Celebrities Need to Disclose NFT Ownership Before Endorsing Them, Says Advertising Body
Here’s a seemingly innocuous exchange: talk show host Jimmy Fallon in conversation with Paris Hilton back in January; between them, sit two ape cartoons donning clumsily imposed accessories. Both apes wear pairs of heart-shaped sunglasses and identical hats, barring the colors and the embroidered logo. The apes are quite unremarkable if you think of it, but Fallon paid almost $200,000 for this artwork, and Hilton managed to pay $300,000 for the template later.
The apes are by-products of the Bored Ape Yacht Club, one of the most expensive NFT projects in the world. Both Hilton and Fallon are endorsing their respective apes, one dressed in red and the other in stripes, being shown off to a television audience that runs into millions.
This is what’s called “shilling” in the world of NFTs (here’s a primer) — when people promote an NFT and encourage others to invest in that particular NFT project. Ever since NFTs caught wind in the cultural zeitgeist, more and more celebrities have been shilling NFTs, endorsing them on television and social media, seamlessly incorporating these into the fabric of their brand. There is an echo felt in India too, where celebrities are launching and purchasing NFT collections. Amitabh Bachchan last year revealed plans to monetize autographed posters of his movies, and Salman Khan gushed to his Twitter followers about a mysterious NFT launch.
But this system of money is hardly innocuous and not uncommon. So much so that on Monday, a U.S.-based consumer watchdog group called Truth in Advertising sent a letter to 17 celebrities — including Fallon, Hilton, Gwenyth Paltrow, DJ Khaled, Drake Bell, among others — warning them of a loophole that many seem to be evading. People are meant to disclose the money they receive from endorsing NFTs on social media, and not doing so is violative of the country’s Federal Trade Commission guidelines that are meant to regulate unlawful business practices.
They called NFT promotion an “area rife with deception” for the simple reason that the person doing the promotion fails to” clearly and conspicuously disclose” their material connection to the endorsed NFT company. Moreover, the endorsement doesn’t mention 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).”
The warning speaks to a previously unchecked phenomenon in the world of crypto goods marketing: how celebrities make money using NFTs. When a celebrity influences, or endorses an NFT collection, their cultural stamp raises the value of the entire collection and the subsequent rewards for those holding them, thus creating a conflict of interest. Let’s say a celebrity buys an NFT early on for cheap and talks about it on social media or endorses it on a talk show, they pump up the value of their investment and can make a profit when they sell it later. Stars are essentially inflating or manufacturing value for something by virtue of their own cultural dominance, a form of market manipulation that is currently unrestricted and even unrecognized by government financial regulation.
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What’s happening, in theory, is then an omission of informed truth. Celebrities are endorsing NFT projects without telling their audience it was an ad or that they were paid in money or a free NFT. Take Eminem, who publicly spent north of $200,000 on a similar ape, or Snoop Dogg investing in cartoon bear collections. An unwitting fan or audience member may feel inspired to buy the collection themselves perhaps due to solidarity and allegiance with the celebrity — similar to people buying merchandise. But this purchase is indirectly increasing the wealth of the celebrity figure, and is inevitably devoid of financial prudence as people invest in collections — that are akin to speculative financial instruments — without possessing accurate knowledge.
“Consumers deserve to understand the full picture behind a celebrity endorsement so that they can make fully informed decisions on whether or not to invest in NFTs,” the advertising body stated in the letter. “Promoting NFT without offering this knowledge is then an omission of the risks that are associated with these projects.”
The risks are then disproportionately borne by some. The shilling without duly communicating the stakes and ownership of the said celebrity creates “a vicious cycle where those with the right knowledge or connections sell at the right time and leave their disciples in the dust – AKA a ‘pump and dump,'” as Dazed Digital explained. For others, those devoid of the right information and financial know-how to keep up with the digital architecture of investment, the investment is money lost in the name of the celebrity. The onus is on crypto services to adhere to advertising guidelines — a framework that must itself reckon with the newfangled challenges and gray areas present within crypto marketing.
Arguably, this crypto goods marketing taps into the intrinsically exploitative principles of marketing and consumerism, convincing people to embrace a fascinating, edgy new world with zany new products. This frontier of monetizing art, and the internet as we know it, got more exclusive and exclusionary.