Jonathan Mann, known for creating songs every day for over 16 years, and conceptual artist Brian L. Frye have filed a lawsuit against the U.S. Securities and Exchange Commission (SEC). The case centers on whether NFTs, which represent digital art like those created by Mann and Frye, should be classified as securities under U.S. law. Mann, who has composed some of the industry's most iconic crypto-related songs, wrote “this song is a security” in protest.
I've been writing a song every day for 16 years and 211 days.
Today I am suing the SEC.
(Yes, this is real) pic.twitter.com/QubAgbltr0
— Singing every day for 16 years (@songadaymann) July 29, 2024
Mann and Frye argue that their digital artworks, sold as NFTs, should not be subject to the broad regulatory framework designed for traditional securities. Mann will release a 10,420-piece NFT collection featuring a unique remix of his song “This Song Is A Security.” In contrast, Frye will offer 10,320 NFTs in his project, “Cryptographic Tokens of Material Financial Benefit.”
Mann said in a statement:
Now I've remixed that song For purposes of this lawsuit onlyI recorded roughly 300 layers, which will be combined programmatically for a total of 10,420 separate and unique remixes. This will be the basis of the NFT project that I will submit to the court (…) The project cannot be made public until the court rules in our favor.”
The plaintiffs argue that the SEC's recent actions against other NFT projects, including the Stoner Cats and Impact Theory cases, unfairly extend securities regulation to digital art. The plaintiffs stress 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 are seeking judicial clarity to allow the art projects to proceed without being classified as securities, thereby avoiding potentially costly regulatory compliance and litigation.
Artists worry that the SEC's approach, lacking clear guidelines, will stifle creativity and innovation in the digital art field. They argue that simply because artworks, whether physical or digital, can increase in value, art sales shouldn't be required to comply with securities laws.
Mann further commented:
“NFTs have become a joke these days, it feels like 2017. Very few people think they’re worth pursuing. But I still believe in NFTs! “Even through the frenzy of 2021 and the period of dormancy we're all currently experiencing, the core ideas that initially excited me remain relevant.”
Mann and Frye's lawsuit reflects broader anxiety within the digital arts community over increased SEC scrutiny and the uncertain legal landscape surrounding NFTs. They argue that without clear boundaries, the SEC's broad view of its regulatory powers could have a chilling effect on artists' ability to embrace new technology and monetize their work.
The outcome of this case will set an important precedent regarding the treatment of NFTs under U.S. securities law and could impact a wide range of digital artists and collectors.
