NFTs have the potential to change the way films are made, produced and distributed by allowing film creators to maintain their royalties and bypass Hollywood's existing order of financing by selling tokens. This system would also allow films to be owned by fans, the NFT owners.
“If we have to summarize what are we trying to solve here, it’s ownership. We now have an opportunity to express ownership digitally,” Soto-Wright said. “The key word of this year will be royalties — the idea that you can take this intellectual property and you can monetize it.”
Regulators are left to make sense of it all. In March, Bloomberg News reported that attorneys at the SEC had sent subpoenas demanding information about certain token offerings as part of a larger effort to scrutinize creators of NFTs and crypto exchanges. The inquiry is the latest attempt by SEC Chair Gary Gensler to ensure the crypto market adheres to its regulations.
While the SEC has said that many tokens fall under its purview, some crypto enthusiasts argue regulations meant to police the equity markets shouldn’t apply to virtual currencies.
“You have a lot of gray area,” Stark said. “It’s a little harder with an NFT to prove that it’s a security and it’s always going to be on a case by case basis.”
As more high-profile figures enter the space, questions on whether celebrities are in fact paying in full for their digital goods, or simply promoting collections in exchange for money, have started surfacing.
Justin Bieber joined the Bored Ape Yacht Club back in January, after purchasing an NFT from the collection for 500 Ethereum, or $1.5 million. Hours before his purchase, another wallet owned by the creators of another NFT collection, inBetweeners, dropped about 916 Ethereum into Bieber’s — which experts say raised questions about whether Bieber paid for his ape with money received from an undisclosed endorsement deal.
Asked why the 916 Ethereum was transferred, a spokesperson at inBetweeners said Bieber was an owner in the project and that the Ethereum represented his proceeds from the “mint,” or the process of publishing NFTs on the blockchain. A representative for Bieber declined to comment.
Madonna entered the metaverse last month, acquiring a Bored Ape NFT worth more than $500,000. Maverick, the firm run by her manager Guy Oseary, late last year signed Yuga Labs, the parent company of Bored Ape Yacht Club, as a client.
That’s not to say that celebrities haven’t found themselves in trouble when promoting crypto projects that left investors with major losses. Kim Kardashian and Floyd Mayweather Jr. are being sued in a class action lawsuit for allegations that they promoted a little-known cryptocurrency called EthereumMax to their millions of followers on social media, artificially inflating its price. A few weeks after Kardashian's endorsement, the token's price plunged.