Unless you’re the government, running lotteries is illegal in the U.S.
If you run a sweepstakes or giveaway as part of your NFT project (or anywhere else), you don’t want to risk having your promotion look like a lottery.
What’s the difference?
In a sweepstakes, entrants can win a prize for free based on chance alone.
No purchase, payment, or other consideration is needed, and the winner is picked at random.
In a lottery, the entrant has to give something of value (like buying a ticket or an NFT), called consideration.
So to avoid having your promotion be called a lottery, you need a free method of entry that counts the same as any paid methods.
It is a crime in every state to run a lottery.
And in California, you need to let people know, “clearly and conspicuously,” that no payment is necessary to enter.
As NFTs continue to grow in popularity, you can bet they will attract attention from regulators and plaintiffs’ lawyers.
It’s worth the effort to understand the risks you are taking with how you promote your NFT project, so that you can avoid a surprise lawsuit down the road.
If an influencer creates a TikTok promoting a brand, using music that’s not in TikTok’s commercial library, then that influencer risks committing copyright infringement unless they have a license from the rights owner.
And the brand and any ad agency involved in the campaign can be liable for the infringement too.
That might seem surprising—it’s extremely common to see popular songs in the background of influencer content.
But just because everyone is doing it doesn’t mean it’s allowed.
Sony Music’s recent lawsuit against Gymshark is just one example of how this problem can rear its head.
Sony sued Gymshark over hundreds of TikToks and IG videos that “include sound recordings featuring such chart-topping and award-winning artists as Beyoncé, Britney Spears, A$AP Rocky, and Calvin Harris.”
Sony’s complaint lays out how Gymshark pays influencers to create videos wearing and promoting Gymshark products and including popular songs.
Sony points to the IG and TikTok terms of service to support the infringement theory:
IG’s TOS says: “Use of music for commercial or non-personal purposes in particular is prohibited unless you have obtained appropriate licenses.”
TikTok’s says “NO RIGHTS ARE LICENSED WITH RESPECT TO SOUND RECORDINGS AND THE MUSICAL WORKS EMBODIED THEREIN THAT ARE MADE AVAILABLE FROM OR THROUGH THE SERVICE.”
Sony specifically alleges the “third-party influencer who created Gymshark videos have likewise infringed Plaintiffs’ copyrights” and that Gymshark is liable for contributing to that infringement.
So what the lesson from this?
If influencers have the creative freedom to pick sounds for their content, they should clear those sounds with the brand before posting.
The obligation to clear sound choice before posting is something that can and should be addressed by the brand/agency in the influencer agreement.
And if you’re the agency or the brand, claiming you didn’t know about the music or that you needed to clear rights won’t help you much from a legal perspective.
Gymshark has until January 25 to respond to the lawsuit, and it has told the court it plans to move to dismiss.
I’ll provide updates here as the case progresses.
A lot of people are afraid of contracts.
That’s because they are approaching the concept from the wrong perspective.
I often hear from people who are worried that a formal contract with scare off someone they’re looking to work with, because forcing someone to sign a document shows you don’t trust them.
It’s a mistake to allow those worries to convince you that you don’t really need to get whatever it is in writing.
True, not everything needs a 20-page agreement filled with legalese.
But every agreement that matters needs to be documented.
Think about it like this: contracts aren’t really about trust at all.
You build trust through your reputation and your work; not through your documents.
My friend Andy Frisella summed up this issue nicely in a recent episode of his podcast (I’m paraphrasing):
That fear of sending contracts isn’t an issue of trust but communication.
When you present that agreement to the other party, it should be with the intent that it will never need to be looked at again, unless an issue cannot be resolved through a conversation.
And if you get to that point, the contract is like an insurance policy—it’s there to help everyone navigate the impasse and get through it.
Of course, you should always make sure that you understand and are comfortable (or at least willing to live with) everything in a contract presented to you before you sign it.
If something seems unfair, or even if you just aren’t completely sure, have it reviewed by someone with experience who will look out for you.
But don’t be afraid of written contracts—use them to help protect your business so that you have an easier time building that trust.