Image source: Empire Weekly
Since non-fungible tokens (NFTs) rose to prominence in early 2021, celebrities started joining the trend, often making significant purchases.
However, those dabbling in NFTs recently got called out for shilling NFTs.
Truth in Advertising
Consumer watchdog group Truth in Advertising or TINA.org recently called out over 19 celebrities.
The group alleged that the celebrities were promoting NFTs without disclosing their connections to the project.
A non-profit organization, Truth in Advertising posted on their website that they investigated “celebrities who promoted non-fungible tokens (NFTs) on their social media channels,” finding that “it is an area rife with deception.”
With a number of celebrities connected to NFTs, Truth in Advertising focused on a small group of big names.
Among those cited are athletes Floyd Mayweather and Tom Brady, rappers Eminem and Snoop Dogg, and actresses like Gwyneth Paltrow.
All celebrities were sent letters that urged them to immediately disclose material connections in their possession to the NFT companies and brands they promote.
“The promoter often fails to disclose material connection to the endorsed NFT company,” explained Truth in Advertising.
Despite no real legal penalty attached, the group noted it sent the letters on August 8, outlining their grievances and advising them about the potentially harmful effect shilling NFTs can have on people.
Truth in Advertising shared that it is concerned about the possible financial risks involved with investing in speculative digital assets that aren’t disclosed.
The organization sent letters to Justin Bieber and Reese Witherspoon’s legal teams earlier on June 10, writing to them about their NFT promotion on social media accounts without revealing their connection to the projects.
Both teams eventually replied.
Bieber’s legal team wrote back on July 1, denying any wrongdoing and saying they would update the posts.
Witherspoon’s legal team replied 19 days later, explaining she isn’t receiving material benefits for the promotions.
FTC Guideline violations
The organization also put up a blog post on their website wherein they cited that celebrities could be violating the Federal Trade Commission or FTC rules regarding the Use of Endorsements and Testimonials in Advertising.
The group links to the FTC website, outlining that influencers must disclose material connections to brands they endorse.
The action provides transparency so disclosures are clear, unambiguous, conspicuous, and are within the endorsement.
As of now, there have been no publicized cases of celebrities dealing with legal penalties for shilling NFTs.
However, there have been a handful of class action suits regarding crypto assets.
The most notable incident is Elon Musk’s Dogecoin endorsement and Mark Cuban’s Voyager crypto product promotion.
Meanwhile, celebrities like Matt Damon made waves when he appeared in an advertisement that promoted crypto products.
The cameo resulted in Damon getting mocked and ridiculed for his involvement.
SEC early warning
Over five years ago, the United States Securities and Exchange Commission or SEC warned investors about initial coin offerings that are promoted by celebrities.
“Investors should note that celebrity endorsement may appear unbiased, but instead may be part of a paid promotion,” the SEC post wrote on their website.
“Celebrities who endorse an investment often do not have sufficient expertise to ensure that the investment is appropriate and in compliance with federal securities laws.”
The SEC said that celebrities and influencers that encourage their followers to purchase stocks or get into investments could be unlawful, especially if they fail to disclose the nature, source, and amount of compensation paid.