Should artists have to file paperwork with the Securities and Exchange Commission (SEC) just to sell their own creations? Should they be required to warn buyers that art values might fluctuate? Should the SEC get to say if art sales count as an "investment"? Does the SEC have the regulatory authority to police art sales? The SEC seems to think it does—if the art is a nonfungible token (NFT).
As a federal lawsuit against the SEC explains, NFTs are digital tokens stored on a blockchain that "can give the owner a wide array of digital and/or physical rights." Think of an NFT as a digital collector's item, designed to be one of a kind.
The plaintiffs in that lawsuit, musician Jonathan Mann (known online as songadaymann) and conceptual artist Brian L. Frye, want to continue selling NFTs, but they worry that the SEC under Chairman Gary Gensler will try to stop them. Mann and Frye, who filed their lawsuit last July in the U.S. District Court for the Eastern District of Louisiana, were alarmed by recent SEC actions against other NFT artists that resulted in punishing settlements. They are seeking an injunction barring the SEC from bringing similar enforcement actions against them, which they argue would exceed the agency's legal authority.
