sec scrutinizes nft over illegal token

Separately, U.S. Securities and Exchange Commission rules stipulate that it is unlawful for any person to tout a security, like a stock, without disclosing a financial relationship or ownership to the source. In other words, celebrities that are being compensated would need to disclose their payment.

The SEC could determine whether or not NFTs are securities, but the regulator has yet to disclose a case in which they have categorized the assets as such, according to John Reed Stark, former chief of the SEC Office of Internet Enforcement. That doesn’t mean the SEC is not investigating certain NFTs, he added.

NFTs mostly therefore fall under the jurisdiction of the Federal Trade Commission, a civil regulatory organization that can issue warnings.

Sec scrutinizes nft market over illegal crypto token offerings

Related:Seven Industries Rife With NFT Investing Opportunities

Now, all those Bored Apes, hopeful artists and profit-minded speculators clamoring aboard the Crypto Express are facing larger legal questions on how they promote their involvement in NFTs and whether they need to disclose paid endorsement deals.

“Celebrities and social media influencers have a lot of brand power,” said Bob Seeman, a tech and legal adviser and author of the book “Bitcoin: Unlicensed Gambling.” “But this is a whole new area with NFTs so the regulatory interpretation of it and how the regulators will treat it is unknown.”

Related:What the Rise of NFTs Means for Advisors

Read More: SEC Scrutinizes NFT Market Over Illegal Crypto Token Offerings

A key legal question is whether digital assets including NFTs are securities, and therefore subject to the same rules as stocks.

Maverick, the firm run by her manager Guy Oseary, late last year signed Yuga Labs, the parent company of Bored Ape Yacht Club, as a client.

That’s not to say that celebrities haven’t found themselves in trouble when promoting crypto projects that left investors with major losses. Kim Kardashian and Floyd Mayweather Jr. are being sued in a class action lawsuit for allegations that they promoted a little-known cryptocurrency called EthereumMax to their millions of followers on social media, artificially inflating its price.
A few weeks after Kardashian’s endorsement, the token’s price plunged.

This post is for subscribers only. You don’t have access to this post on the cod3x at the moment, but if you upgrade your account you’ll be able to see the whole thing, as well as all the other posts in the archive! Subscribing only takes a few seconds and will give you immediate access.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Donec eget augue quam. Suspendisse feugiat eros dapibus, auctor nulla eu, ultrices nibh.
Aliquam felis justo, laoreet non sapien sit amet, vestibulum auctor est. Curabitur ultrices orci libero. Donec ac sem ac nisi vulputate condimentum.
Aliquam felis justo, laoreet non sapien sit amet. Donec eget augue quam. Suspendisse feugiat eros dapibus. Curabitur rhoncus varius mauris eu feugiat.
Curabitur ultrices orci libero. Donec ac sem ac nisi vulputate condimentum. Aliquam felis justo, laoreet non sapien sit amet.

Justin Bieber joined the Bored Ape Yacht Club back in January, after purchasing an NFT from the collection for 500 Ethereum, or $1.5 million. Hours before his purchase, another wallet owned by the creators of another NFT collection, inBetweeners, dropped about 916 Ethereum into Bieber’s — which experts say raised questions about whether Bieber paid for his ape with money received from an undisclosed endorsement deal.

Asked why the 916 Ethereum was transferred, a spokesperson at inBetweeners said Bieber was an owner in the project and that the Ethereum represented his proceeds from the “mint,” or the process of publishing NFTs on the blockchain. A representative for Bieber declined to comment.

Madonna entered the metaverse last month, acquiring a Bored Ape NFT worth more than $500,000.

Names include Ashton Kutcher, Bruce Willis, Gal Gadot, Gwyneth Paltrow, Jason Derulo, Mindy Kaling, Shawn Mendes, Matthew McConaughey and Steve Aoki.

For MoonPay CEO Ivan Soto-Wright, it’s clear why artists and musicians are so attracted to NFTs: Web3 and the blockchain technology that underpins NFTs have the potential to disrupt how creators and artists manage their royalties without the help of middlemen, he said. Soto-Wright compared this disruption to artists who got into streaming early and benefited as a result.

NFTs have the potential to change the way films are made, produced and distributed by allowing film creators to maintain their royalties and bypass Hollywood’s existing order of financing by selling tokens.

This system would also allow films to be owned by fans, the NFT owners.

In an email to Bloomberg News, FTC spokesperson Juliana Gruenwald reinforced that the agency assesses whether someone has not disclosed a paid endorsement deal — especially if it affects how consumers evaluate the endorsement.

The NFT market exploded last year, drawing attention for multimillion dollar sales and buy-in from celebrities. About $44 billion worth of crypto was sent to smart contracts on the Ethereum blockchain tied to NFTs during 2021, up from $106 million the year before, according to data from Chainalysis.

To gauge celebrity interest in NFTs, look no further than the recent funding round announced by crypto-payment company MoonPay, which has focused on the checkout experience of buying and selling NFTs.
On Wednesday, the company said that up to 16% of its $555 million initial Series A funding round came from musicians, actors and other personalities.

Donec eget augue quam. Suspendisse feugiat eros dapibus.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Donec eget augue quam. Suspendisse feugiat eros dapibus, auctor nulla eu, ultrices nibh. Aliquam felis justo, laoreet non sapien sit amet, vestibulum auctor est. Curabitur ultrices orci libero. Donec ac sem ac nisi vulputate condimentum. Aliquam felis justo, laoreet non sapien sit amet. Donec eget augue quam. Suspendisse feugiat eros dapibus. Curabitur rhoncus varius mauris eu feugiat.

Curabitur ultrices orci libero. Donec ac sem ac nisi vulputate condimentum. Aliquam felis justo, laoreet non sapien sit amet. Donec eget augue quam.

Suspendisse feugiat eros dapibus.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Donec eget augue quam. Suspendisse feugiat eros dapibus, auctor nulla eu, ultrices nibh.

The inquiry is the latest attempt by SEC Chair Gary Gensler to ensure the crypto market adheres to its regulations.

Read More: Celebrity NFTs Risk ‘Catastrophic Failure.’ Just Ask John Cena

While the SEC has said that many tokens fall under its purview, some crypto enthusiasts argue regulations meant to police the equity markets shouldn’t apply to virtual currencies.

“You have a lot of gray area,” Stark said. “It’s a little harder with an NFT to prove that it’s a security and it’s always going to be on a case by case basis.”

As more high-profile figures enter the space, questions on whether celebrities are in fact paying in full for their digital goods, or simply promoting collections in exchange for money, have started surfacing.

Read More: Spotify Who? Musician’s Earnings Go From $300 to $60,000 in Web3

“If we have to summarize what are we trying to solve here, it’s ownership. We now have an opportunity to express ownership digitally,” Soto-Wright said.

“The key word of this year will be royalties — the idea that you can take this intellectual property and you can monetize it.”

Regulators are left to make sense of it all. In March, Bloomberg News reported that attorneys at the SEC had sent subpoenas demanding information about certain token offerings as part of a larger effort to scrutinize creators of NFTs and crypto exchanges.

Similar Posts:

Leave a comment