Marketing Info

Celebrities cannot publicize the stock. Can they support NFT?

(Bloomberg) — Hollywood stars are increasingly marching into the NFT universe as regulators struggle to oversee the space.

Hundreds of celebrities, from Madonna and Reese Witherspoon to Paris Hilton and Justin Bieber, have bought, backed or invested in projects or companies promoting non-fungible tokens over the past year – in some cases driving up the price of digital assets.

Now, all those bored apes, hopeful artists and profit-minded speculators aboard Crypto Express are facing big legal questions about how they promote their participation in NFTs and whether they get paid backing deals. needs to be disclosed.

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

Read more: SEC Investigates NFT Market Over Illegal Crypto Token Offerings

A major legal question is whether digital assets, including NFTs, are securities, and therefore subject to the same regulations as stocks. Separately, US Securities and Exchange Commission regulations stipulate that it is illegal for any individual to own all securities, like stocks, without disclosing ownership of a financial relationship or source. In other words, the celebrities who are being compensated have to Disclose their payment.

According to John Reed Stark, former head of the SEC Office of Internet Enforcement, the SEC can determine whether NFTs are securities, but the regulator has yet to disclose a case in which they classified assets as such. That doesn’t mean the SEC isn’t investigating certain NFTs, he said.

NFTs mostly therefore fall under the jurisdiction of the Federal Trade Commission, a civil regulatory organization that can issue warnings. In an email to Bloomberg News, FTC spokeswoman Juliana Grunewald stressed that the agency assesses whether anyone has disclosed a paid support deal — especially if it affects how consumers evaluate support. Huh.

The NFT market exploded last year, attracting multimillion-dollar sales and buying and selling from celebrities. According to data from Chainalysis, around $44 billion worth of cryptocurrency was sent for smart contracts on the NFT-linked Ethereum blockchain during 2021, up from $106 million a year earlier.

To gauge celebrity interest in NFTs, look no further than the recent funding round announced by crypto-payments company MoonPay, which has focused on the checkout experience of buying and selling NFTs. On Wednesday, the company said 16% of its $555 million initial Series A funding round came from musicians, actors and other celebrities. Names include Ashton Kutcher, Bruce Willis, Gal Gadot, Gwyneth Paltrow, Jason Derulo, Mindy Kaling, Shawn Mendes, Matthew McConaughey and Steve Aoki.

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

NFTs have the potential to change the way films are produced, produced, and distributed by allowing filmmakers to retain their royalties and bypass Hollywood’s current funding order by selling tokens. This system will also allow the movies to be owned by fans, NFT owners.

Read more: Spotify Who? Musicians Earn from $300 to $60,000 in Web3

“If we have to summarize what we are trying to solve here, it is ownership. Now we have the opportunity to express ownership digitally,” Soto-Wright said. “The key word this year will be royalties – the idea that you can take this intellectual property and you can monetize it.”

It is left to the regulators to figure it all out. In March, Bloomberg News reported that lawyers for the SEC had sent summons seeking information about certain token offerings as part of a larger effort to investigate the creators of NFTs and crypto exchanges. The inquiry by SEC Chairman Gary Gensler is the latest attempt to ensure the crypto market follows its rules.

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 that the rules to police mean equity markets should not apply to virtual currencies.

“You have a very gray area,” Stark said. “With NFTs it’s a little bit harder to prove that it’s a security and it’s always going to be on a case by case basis.”

As high-profile figures enter the space, questions have begun to emerge as to whether celebrities are actually paying in full for their digital goods, or are simply promoting collections in exchange for money.

Justin Bieber joined Bored Ape Yacht Club in January, after buying 500 Ethereum, or NFTs, from a collection of $1.5 million. Hours before their purchase, Inbetweeners, another wallet owned by the creators of another NFT collection, dumped approximately 916 Ethereum into Bieber – which experts say is what Bieber did with funds obtained from an undisclosed backing deal. Had paid for his monkey.

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

Madonna entered the Metaverse last month, receiving over $500,000 worth of Bored App NFTs. Maverick, the firm run by their manager Guy Osseri, signed Yuga Labs, the parent company of Bored Ape Yacht Club, as a client late last year.

This doesn’t mean that celebrities didn’t find themselves in trouble promoting crypto projects, causing huge losses to investors. 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 millions of their followers on social media, artificially inflating its price. A few weeks after the Kardashian backing, the coin’s price plummeted.

—With assistance from Nathan Crooks.

To contact the author of this story:
Missirlena Egkolfopolu in New York [email protected]

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button