Had she been peddling FMCGs, some say the “advertising” label might have arguably been enough for the Federal Trade Commission, which typically deals with issues related to influencers and their endorsements. expert says:

The SEC maintains a different standard for those who push for anything the SEC sees as security. “No advertising” clauses have been part of securities law for decades so that investors know when they have a conflict of interest that could affect their recommendations to buy or sell securities. It is intended to

The cryptocurrency boom is attracting many investors, including inexperienced ones, raising questions about what is appropriate when marketing these types of assets.

David Klein, managing partner of marketing law firm Klein Moynihan Turco LLP, said many highly touted initial coin offerings, among other activities that caused consumers to lose their investment, went nowhere. said. “The SEC has a mandate to get involved and make sure this kind of thing doesn’t keep happening,” he said.

Here’s what marketers need to know about the SEC’s latest move and what it means for influencers.

How can brands and influencers gain an edge?

When it comes to cryptocurrencies, brands and the influencers they work with need to act with caution and be clear when influencers are compensated for their endorsement, whether financial or not. said Lartease Tiffith, executive vice president of public policy. Interactive Advertising Bureau, a digital media and marketing trade association.

“It’s better to over-disclose,” he said. “Even if you think you may be in a gray zone, you should clear it, so to speak.”

Klein said social media influencers and businesses should seek legal advice early in their marketing plans to ensure compliance with all applicable regulations.

“The fact that something is happening on social media doesn’t mean the old rules of the land don’t apply. They do,” he said.

Why did the SEC handle this?

The SEC can get involved when a promotion involves securities, which can give consumers a much greater stake than general advertising.

“It’s a lot more risky for ordinary consumers than buying celebrity-sponsored dresses and diet products online,” said Farrah Sanderge, a partner at law firm Dorsey & Whitney LLP. You can obviously lose a lot of money with any kind of product you buy, but these are more protected and sensitive areas and you definitely know what people are doing. I would like to.”

In announcing the settlement, the SEC said any promotion of securities must meet certain requirements.

“Federal securities laws make it clear that celebrities and other individuals who promote cryptocurrency securities must disclose the nature, source, and amount of compensation received in exchange for the promotion,” the SEC said. Gurbir Grewal, Director of Execution, said. , in the announcement.

When does something become security?

The SEC warns that virtual tokens or coins sold in initial coin offerings may be securities and that anyone offering and selling securities in the United States must comply with federal securities laws. increase.

Christopher Gerold, partner in cryptography practice at law firm Lowenstein Sandler LLP, said the SEC uses specific tests to confirm what falls under its definition. Jerrold, who served as director of the New Jersey Securities Bureau in 2018, took action against crypto assets promoted by actor Steven Seagal.

To consider whether a digital asset is a security, we need to determine whether something contains an investment contract. This is a test that is met if you invest your money in a common business with a reasonable expectation of profit from the efforts of others.

However, the subject has resulted in controversy.

“Over time, especially in the crypto space, [people] Try calling it something else to avoid securities laws,” Jerrold said.

Some insiders in the cryptocurrency industry argue that bitcoin and some stablecoins are commodities, he added. Federal agencies and congressional committees are divided over which regulators should oversee cryptocurrencies by variously casting them as commodities or securities.

“There’s still a lot of debate about this — what’s security? What’s merchandise? Anything else?”

Is the star of the Super Bowl commercial exposed?

Cryptocurrency companies such as FTX and Crypto.com have used celebrities from Larry David to LeBron James to market themselves in ads, including the commercials that ran at this year’s Super Bowl.

Just because they appear in TV commercials doesn’t mean these messages are any more protected than short posts on social media. Jerrold said it could depend on what the stars are saying in these ads. It is considered different from doing

“You run into proper trouble when you’re promoting an issuer of securities,” he said.

write destination Megan Graham: [email protected]