A total of 17 celebrities, including Jimmy Fallon and Gwyneth Paltrow have received soft letters from Truth in Advertising (TINA.org) a consumer watchdog group, reminding them that posting about NFTs on social media without disclosing material connections violates Federal Trade Commission policies.
The letter notes that NFTs in general are “rife with deception” and that the promotion of them almost always never mention their risks:
“We have found that celebrity NFT promotions is an area rife with deception, including, but not limited to, a failure to clearly and conspicuously disclose the promoter’s material connection to the endorsed NFT company, as well as the omission of other material information, such as the risks associated with investing in such speculative digital assets, the financial harm that can result from such investments, and the personal benefit(s) the promoter may gain by virtue of the promotion(s).”
It was reported that among the 17 celebrities who received a letter are DJ Khaled, Eminem, Jimmy Fallon, Paris Hilton, Snoop Dogg and Timbaland.
“When it comes to NFTs, some celebrities are able to take financial risks due to their wealth, but many vulnerable consumers don’t have that luxury. Consumers deserve to understand the full picture behind a celebrity endorsement so that they can make fully informed decisions on whether to invest in NFTs”, said Bonnie Patten, executive director of TINA.org.
There are two celebrities where the connection is clear to the NFTs they’ve posted about: Reese Witherspoon, whose company Hello Sunshine is a partner of World of Women NFTs, and Justin Bieber, who is one of the investors on the inBetweeners NFT project. Earlier on June 10, the Group sent both celebs more stern letters.
On July 1, Bieber’s legal team denied any wrongdoing, but said the posts would be updated. TINA.org was contacted by Witherspoon’s legal team on July 20, claiming she did not receive any material benefits from promoting the NFTs.
While no legal penalties have been imposed, TINA.org informed the celebrities involved on Aug. 8 about the potential negative effects shilling NFTs can have on the public.
A NFT is a digital certificate that proves ownership of a digital or physical asset, such as artwork, stored on the blockchain. Influencers’ shillings could potentially influence the value of the entire NFT collection: buying an NFT early, tweeting about it or talking about it on a TV show can raise its value, and selling it later for a profit. Regardless of whether they invest their own money into the NFT, the celeb is indirectly pumping its value.
There are other times whereby celebs may receive complimentary NFTs by the collection owners. Jimmy Fallon changed his Twitter avatar to an image of a cartoon owl after being gifted a free Moonbird NFT by the collection’s owners. This was part of their plan to give away free NFTs to friends or specifically for marketing reasons. The collection’s value was increased by Fallon’s promotion, but it was never made clear to his viewers it was a freebie. Fallon received a letter from Truth in Advertising that week for not disclosing its true nature.
There have been no reported cases of celebrities facing legal penalties for shilling NFTs or crypto so far. It is worth noting that there are still several class action lawsuits pending, including Elon Musk’s Dogecoin endorsement and Mark Cuban’s Voyager crypto products promotion.