungible tokens are subject to the commission’s authority. Attorneys for the plaintiffs, law professor, and filmmaker Brian Frye and singer Jonathon Mann, requested clarification on which behavior potentially violated US securities laws while generating and selling NFT art.

According to the July 29 court filing, lawyers have enquired as to whether artists must register their NFT work before making it available for purchase and if they are required to notify potential buyers of the “risks” involved in doing so.

Artists Challenge SEC’s Classification of NFT as Securities

Frye and Mann’s attorneys argued that categorizing NFTs as securities would be ludicrous, using tickets to a Taylor Swift concert as evidence.Taylor Swift made statements to promote her live performances and sell tickets on the secondary market; yet, the attorneys contended that it would be “utterly nonsensical” for the SEC to classify Swift’s tickets or collectibles as securities.

With very different backgrounds Taylor Swift, Jonathan Mann, and Brian Frye are in the same situation concerning this lawsuit. As artists, their goal is to produce and market their digital artwork without facing legal action or an investigation by the SEC.In order to stop the SEC from taking “unlawful enforcement actions” on NFT initiatives that Frye and Mann started, the lawsuit asks for declaratory and injunctive relief.

In August of last year, the SEC filed its first NFT lawsuit against the podcast and YouTube channel Impact Theory. The lawsuit claimed that the channel had convinced potential investors to consider buying Founders Key NFTs as an investment with the expectation of profit.

Frye and Mann’s lawyers disagreed with the SEC’s allegations, arguing that Taylor Swift’s NFT form songs and collectibles were securities. They argued that the SEC’s approach threatens the livelihoods of artists and creators who experiment with new technologies or choose NFTs as their preferred medium, similar to the situation with Impact Theory and SC2.