Earlier this month, the United States Securities and Exchange Commission (SEC) announced its second enforcement action against NFT project creators — this time, against the team behind Mila Kunis’s NFT-backed web series “Stoner Cats.” Against. ‘ production company that included the singing talents of Hollywood A-listers including Kunis, Ashton Kutcher, Chris Rock and Jane Fonda.
While the SEC’s first case regarding NFTs – against a media company that promised “massive” returns on its subscription passes after becoming “the next Disney” – raised relatively low eyebrows among industry experts, given the claims cited The reception of the “Stoner Cats” has been quite different.
This case appears to highlight the growing ecosystem of film and television projects seeking to leverage NFTs to raise funds directly from loyal fan bases rather than relying on hyper-centralized studio systems for financing and distribution. Sent a shock through.
“It’s terrible and I’m very worried,” the creator of an upcoming independent television series backed by NFTs told Decrypt on condition of anonymity. Although they say this creator’s project has been screened for any potential legal issues, they are now afraid – in the wake of the actions of the “Stoner Cats” – to draw attention to their project resulting in regulatory scrutiny. Might be possible.
A key element of that fear relates to the well-established ambiguity of the SEC’s approach to crypto and NFTs. The federal agency has not issued a single guideline or rule outlining which applications of NFTs it will consider legal; Instead, commission Chairman Gary Gensler has repeatedly said the agency’s lawsuits speak for themselves. This is regulation by enforcement.
Following the public announcement of the SEC’s action against “Stoner Cats”, the agency’s two commissioners – Hester Pierce and Mark Ueda – delivered a strongly worded rebuke of the decision, arguing that it would hinder innovation and create uncertainty among creators. Will happen.
“It makes no sense for the Commission to enforce securities laws here and discourages content creators from exploring ways to use social networks to create and distribute content,” the commissioners wrote. “In general, this contributes to the legal ambiguity faced by artists, writers, musicians, filmmakers, and others seeking to build a loyal, engaged following.”
This sentiment was shared among several independent television and film producers who spoke with Decrypt, and now wonder whether their NFT-backed projects will be next.
“Trying to comply with SEC rules and regulations is like trying to hit a moving target,” Justin Winters, co-founder and CEO of Web3 film studio Verified Labs, told Decrypt. “Until they have specific laws that we can all refer to and follow, it is completely inappropriate to start issuing fines.”
Winters runs Verified with several partners, including co-founder and “Napoleon Dynamite” actor Jon Heder. Together, their team has funded several television projects by selling NFTs to loyal fans that grant access to content and special features. Winters doesn’t think Verified’s projects, or the “Stoner Cats” for that matter, should be reprimanded for the way they raise funds or engage with their NFT holder communities. For this reason, he intends to pursue Verified’s projects with full force.
“I know the team behind ‘Stoner Cats,’ and they delivered on their promise,” Winters said. “Our studio has four Web3-native animated series following the ‘Stoner Cats’ model – it allows you to finance, develop, produce and distribute an animated series independently of the studio system “
However, others in the industry believe the action against “Stoner Cats” was justified, given that the project had publicly claimed that the more successful the show was, the more “successful” the NFTs would be. Will go.
“Claiming future prices as a product feature is something we should all avoid,” the CEO of the Web3 media brand told Decrypt on condition of anonymity.
But do NFT-backed media projects that don’t explicitly promise future profits to holders really have anything to fear?
Drew Hinks, an attorney and assistant professor at NYU who specializes in digital assets, was particularly concerned by a paragraph of the SEC’s cease-and-desist order against “stoner cats,” which echoes the language of the agency’s earlier order against NFTs. Looked similar. Last month’s offer.
In both cases, the SEC indicated that if an NFT project ever charged creator royalties – a small fee returned to the project every time an asset is resold – then that project was illegally operating. More likely to be an unregistered securities scheme. Most NFT projects have royalty fees associated with them, which typically range between 2.5% to 10% of the secondary sale price.
For Hinks, that clear position could have far-reaching consequences for the NFT industry — not only for creators who support royalties as a means to support artists (despite little enforcement), but for NFT marketplaces. Those who impose and enforce those charges.
“You could read this as a suggestion that marketplaces that facilitate the trading of NFTs that pay royalties to issuers on secondary market transactions, which may be securities under the SEC’s principles, should be regulated by the SEC as brokers.” There may be some risk of being considered a dealer or securities exchange,” Hinks told Decrypt. “This is the implication of the position that the SEC is taking here.”
If NFT marketplaces, according to this logic, were treated by the SEC as securities exchanges, they would not be allowed to operate without obtaining the same type of registration held by stock markets like the New York Stock Exchange and Nasdaq. Such registrations are issued very rarely.
Due to the SEC’s current, stringent approach to crypto regulation, it may not be known for some time whether the agency’s regulatory appetite is that broad. But the uncertainty and fear created by its action against “Stoner Cats” is almost certain to spread beyond the tight-knit ecosystem of NFT-backed media projects – many known as “Film 3” projects.
For Hinks, the SEC’s current behavior regarding NFTs is reminiscent of its approach toward crypto. Although the agency first pursued crypto companies that grossly violated securities laws, it steadily expanded its scope until it sued nearly every major crypto exchange with a presence in the US.
“This echoes the pattern the SEC has followed with convertible tokens,” he said.
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Source: decrypt.co
This news is republished from another source.
