Advertisement Policies and Kim Kardashian’s Cryptocurrency Lawsuit

In recent years, the rise of social media has led to an era of influencers within these platforms that aspire to do exactly what their title entails: influence everyone else on the apps viewing their content. Given this, we all know that, when we scroll through Instagram, we see post after post about a variety of different products usually marked by a blue “#ad” at the end of the caption signaling the opinion expressed is probably not genuine. These forms of ads have given way to almost anyone with a substantial following being able to be paid or receive products in exchange for a post. The ever-increasing presence of these ads has shaped how the world and the legal sphere respond to such posts. 

Although many may assume that the reason many influencers signal that a post is an ad is to be transparent and genuine, in actuality, the Federal Trade Commission does regulate deceptive advertising. They, therefore, encourage such signposting so that influencers avoid breaking regulations. This prompts the question of the scope by which such signposting can prevent lawsuits, as they require disclosure of all “material relationships” between the advertiser and the company. For example, Kim Kardashian used the “#ad” signposting in her June 2021 Instagram post about EMAX tokens that she recently was sued over. So why was she sued when she abided by this common practice of Instagram ads? 

Simply because her advertisement was in relation to a financial investment company and not a simple product like shampoo or vitamins. Kim Kardashian’s lawsuit fell under the Securities Exchange Act overseen by the U.S. Securities and Exchange Commission. The SEC most recently adopted a re-writing of regulations in relation to modern advertising forms in 2020. These regulations outlined how advertisements that were about financial investment must be accompanied by the promoter disclosing the amount of money they would receive from the investor/investment company in exchange for posting the advertisement. This regulation is in addition to the requirement of clear signposting that something is, in fact, an advertisement and not a personal opinion. These kinds of policies have shown how technology and social media are shaping the legal sphere around certain issues, such as deceptive advertising. The rise of both cryptocurrency and social media influencers together created the exact anti-touting provision (the provision that requires the disclosure of payment) that Kardashian violated with her advertisement. 

In June of 2021, Kim Kardashian posted on Instagram about Ethereum Max’s crypto tokens called EMAX tokens. Within this post she specified she was not giving financial advice and also had a “#ad” at the end of her caption. Regardless, she did not disclose the amount of money she was being paid by the company for the post, which ended up being $250,000. This lack of disclosure violated the anti-touting provision of the Security Act. Following this incident, the U.S. Securities and Exchange Commission filed a lawsuit against Kardashian. Kardashian agreed to pay over $1 million to settle the SEC charges and also agreed to not post on social media about cryptocurrency for the following three years. 

The rise of social media and the subsequent rise of advertisements and money pumping through a variety of these platforms has given way to the need for these policies to adapt and change to modern influencer practices. As can be seen in the differing regulations based on different types of products being featured in advertisements, these policies have begun to shift to fulfill the needs of a world with widespread ads on almost every person’s phone. The prominence of advertisements in modern daily life has created the systems by which lawsuits such as Kim Kardashian’s occur, keeping celebrities and influencers responsible.