Celebrities have been quick to jump into NFTs, but their motivations for doing so may be confusing to fans. Truth in Advertising, a consumer watchdog group, just sent letters to 17 celebrities, including Jimmy Fallon and Gwyneth Paltrow, reminding them that not disclosing material connections (i.e., “Do you make money from this?”) when posting about something on social media violates Federal Trade Commission guidelines.
“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,” Bonnie Patten, executive director of the group that sent the letters, told BuzzFeed News. “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 letter from Truth in Advertising to the celebrities also notes that NFTs in general are “rife with deception” and that the promotion of them almost always omits mentioning the risks associated with them:
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).
The letter goes on to remind the celebrity that material connections to an NFT collection should be disclosed in any social media post. While it’s unclear what connection these celebrities have to the NFTs they’ve posted about, there are two celebrities where the connection is clear: Justin Bieber, who is listed as an investor on the inBetweeners NFT project, and Reese Witherspoon, whose company Hello Sunshine is a partner of World of Women NFTs, both received more stern letters from the group in June.
Here are the 17 celebrities who received a letter:
When a celebrity or influencer buys into an NFT collection and then posts about it on their social media, they may be influencing the value of the entire NFT collection. Even if they paid for the NFT with their own money, they’re essentially pumping the value of their own investment. If a celeb buys an NFT early on for cheap and tweets about it (or when Paris Hilton appeared on The Tonight Show talking about her Bored Ape), this can raise the value of the NFT, so they can then make a profit when they sell later on.
To make matters more complicated, although sometimes celebrities pay for their own NFTs, other times they are gifted free ones by the collection owners. When Jimmy Fallon changed his Twitter avatar to an image of a cartoon owl, it was after he was gifted a free Moonbird NFT by the collection’s owners as part of their plans to give free NFTs to friends or explicitly for marketing purposes. Fallon’s promotion of the Moonbird collection raised its value – but he never disclosed that was a freebie. Fallon received a letter from Truth in Advertising this week.
The letters sent today are soft reminders. But in the past, Truth in Advertising has made this a first step in a series of escalations that eventually lead to FTC involvement. In 2016, the group sent a bunch of celebrities, including the Kardashians, this kind of gentle letter, but by 2017 the FTC was sending its own letters.