Deceptive advertising practices may be tied to celebrity NFTs

By: Lauren Degen, Content Editor

Non-fungible tokens, commonly referred to as NFTs, have rapidly grown in popularity over the past few years. The cryptographic assets exist via blockchain and often represent tangible possessions like artwork or individuals’ identities. Because the current market for NFTs is primarily focused on collectibles, many athletes, musicians, and other celebrities use the digital tokens to release their own collections, purchase exclusive NFT artwork, and promote new creators through endorsements. While it is completely legal for celebrities to engage in the promotion and endorsement of NFTs, the practices may create legal issues of deceptive advertising when relevant information is not properly disclosed.  

For example, many celebrities, including Justin Bieber, have been warned by the consumer watchdog agency Truth in Advertising (“TINA”) for promoting NFTs online via Instagram. In the case of Bieber, he did not properly disclose that the promotional NFT posts were advertisements, nor that he had a material connection to the company which created the NFTs. Similarly, TINA warned Reese Witherspoon after promoting NFTs created by a company that was engaged in partnership with a brand owned by Witherspoon.  

These practices appear to be in direct violation of the Federal Trade Commission Guides Concerning the Use of Endorsements and Testimonials in Advertising (“The Guides”). The Guides explicitly state that any material connection in advertising, which includes personal stake in the promoted company or compensation in the form of money or free products, must be clearly disclosed to the public.  

The purpose of such disclosures is to protect the public, and the Federal Trade Commission (“FTC”) has ramped up enforcement as companies continue to seek celebrity endorsement via social media sites like Instagram and TikTok. In recent months, the FTC issued notices to over 700 companies for engaging in potentially deceptive advertising practices. Similarly, TINA has focused directly on reaching out to celebrities, like Jimmy Fallon and Tom Brady, to warn them that their NFT promotion practices may result in regulatory action from the FTC. The FTC also sought public comment on potential amendments to The Guides in order to strengthen advertising guidelines specifically targeting businesses and social media influencers.  

Many of the celebrities promoting NFTs use their platforms to reach consumers as influencers. Since the Guides were last amended in 2009, technological advancements and growth of social media advertising have created an appetite for updated endorsement regulation. However, a more beneficial approach may be to invest in educating brand marketers and influencers about the requirements they must follow when endorsing products like NFTs. Digital asset investment can sometimes be volatile, so celebrities should take caution to follow all endorsement guidelines issued by the FTC on future NFT collaborations to avoid reprimands and fines.  


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