Artist and Musician Sue SEC Over Its NFT Regulatory Jurisdiction

"Five years ago, Brian Frye set an elaborate trap," writes Decrypt.co. "Now the law professor is teaming up with a singer-songwriter to finally spring it" on America's Security and Exchange Commission "in a novel lawsuit - and in the process, prevent the regulator from ever coming after NFT art projects again." Over and again, the SEC has sued cherry-picked NFT projects it says qualify as unregistered securities - but never once has the regulator defined what types of NFT projects are legal and which are not, casting a chill over the nascent industry... [In 2019] Frye, an expert in securities law and a fan of novel technologies, minted an NFT of a letter he sent to the SEC in which he declared his art project to constitute an illegal, unregistered security. If the conceptual art project wasn't a security, Frye challenged the agency, then it needed to say so. The SEC never responded to Frye - not then, and not after several more self-incriminating correspondences from the professor. But in due time, the agency began vigorously pursuing, and suing, NFT projects. So 10 months ago, Jonathan Mann - who writes a new song every day and shares it online - crafted a song titled "This Song is A Security." As a seller of NFTs himself, Mann wrote the song "to fight back against the SEC, and defend his right - plus the rights of other artists like him - to earn revenue," according to the article:Frye, who'd practically been salivating for such an opportunity for half a decade, was a natural fit.... In the lawsuit filed against the SEC in Louisiana earlier this week, they challenged the SEC's standing to regulate their NFT-backed artworks as securities, and demanded the agency declare that their respective art projects do not constitute illegal, unregistered securities offerings. More from the International Business Times:The complaint asked the court to clarify whether the SEC should regulate art and whether artists were supposed to "register" their artworks before selling the pieces to the general public. The complaint also asked whether artists should be "forced to make public disclosures about the 'risks' of buying their art," and whether artists should be "required to comply" with federal securities laws... The Blockchain Association, a collective crypto group that includes some of the biggest digital asset firms, asserted that the SEC has no authority over NFT art. "We support the plaintiffs in their quest for legal clarity," the group said. In an interview with Slashdot, Mann says he started his "Song a Day" project almost 17 years ago (when he was 26 years old) - and his interest in NFTs is sincere:"Over the years, I've always sought a way to make Song A Day sustainable financially, through video contests, conference gigs, ad revenue, royalties, Patreon and more. "When I came across NFTs in 2017, they didn't have a name. We just called them 'digital collectibles'. For the last 2+ years, NFTs have become that self-sustaining model for my work. "I know most people believe NFTs are a joke at best and actively harmful at worst. Even most people in the crypto community have given up on them. Despite all that, I still believe they're worth pursuing. "Collecting an NFT from an artist you love is the most direct way to support them. There's no multinational corporation, no payment processor, and no venture capitalists between you and the artist you want to support." Slashdot also tracked down the SEC's Office of Public Affairs, and got an official response from SEC public affairs specialist Ryan White. Slashdot: The suit argues that the SEC's approach "threatens the livelihoods of artists and creators that are simply experimenting with a novel, fast-growing technology," and seeks guidance in the face of a "credible threat of enforcement". Is the SEC going to respond to this lawsuit? And if you don't have an answer at this time, can you give me a general comment on the issues and concerns being raised? SEC Public Affairs Specialist Ryan White: We would decline comment. Decrypt.co points out that the lawsuit "has no guarantee of offering some conclusive end to the NFT regulation question... That may only come with concrete legislation or a judgment by the Supreme Court." But Mann's song still makes a very public show out of their concerns - with Mann even releasing a follow-up song titled "I'm Suing the SEC." (Its music video mixes together wacky clips of Mila Kunis's Stoner Cats and Fonzie jumping a shark with footage of NFT critics like Elizabeth Warren and SEC chairman Gary Gensler.) And an earlier song also used auto-tune to transform Gensler's remarks about cryptocurrencies into the chorus of a song titled "Hucksters, Fraudsters, Scam Artists, Ponzi Schemes". Mann later auctioned an NFT of the song - for over $3,000 in Ethereum.

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