Clark Hill's Alex Yastremski Guides NFT Platform Through Fundraising Round
San Francisco attorney Alex Yastremski recently helped a new NFT marketplace that specializes in curated digital collectibles built by and for the electronic music industry through a $5 million private seed fundraising round.
According to a Music Business Worldwide article, Yastremski’s client, RCRDSHP, offers limited edition collectibles built on the Flow blockchain that “encapsulate a unique aspect of an artist, label, or festival’s musical worlds.” The article stated that the platform launched in mid-August by releasing more than 5,000 “Genesis Packs” made up of electronic and dance music digital collectibles, and the release sold out in a matter of hours.
Yastremski led a team of Clark Hill attorneys who helped the founders of RCRDSHP through formation, investor negotiation and documentation, IP protection, and commercial contract preparation. The group is also advising the NFT platform on its terms and conditions and advises RCRDSHP on the generation, marketing, and sales of NFTs on the company’s proprietary music-NFT marketplace.
“Private seed fundraising in the blockchain start-up space requires corporate and securities review, like other industries,” Yastremski said. “In the NFT space, there are unique legal considerations that consumers and platforms should be aware of.”
Creating an NFT
Yastremski explained that the creation and sale of an NFT can be broken down into two parts. The blockchain handles the minting and accounting of the NFT first, and the second component is the initial sale and resale process.
“Minting platforms are doubling up as marketplaces to provide artists and other NFT content providers with a one-stop shop for a full suite of services. NFT servicers straddle the chain between an artist (i.e. vendor) and all initial and subsequent purchasers of the NFTs. The legal issues involved include formulating an appropriate set of terms and conditions to govern such relationships, balancing the competing interests of the content provider, the initial buyer, of each subsequent seller and buyer in subsequent downstream transactions.”
On fractionalization within the NFT industry, Yastremski said there remains potential for securities issues ahead.
“Given the significant sums that some NFTs are selling for, fractionalization would allow smaller investors to purchase interests in an NFT bringing to bear the regulatory concern that they may be securities,” Yastremski said. “Until the SEC’s views are clarified, uncertainty about whether NFTs are securities is likely to persist.”
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