Emojis, while being a widespread form of modern expression, can potentially cause legal problems for firms.
Theta Lake‘s Susannah Hammond recently provided insight into a recent legal case involving the use of emojis related to NFTs and what this means for companies across various industries.
A rocket ship emoji is not always a symbol of futuristic adventure; it can be a significant legal matter. Recently, a U.S. court ruling stated that a firm and its control person had violated securities laws by offering NFTs for sale to the public without filing the necessary registration statement with the SEC.
In an unexpected twist, a judge ruled that a tweet from NBA Top Shot promoting an NFT using emojis constituted an investment contract under the Howey Test, despite the tweet never using the word “profit”. Emojis symbolising a rocket ship, stock chart, and money bags were interpreted as an expectation of a financial return on investment.
The Howey Test, essential for determining whether a transaction qualifies as an investment contract, includes investment contracts in the U.S. Securities Act’s broad definition of a security. It involves four criteria for recognising an investment contract, and its application to cryptocurrencies and initial coin offerings (ICOs) is of special importance in the FinTech sector.
In the case in question, the court’s conclusion was narrow, indicating that not all NFTs will necessarily be considered securities. Instead, each case must be analysed individually.