Kim Kardashian was fined $1.26 million on Monday for calling out crypto schemes — even as much more high-profile pitches from the likes of Matt Damon and Larry David have gone unpunished. The apparent double standard is a function of a subtle yet crucial distinction in securities law.
Why it’s important: Celebrity crypto endorsements drew millions of Americans into the crypto market at the beginning of this year, just before prices cratered.
- The TV commercials, which cost up to $6 million each, aired thousands of times and reached millions of viewers. Almost everyone who bought crypto at these levels ended up losing money.
- A single post on Kardashian̵[ads1]7;s Instagram page, however, for a coin almost no one had heard of, could have caused a loss to anyone who bought that coin after seeing the ad. But the number of such people – and the total aggregate loss – was small compared to the industrial-scale ad campaigns of the major crypto platforms.
What they say: SEC Chairman Gary Gensler announced the Kardashian settlement, attacking celebrity endorsements more generally:
“This case is a reminder that when celebrities or influencers endorse investment opportunities, including crypto-assets, that doesn’t mean those investment products are right for all investors.”
Between the lines: Despite Gensler’s bluster, legally, it is nice for celebrities and influencers to endorse investment opportunities, including crypto investments. Where Kardashian crossed the line was when she endorsed a crypto asset Safety.
- The height of the crypto advertising boom was the 2022 Super Bowl, where companies like FTX and Crypto.com spent untold millions promoting their websites as a place to buy crypto – and implicitly get rich doing it.
- Kardashian’s relatively low-budget 2021 Instagram post, however — she was paid just $250,000 for it — claimed an actual coin, EthereumMax, which the SEC has determined qualifies as a security. That brings it under SEC jurisdiction, which is much stricter than the FTC regulations that govern most advertising.
How it works: If you support a company, the only rules that apply are the relatively lax ones from the FTC. If you give a security, disclose that you got paid—as Kardashian did with an #AD hashtag—isn’t enough; you must also disclose how much you were paid.
Bottom line: If you’re going to tout crypto, tout a crypto companynot a coin.