Jonathan Mann, known for his daily songwriting streak of over sixteen years, has teamed up with conceptual artist Brian L. Frye to file a lawsuit against the US Securities and Exchange Commission (SEC). The crux of the matter lies in the classification of NFTs representing digital art, such as those created by Mann and Frye, under US securities laws. Mann, a prominent figure in the crypto community for his crypto-themed songs, penned a track entitled “This song is a security” as a form of protest against the SEC.
Mann and Frye argue that their digital artworks, sold in the form of NFTs, should not be subjected to the extensive regulatory framework that traditional securities abide by. Mann plans to release a collection of 10,420 NFTs featuring unique remixes of his song, while Frye intends to offer 10,320 NFTs under his project. Mann stated, “Now, I’ve remixed that song specifically for the purpose of this lawsuit […] This forms the basis of an NFT project I am submitting to the court. The project cannot be released until the court rules in our favor.”
The plaintiffs argue that recent actions taken by the SEC against other NFT projects, such as Stoner Cats and Impact Theory, unfairly extend securities regulations to digital art. They criticize the SEC’s broad interpretation of the Howey test, used to determine investment contracts, as potentially encompassing all art forms and collectibles, not just limited to NFTs. Mann and Frye seek clarity from the judiciary to ensure that their art projects can proceed without being labeled as securities, thus avoiding costly regulatory compliance or legal battles.
The artists are worried that the SEC’s ambiguous approach, without clear guidelines, could hinder creativity and innovation in the digital art realm. They argue that the mere possibility of artwork appreciating in value should not automatically subject it to securities laws. Mann expressed, “NFTs have become a joke lately […] but I still believe in NFTs! Beyond the hype of 2021, the core idea that initially got me excited is still there.”
Mann and Frye’s lawsuit mirrors the broader concerns within the digital art community regarding the SEC’s heightened scrutiny and the murky legal landscape around NFTs. They fear that the SEC’s expansive view of regulatory authority could stifle artists’ ability to explore new technologies and monetize their work. The ruling on this case could establish a significant precedent for how NFTs are treated under US securities law, potentially impacting a wide array of digital artists and collectors.
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