Non-fungible token marketplace OpenCy could face an SEC lawsuit. The crypto industry says this is another example of a regulator's unfair crackdown, while regulators focus on risks to consumers. For a musician, the problem is his livelihood.
“That's why we fightin'/Want to get it in writing/So we applaud the war he instigates.”
That's an excerpt from a song Jonathan Mann posted on his website Wednesday in response to news that the US Securities and Exchange Commission had sent OpenSea a Wells notice — a letter informing the non-fungible token marketplace that a lawsuit might be filed.
“He,” of course, refers to SEC Chair Gary Gensler, whose crackdown on crypto businesses has drawn the ire of the industry.
Mann wrote and recorded a song every day for 17 years and monetized the tracks by printing them as NFTs.
He joined a second artist, Brian Frye, to file a preemptive lawsuit against the SEC this month, saying they fear an impending crackdown on their own NFT projects.
So, it's no surprise that Mann took the openness news so personally that he wrote a song about it. He worries about what comes next after the regulator settled suits with NFT projects Stoner Cats and Impact Theory last year.
OpenSea's news is “why we're suing the SEC,” he said News. “They will go after anyone and for any reason.”
The OpenSea case is also the latest wrinkle in the SEC's ongoing battle with the crypto industry. On the one hand, the industry has accused the regulator of overstepping its authority and imposing arbitrary penalties.
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Another argues that unregistered projects spell disaster for investors and consumers.
Meanwhile, Mann and Fry find themselves in the middle of this conflict.
Art is like life
Mann first picked up the guitar as a Bob Dylan-obsessed kid growing up in Vermont. Since then, he wants music.
When he lost his job at age 26 amid the Great Recession, he decided to focus his energies, which culminated in his Song A Day project on January 1, 2007.
And he continued.
In 2023, he set a Guinness World Record for the most consecutive days of writing a song — 5,186. As of Friday, he had collected 5,721 songs.
Initially, his income from the project was inconsistent. But by 2017, married and with a young family, Mann needed a reliable way to monetize his work.
He knows a little about crypto. Mann attended a discussion on blockchain tech hosted by Cosmos co-founder Ethan Buchman.
Inspired by his sense of tech's potential for the art world, Mann has published his songs as NFTs and is bidding on them daily through 2022.
Mann sees himself in the same vein as artists such as Tehching Hsieh, who did a performance piece in the early 1980s. There he struck the time clock Every hour of the year.
Small but simple activities like time clock practice or recording a song serve to record the mundanity of life over time — as well as its triumphs and pains.
“Life is hard and it's hard. It is like life, it puts a certain frame around life, and 'here life is art,' says Mann.
This is reflected in his songs, which deal with everything break up to politicsto His wife has the fluAlso Filing a lawsuit against the SEC.
Livelihoods are threatened
Song A Day was not only Mann's life's work, it was his livelihood. So when the SEC sued Stoner Cats and Impact Theory last year, respectively, he was alarmed.
Enforcement actions followed the craze for NFTs in 2021 that saw the market peak at $12.6 billion.
Regulators worried that ballooning some NFT projects endorsed by celebrities including Paris Hilton, Mila Kunis and Justin Bieber could lure consumers into get-rich-quick schemes.
When OpenCy said this week that the SEC had served it with notice of a potential lawsuit, the industry cried foul that Gensler was falsely labeling NFTs as securities.
You wear unregistered security as your profile picture, don't you? pic.twitter.com/FivimAVDIE
— Lawrence (@functi0nZer0) August 28, 2024
You wear unregistered security as your profile picture, don't you? pic.twitter.com/FivimAVDIE
— Lawrence (@functi0nZer0) August 28, 2024
“If they want to regulate NFTs, they should clearly state why. What makes the artifact on the blockchain fall under their jurisdiction?” Mann asked, echoing the protests.
The SEC is unlikely to argue that NFTs in and of themselves are securities.
Its potential argument is that NFTs become securities in the context of projects – such as Stoner Cats and Impact Theory – that encourage investors to fund the project with the promise of future returns.
Investors are not protected if the project is registered with the regulator and discloses their management or finances.
“Unless there is a valid exemption, securities offerings, in any form, must be registered,” said Antonia Apps, director of the SEC's New York office. Said The regulator settled on the impact theory last August.
“Without registration, investors of all types will lose the protections afforded them through the robust disclosure and other protections long provided by our securities laws.”
Still, Mann and Fry want assurances that their art projects won't put them in the SEC's firing line or prevent others from starting their own projects.
In their joint complaintMade public on August 2, they asked a Louisiana court to declare that their art would not be considered a security.
“There's no discernible difference between what we're presenting and what Stoner Cats does or what 99% of NFT projects do,” Mann said. “And now they're going after OpenSea.”
“The settlements they reach will affect everyone in this place,” he added.
Joanna Wright writes about control News. Contact her at [email protected].
