In a groundbreaking legal movement, two artists have launched a lawsuit against the United States Securities and Exchange Commission (SEC) challenging its jurisdiction over the regulation of NFTs.
Musician Jonathan Mann, also known as “Song a Day Mann” and celebrated for achieving a Guinness World Record for the longest songwriting streak, together with Brian L. Frye, an artist and law professor, have brought forward their case to the U.S. District Court for the Eastern District of Louisiana, filed on July 29. They contend that SEC’s regulatory framework is inappropriately applied to both tangible and digital art forms.
The duo is pursuing a declaratory judgment from the court
which would issue a decision in their favor potentially without the need for an exhaustive trial. In their argument, they highlight the illogicality and superfluous nature of the requirement for artists to ‘register’ their art, such as NFTs, and disclose investment risks to the public, which they believe should not be applicable to the art world.
Their legal action builds the case around the fundamental principle that art should exist free from the regulatory boundaries traditionally associated with securities.
The complaint references iconic artists such as Basquiat and O’Keeffe, posing the rhetorical question of whether it would have been plausible for these art pioneers to have registered their masterpieces as securities with the government
The genesis of this legal challenge can be traced back to the SEC’s recent enforcement actions.
Against the NFT projects Impact Theory and Stoner Cats, which the SEC labeled as “unregistered offerings of crypto asset securities.” Mann and Frye argue that such a classification is a departure from how physical artwork trading has been handled, drawing analogies to famous works like Andy Warhol’s “Campbell’s Soup Cans.”
The SEC has yet to make any public statements regarding the pending litigation.
Through this lawsuit, Mann and Frye seek to underscore the differences between the sale of conventional art and that of digital art.
Questioning the relevance and enforcement of securities regulations in the art market’s digital transformation. As the case unfolds, it is poised to set a precedent with potentially significant outcomes for creators, vendors, and collectors in the realm of digital art.
In integrating themes related to traditional art transactions and the emerging NFT market into their argument.
The legal action juxtaposes the use of established tools such as the Artnet Price Database against the evolving digital art space where the pricing and sale of NFTs remain hot topics. The discourse around this case is critical for understanding the evolving intersections of art, the digital economy, and legal landscapes.
