NFT Artists Sue SEC

A pair of NFT artists, law professor Brian Frye and songwriter Jonathan Mann, have filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) to clarify whether non-fungible tokens (NFTs) are under the agency’s jurisdiction. The complaint was filed in U.S. District Court for the Eastern District of Louisiana.

Allegations Against the SEC

Frye and Mann’s lawyers accuse the SEC of attempting to assert jurisdiction over digital art sales, referencing two high-profile cases involving the agency and NFTs. Both artists are working on NFT projects and are seeking a declaratory judgment.

The complaint highlights the SEC’s first NFT-related enforcement action against the YouTube channel and podcast studio Impact Theory, which was charged for treating Founders Key purchases as investment contracts. A month later, the SEC sued Stoner Cats 2 LLC for an unregistered NFT offering, resulting in a combined total of $8 million raised from investors. Both cases ended in settlements.

Impact on Artists

The artists’ lawyers argue that the SEC’s actions endanger the livelihood of creators exploring new technologies. The complaint raises concerns that artists must hire securities lawyers to navigate the fate of their art in light of recent enforcement actions.

The SEC declined to comment on the lawsuit. Legal expert Ashley Ebersole highlighted the pressing need for clarity regarding NFTs as securities, given the SEC Chair’s broad statements about crypto jurisdiction.

Comparison to Taylor Swift

Comparing their situation to Taylor Swift, Mann and Frye’s lawyers noted that even artists like Swift could face similar scrutiny. If the SEC deemed Swift’s music or collectibles securities, it could have drastic consequences.

Community Response

Reactions on social media have been vocal, with crypto executives and organizations expressing support. Katherine Minarik, chief legal officer at Uniswap Labs, criticized the SEC’s alleged arbitrary actions, while the Blockchain Association stated that expecting artists to navigate securities laws is unreasonable.