Artists back OpenSea as NFTs face renewed SEC scrutiny

“This is why we’re fightin’/wanna get it in writing/So we’re clapping back at the battle he’s inciting.”

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 sent OpenSea a Wells notice — a letter notifying the non-fungible token marketplace that it may sue.

“He,” of course, refers to SEC chair Gary Gensler, whose crackdown on crypto businesses has earned him the wrath of the industry.

Mann has written and recorded one song every day for 17 years, and monetised the tracks by minting them as NFTs.

He joined forces with a second artist, Brian Frye, to preemptively sue the SEC this month over what they fear is an impending crackdown on NFT projects like their own.

So, it’s no surprise that Mann took the OpenSea news personally enough to write a song about it. That’s because he’s worried about what could come next after the regulator settled suits with NFT projects Stoner Cats and Impact Theory last year.

OpenSea’s news “is exactly why we’re suing the SEC,” he told DL News. “It seems like they will go after whomever and for whatever reason.”

OpenSea’s case is also the latest wrinkle in the SEC’s ongoing battle with the crypto industry. On the one hand is an industry accusing the regulator of overstepping its authority and dishing out arbitrary punishments.

On the other is a regulator arguing that unregistered projects spell disaster for investors and consumers.

Meanwhile, Mann and Frye find themselves right in the middle of this conflict.

Art as life

Mann first picked up a guitar as a Bob Dylan-obsessed kid growing up in Vermont. From then on, he said, music was all he wanted to do.

When he found himself jobless at 26 amid the Great Recession, he said he needed a focus for his energies, which culminated in his Song a Day project on January 1, 2007.

And he just kept going.

In 2023, he set a Guinness World Record for most consecutive days writing a song — 5,186. As of Friday, he’s amassed 5,721 songs.

Initially, his income from the project was haphazard. But by 2017, married and with a young family, Mann needed a reliable way to monetise his work.

He knew little about crypto. Then Mann attended a talk on blockchain tech run by Cosmos co-founder Ethan Buchman.

Inspired by a sense of the tech’s potential for the art world, Mann was publishing his songs as NFTs and auctioning them daily by 2022.

Mann sees himself in the same vein as artists like Tehching Hsieh, who in the early 1980s did a performance piece where he punched a time clock every hour for a year.

Small but regular activities like the time clock practice or recording a song accrete over time into a body of work that records life’s banality — as well as its triumphs and sorrows.

“Life is hard and it’s drudgery. This is the same thing as life, it’s putting a specific frame around life, and saying, ‘Here’s life as art,’” Mann said.

That’s reflected in his songs, which deal with everything from breakups to politics, to his wife having the flu, as well as suing the SEC.

Livelihood threatened

Song a Day is not just Mann’s life work, it’s his livelihood. So when the SEC sued Stoner Cats and Impact Theory in succession last year, he was alarmed.

The enforcement actions followed a craze for NFTs in 2021 that saw the market peak at $12.6 billion.

Regulators worried that ballooning NFT projects — some endorsed by celebrities including Paris Hilton, Mila Kunis, and Justin Bieber — could lure consumers into dicey get-rich-quick schemes.

When OpenSea said this week that the SEC had served it with notice of a potential lawsuit, the industry howled that Gensler was mistakenly labelling NFTs as securities.

“If they want to regulate NFTs, they must articulate why. What makes an art piece on the blockchain transmogrify into something that falls under their jurisdiction?” Mann asked, echoing the protests.

The SEC is unlikely to argue that NFTs in and of themselves are securities.

Its probable contention is that NFTs become securities in the context of projects — like Stoner Cats and Impact Theory — that encourage investors to fund a project with the promise of future returns.

Investors aren’t protected as they would be if the project were registered with the regulator and had to disclose their management or financials.

“Absent a valid exemption, offerings of securities, in whatever form, must be registered,” said Antonia Apps, director of the SEC’s New York office, said when the regulator settled with Impact Theory last August.

“Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.”

Still, Mann and Frye want assurance that their art projects won’t put them in the SEC’s firing line, or deter others from starting their own projects.

In their joint complaint, made public on August 2, they asked a Louisiana court to declare that their art won’t be considered a security.

“There’s no discernible difference between what we’re presenting and what Stoner Cats did, or what 99% of NFT projects do,” Mann said. “And now they’re going after OpenSea.”

“The settlements they reach affect everybody in this space,” he added.

Joanna Wright writes about regulation for DL News. Reach out to her at joanna@dlnews.com.