Jonathan Mann, popularly known for creating a daily song for over sixteen years, along with conceptual artist Brian L. Frye, recently filed a lawsuit against the US Securities and Exchange Commission (SEC). The lawsuit revolves around the question of whether NFTs (Non-Fungible Tokens) representing digital art, like the ones created by Mann and Frye, should be considered securities under US law.
Mann and Frye argue that their digital artworks, sold as NFTs, should not fall under the extensive regulatory framework designed for traditional securities. Mann plans to release a collection of 10,420 NFTs featuring unique remixes of his song “This Song Is A Security,” while Frye intends to offer 10,320 NFTs under his project “Cryptographic Tokens of Material Financial Benefit.”
Mann expressed, “Now, I’ve remixed that song specifically for the purpose of this lawsuit. I’ve recorded roughly 300 layers that will be programmatically combined into a total of 10,420 individual, unique remixes. 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 challenge the SEC’s recent actions against other NFT projects, arguing that extending securities regulations to digital art is unjust. They emphasize that the SEC’s broad interpretation of the Howey test, used to determine what constitutes an investment contract, could potentially encompass all forms of art and collectibles, not just NFTs.
Mann and Frye seek judicial clarification to ensure that their art projects can proceed without being classified as securities, thereby avoiding potentially costly regulatory compliance or legal challenges. They are concerned that the lack of clear guidelines from the SEC could stifle creativity and innovation in the digital art space. Mann stated, “NFTs have become a joke lately… Hardly anyone thinks there’s anything worth pursuing. But I still believe in NFTs!”
The lawsuit brought forth by Mann and Frye reflects the wider anxieties within the digital art community regarding the SEC’s increasing scrutiny and the ambiguous legal landscape surrounding NFTs. They argue that without clear boundaries, the SEC’s expansive view of regulatory authority could hinder artists’ ability to explore new technologies and monetize their work. The outcome of this case could set a significant precedent for the treatment of NFTs under US securities law, impacting numerous digital artists and collectors.
The lawsuit filed by Jonathan Mann and Brian L. Frye against the SEC underscores the ongoing debate surrounding the classification of NFTs as securities. As the case progresses, it will be interesting to see how the court’s decision shapes the future of digital art and its interaction with securities regulations.