The US Federal Trade Commission (FTC) is targeting crypto companies again. This time it is going after what it considers to be misleading or deceptive crypto advertising.
On December 5, the consumer protection agency said it was investigating several companies. FTC spokeswoman Juliana Gruenwald told Bloomberg News, “We are investigating several firms for possible misconduct regarding digital assets.”
However, she declined to provide further details on which firms were targeted.
The FTC enforces laws regarding advertising and disclosure by individuals who have been paid to endorse a product or service.
Crypto companies poured millions into high-profile advertising campaigns in 2021 and 2022. Furthermore, Crypto.com is still sponsoring the FIFA World Cup despite crippling market conditions.
SEC On the Crypto Advertising Warpath
Along with the FTC, the US Securities and Exchange Commission (SEC) is also on the crypto warpath. The collapse of FTX has given regulators much more ammunition in the battle against the digital asset industry.
The agency has rules for disclosures that individuals who market securities must make. It still considers cryptocurrencies to be securities, even though they are not yet officially classified as such.
In a recent high-profile case, the SEC filed enforcement actions against reality TV star Kim Kardashian. It accused her of illegally promoting a cryptocurrency on social media channels. She did not admit or deny the charges, but agreed to pay a $1.26 million settlement.
Other celebrities have also been the target of the regulator’s wrath regarding crypto. Athletes Tom Brady and Steph Curry were among those who promoted the FTX exchange before it collapsed.
Investors filed a class action lawsuit against the couple and several others for promoting the exchange and targeting “unsophisticated investors.”
Earlier this year, the UK Financial Conduct Authority targeted companies for misleading crypto advertising. In August, Premier League giants Arsenal lost an appeal against action by the Advertising Standards Authority regarding misleading NFT ads.
Until crypto is fully regulated, government agencies will use all the tools at their disposal to target companies that market tokens or services.
Regulatory red flags
The collapse of the FTX exchange has caused one of the industry’s biggest capital losses in its history. This has been more fuel for regulators, who were already ready to crack down on the industry.
Many expect 2023 to be the year of regulation as governments rush to roll out their frameworks. According to the Financial Times, British regulators are finalizing their plans to regulate the industry. But across the pond in the US, things will probably take a little longer.