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If Taylor Swift Tickets Aren’t Securities, Why Are NFTs?
NFTs make their case against the SEC while the SEC cedes ground on altcoins
Jonathan Morgan
July 30, 2024
OVERVIEW
If Taylor Swift Tickets Aren’t Securities, Why Are NFTs?
Three steps forward, two steps back. Four steps backward, five steps forward. That’s the dance the market moves to in the Summer. 💃
In today’s Litepaper, we’re looking at the NFT market and a very, very clever defense it’s making against the SEC.
Also on deck: the SEC’s sneaky way to pacify altcoin hodlers for an easier fight against Binance. 📰
Before we dive in, here’s today’s crypto market heatmap:
And here’s a look at crypto’s total and altcoin market cap YTD:
NFTS
Artists Sue SEC Over NFTs: Taylor Swift Comparison Highlights Legal Battle 🎫
Law professor Brian Frye and songwriter Jonathan Mann are taking on the U.S. Securities and Exchange Commission (SEC). Filing their complaint, the duo seeks clarity on whether non-fungible tokens (NFTs) fall under the SEC's jurisdiction. 👨⚖️
Their lawyers argue that the SEC’s aggressive approach threatens artists and creators experimenting with NFTs, likening the situation to Taylor Swift’s ticket sales. The comparison is simple: if Swift’s tickets aren’t securities, why should NFTs be any different?
Taylor Swift Ticket Example
The complaint draws a parallel to Taylor Swift, whose tickets and music are sold without SEC interference despite their potential to profit buyers. The lawyers argue that if the SEC considered Swift’s work securities, it would sound absurd—just as it does for NFTs.
This argument underscores the absurdity of the SEC's stance on NFTs. If digital art sold as NFTs requires SEC regulation, where does the line get drawn? 🖼️
DraftKings Shuts Down NFT Business Amid Legal Woes
In a related development, sports gambling company DraftKings ($DKNG) announced the immediate shutdown of its NFT business. The decision follows a class action lawsuit alleging that DraftKings' NFTs are unregistered securities. 😱
DraftKings had ventured into the NFT market in 2021 merging digital collectibles with sports culture. Despite initial success, legal pressures forced the company to backtrack. As part of the shutdown, DraftKings is offering buyouts to Reignmakers players while allowing collectors to access and transfer their NFTs.
NFT Market Struggles
The NFT market itself is facing significant challenges. July sales plummeted to near-record lows, with a monthly volume of just $393 million. This marks a 45% drop from the previous quarter and highlights the volatility of the NFT market.
We’ll keep you updated as this legal stupidity continues to play out. 🙄
NEWS
A Sigh of Relief for Solana, Cardano, and Polygon 😃
The SEC has decided to revise its lawsuit against Binance, scaling back its claims that tokens like Solana ($SOL), Cardano ($ADA), and Polygon ($MATIC) are unregistered securities. 🤣
SEC’s Change of Heart
The SEC informed the defendants—Binance, Binance.US, and former CEO Changpeng Zhao—that it intends to seek leave to amend its complaint. This amendment may eliminate the need for the court to rule on whether these tokens are securities, at least for now.
Ripple executives wasted no time in criticizing the SEC. CEO Brad Garlinghouse labeled the amended complaint against Binance as hypocritical. Ripple's Chief Legal Officer, Stuart Alderoty, highlighted the inconsistency in the SEC’s approach. The SEC is backpedaling on Binance, it continues to pursue similar allegations in its case against Coinbase ($COIN). 🪙
SEC’s Judicial Challenges
Adding another layer to the SEC's woes, the agency can no longer rely on its in-house judiciary, often criticized for its bias, to go after anyone and everyone. The prospect of arguing each token's status as a security in an impartial court likely deters the SEC from pursuing aggressive claims.
Instead, Binance wants to try for an easy mode victory against Binance, sidestepping the debates over individual tokens. 🚀
STOCKTWITS “CHART ART”
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NEWS
Crypto News In Three Sentences 📰
👩💼 Women in Crypto Earn More Than Men
Pantera Capital’s survey found that women in crypto earn 15% more than men, likely due to their greater experience. Women hold more mid-level to senior positions, while more men occupy entry-level roles. From CoinDesk.
🇷🇺 No, Russia Didn’t Lift Its Crypto Ban
Contrary to social media buzz, Russia's legislature passed a bill allowing crypto for international trade, not domestic use. The law, still pending central bank infrastructure, won't be effective until later this year. The news highlights public confusion about Russian crypto regulations. Protos has more.
💸 Circle's Private Stock Valued at $5.25 Billion
Circle’s ($USDC) private stock trades between $5 billion and $5.25 billion on the secondary market. Early investors and employees are cashing in as Circle eyes a public offering. Circle’s previous IPO attempt in 2021 valued it at $4.5 billion, with a $9 billion valuation in 2022. Full story at The Block.
💸 Hyperbolic Secures $7M Seed Round
Web3 AI startup Hyperbolic raised $7 million in a seed round led by Polychain Capital and Lightspeed Faction. The firm aims to reduce AI computing costs by aggregating GPU power. Hyperbolic plans to build a decentralized AI ecosystem where all contributors benefit. More from NFTGators.
🕵️ BitClout Founder Charged with Fraud
BitClout founder Al-Naji, aka “Diamondhands,” faces SEC charges for misusing $7 million of investor funds. He allegedly spent the money on personal luxuries, including a Beverly Hills mansion. The case highlights ongoing regulatory scrutiny in the crypto industry. From coincu.
📉 Grayscale ETFs Face Major Outflows
Grayscale's Ethereum ($ETHE) Trust saw $1.72 billion in outflows, contributing to a $20.58 billion reduction across its ETFs. In contrast, other spot Bitcoin ETFs like BlackRock’s and Fidelity’s are seeing positive inflows. The outflows raise questions about investor confidence in Grayscale's offerings. Full story at CryptoDNES.
🇺🇸 Senator Bill Hagerty Champions Bitcoin
Senator Bill Hagerty argues that Bitcoin must thrive in the U.S., believing it would under a Trump administration. He calls for regulatory clarity to keep blockchain companies from moving abroad. Hagerty highlights the economic and security benefits of a strong cryptocurrency market in America. More from CryptoGlobe.
📈 Solana DEX Outpaces Ethereum
Solana's ($SOL) DEX ecosystem now has a higher trading volume than Ethereum's ($ETH), driven by 2 million weekly active addresses. Raydium, a leading Solana DEX, reported $24 billion in trading volume. The influx of new tokens, especially memecoins, is fueling this trading surge. The Block has more.
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