On February 2023, the former branch chief of the U.S. Securities and Exchange Commission (SEC), Lisa Braganca, warned the public about using certain emojis in promotional materials. This follows a recent court ruling that classified Dapper Labs’ use of emojis as investment advice.
Braganca stated that the ruling underscores the importance of being mindful of how certain symbols may be interpreted by investors. As they can be seen as indicative of a level of expertise or endorsement beyond what may be intended by their use. As such, she warned companies to avoid using emojis that could be construed in this manner.
Dapper Labs Allegedly Used Emojis As Investment Advice
The ruling came about after Dapper Labs used various emojis in its promotional materials. The SEC argued it constituted investment advice and thus required registration with the agency. The court ruled on behalf of the SEC and stated that the emojis can be seen as an endorsement or recommendation. Particularly when emojis are used in close proximity to financial terms.
Braganca noted that this ruling reminds companies to be aware of how investors may interpret their promotional materials. Moreover, Braganca added that they should take great care when using symbols such as emojis which could potentially lead to confusion or misunderstanding.
Court Filing Highlights Emojis Indicate Investment Advice
A recent court filing (Case 1:21-cv-05837-VM Document 43) highlighted the potential legal consequences of emojis to indicate future gains. A United States District Court judge for the Southern District of New York ruled that emojis such as the 🚀 “rocket ship”, 📈 “stock chart”, and 💰 “money bag” may indicate “financial return on investment”.
The ruling follows an amended complaint alleging that NBA Top Shot Moments non-fungible tokens (NFTs) violated securities laws, which was filed against Dapper Labs. In response, Dapper Labs filed a motion to dismiss the complaint, but Judge Victor Marrero denied the motion.
Former SEC branch chief Lisa Braganca has warned users of the potential legal consequence of using emojis. Braganca tweeted,
A federal court judge ruled that these emojis 🚀📈💰objectively mean “one thing: a financial return on investment.” Users of these emojis are hereby warned of the legal consequence of their use. #emojis #rocketshipemoji #DapperLabs https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rNL9SOS91Xgo/v0
Former SEC Branch Chief Lisa Braganca
Crypto community members have reacted to the news with various responses. Additionally, lawyers have voiced their thoughts on the SEC’s actions against Terra and Paxos. The ruling serves as a warning to users of emojis, with the potential legal implications of using them to indicate financial returns.
There’s a lot of debate across the cryptocurrency community about the emoji investment advice news. However, the bigger picture here is the fact that judge Marrero denied Dapper Labs’ motion to dismiss. The judge noted under the Howey Test, the NFTs are investment contracts. The reason is, buyers were led to expect they can generate profits from the efforts of Dapper Labs.
Time will tell what happens with cryptocurrency regulations and enforcements. Legal Favor will continue to provide updates as they arise.
