Jonathan Mann, known for creating a song daily for over sixteen years, and conceptual artist Brian L. Frye have filed a lawsuit against the US Securities and Exchange Commission (SEC). The case centers on whether NFTs representing digital art, such as those created by Mann and Frye, should be classified as securities under US law. Mann, who has written some of the most iconic crypto-related songs in the industry, wrote, “This song is a security” in protest.
I’ve been writing a song a day for 16 years and 211 days.
Today, I’m suing the SEC.
(Yes, this is real) pic.twitter.com/QubAgbltr0
— 16 years of song a day (@songadaymann) July 29, 2024
Mann and Frye argue that their digital artworks, sold as NFTs, should not be subject to the extensive regulatory framework designed for traditional securities. Mann plans to release a collection of 10,420 NFTs featuring unique remixes of his song “This Song Is A Security.” In comparison, Frye intends to offer 10,320 NFTs under his project “Cryptographic Tokens of Material Financial Benefit.”
Mann wrote in a statement,
“Now, I’ve remixed that song specifically for the purpose of this lawsuit. I’ve recorded roughly 300 layers that will be programmatically combined into a total of 10,420 individual, unique remixes. This forms the basis of an NFT project I am submitting to the court[…] The project cannot be released until the court rules in our favor.”
The plaintiffs contend that the SEC’s recent actions against other NFT projects, including the Stoner Cats and Impact Theory cases, unjustly extend securities regulations to digital art. They highlight that the SEC’s broad interpretation of the Howey test—used to determine what constitutes an investment contract—threatens to encompass all forms of art and collectibles, not just NFTs. Mann and Frye seek judicial clarification to ensure their art projects can proceed without being classified as securities, thereby avoiding potentially costly regulatory compliance or legal challenges.
The artists are concerned that the SEC’s approach, which lacks clear guidelines, could stifle creativity and innovation in the digital art space. They argue that selling art, whether physical or digital, should not require adherence to securities laws merely because the artworks might appreciate in value.
Mann further commented,
“NFTs have become a joke lately. It feels similar to 2017. Hardly anyone thinks there’s anything worth pursuing. But I still believe in NFTs! Beyond the hype of 2021, and beyond the fallow period we’re in now, the core idea that initially got me excited is still there.”
Mann and Frye’s lawsuit reflects broader anxieties within the digital art community regarding the SEC’s increasing scrutiny and the uncertain legal landscape surrounding NFTs. They assert that, without clear boundaries, the SEC’s expansive view of its regulatory authority could have chilling effects on artists’ ability to engage with new technologies and monetize their work.
The outcome of this case could set a significant precedent for the treatment of NFTs under US securities law, potentially impacting a wide range of digital artists and collectors.