- A law professor and a songwriter have sued the SEC seeking clarification on how NFTs are securities
- The two argue that the securities watchdog is overstepping its boundaries by policing the NFT market
- They have asked the SEC to provide sections in the United States laws that designate NFTs as securities
The US Securities and Exchange Commission (SEC) has been taken to court to explain how NFTs are securities. The plaintiffs, law professor Brian Frye and artist Jonathan Mann, want the regulator to quote sections of the country’s laws indicating that NFTs are securities. Frye and Mann have also sought clarification on whether NFT creators should notify regulators of their creations before offering them for trading and whether they need to state the risks of investing in collectibles, an indication that some in the NFT space consider the SEC as acting outside its mandate when policing the NFT market.
Plaintiffs Argue That SEC Approach is “Ridiculous”
According to court documents, Frye and Mann compare NFTs with physical paintings saying that it would have been “ridiculous” for great American visual artists like Andy Warhol and Norman Rockwell to register their artistic work, or have them considered to be securities.
I’ve been writing a song a day for 16 years and 211 days.
Today, I’m suing the SEC.
(Yes, this is real) pic.twitter.com/QubAgbltr0
— 16 years of song a day (@songadaymann) July 29, 2024
The plaintiffs argue that the securities regulator is slowly policing the art space through NFTs and is now prohibiting art from being sold before it’s registered.
Their attorney, Jason Gottlied, commented on the development saying NFTs don’t differ from other forms of art and “art is not a security.” As such, NFT creators shouldn’t be subjected to securities laws because it disrupts their livelihoods.
Proud to represent my client and friend Jonathan Mann @songadaymann in his brave and unfortunately necessary lawsuit against the SEC.
Art is not a security, and musicians working in a digital medium should not have to hire expensive securities lawyers just to release music. https://t.co/FBYL9FZZfG
— Jason Gottlieb (@ohaiom) July 29, 2024
SEC Drops Investigations
The lawsuit comes a month after Coinbase sued the SEC seeking clarification on how the regulator approaches cryptocurrency regulation. It also comes a few weeks after the SEC dropped investigations into Hiro Systems and Paxos.
With Frye and Mann accusing the SEC of using arbitrary laws to govern NFTs, it’s to be seen whether the court will compel it to provide clear NFT regulation guidelines.
