The SEC is bullying Kim Kardashian, and it could chill the influencer economy

The Securities and Exchange Commission announced on Oct. 3 that Kim Kardashian settled an allegation that she promoted “a crypto asset security offered and sold by EthereumMax without disclosing the payment [of $250,000] she received for the promotion.” While she cooperated and closed the case with $1.26 million in penalties, the charge highlights the liability that “influencers” increasingly face as a result of an activist SEC that has failed to establish regulatory clarity.

Pushing influencers to leave the United States

Addressing the agency’s action against Kardashian, Jacob Robinson, a legal scholar and host of the Law and Code podcast, noted that “The net-positive is [that] this probably leads to less shilling by celebs who have zero knowledge of the underlying project & are just receiving a big payday.”

Thanks to the proliferation of social media platforms, content creators and influencers have emerged and are working with brands to promote products and services. Sadly, the “creator economy” has also had downsides. In particular, influencers have often sold products and services that may not serve everyone’s interests, accepting payment from companies in exchange for their support.

While that privilege can be, and often is, abused, influencers are not doing anything systematically different than what corporations do when they take out paid advertisements in the media and on television, or even when board members join and take on a retainer to share their network and promote an organization. When a corporation takes out an ad in a large paper or magazine, such as The New York Times or Vogue, are the media outlets equally liable for not disclosing their acceptance of payment to all the readers? Clearly not, and the media’s business model would quickly crumble if they were unable to accept such paid advertising opportunities.

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So, why are influencers treated so differently, and why can they personally be liable and targeted by a federal agency? Consider the car market: If a used car salesperson sells a customer a car that is later recalled or turns out to have some other flaw, are they singled out by a regulatory agency? The car company might be — as we have seen with Volkswagen, Toyota and others over the years — but the individual employee is generally free from such liability.

The SEC’s action against Kardashian risks alienating and stifling other members of the…