IMPORTANT LIMITATIONS, DISCLAIMERS, AND RESTRICTIONS
This opinion is issued to, and intended for the use of, Strikers in connection with advising on select compliance matters and may not be relied on for any other purpose or by any other person.
Legal Questions
1. The Athlete Cards will be hand-drawn or AI-generated, but they are based on real
players, using their names and actual sports stats. Does this present any copyright
infringement challenges?
Athlete Rights. Generally speaking, athletes have certain rights of publicity and privacy that can limit the use of their names, images, voice, signature, distinct personal attributes, and likeness without their permission. Additionally, sports leagues and organizations may have their own rules and regulations governing the use of their athletes’ images and other intellectual property.
Right of Publicity. In Cardtoons, LC v. Major League Baseball Players Ass’n, 95 F.3d 959 (10th Cir. 1996), the court favored Cardtoons, holding that the cards constituted protected speech under the first amendment. The court looked to the parody and social commentary aspects of the cards and reasoned that the balance between the plaintiffs' free speech and the publicity rights favored the speech. The court was also not convinced that the MLBPA would suffer any financial injury due to the cards.
In White v. Samsung Elecs. Am., Inc. 971, F.2d 1395 (9th Cir. 1992), Vanna White sued Samsung for publishing a tv commercial using her likeness. The commercial had a robot dressed in clothing and accessories similar to those worn by Vana White when she hosted the Wheel of Fortune game show. The commercial had her in front of a board that resembled the one used on the show, and there was a voiceover that closely mimicked her voice and personality. The court rejected Samsung’s argument that it was a parody or satire because there were no elements to distinguish it from mere imitation. The court also noted that while the First Amendment protected the use of a celebrity’s likeness in some contexts, such as news reporting or political commentary, this use was purely for commercial purposes and did not include any significant expressive content. The circuit court reversed the lower courts judgment on the right to publicity claim, and reasoned that the plaintiff pleaded claims sufficient to go to a jury.
Strikers Use. The Athlete Cards are AI+human-generated and not based on any existing work. Therefore, there should be no issues regarding copying or reproducing an existing copyrighted work.
The Athlete Cards are not sold as collectibles but are instead used as participation cards for the fantasy sports game. Users buy them at the beginning of the season to track the performance of real athletes and earn points based on their performance. During or at the end of the season, the cards are purchased back from users and burnt, even if users fail to sell them back. Therefore, the Athlete Cards are not being sold for profit as collectibles, which could potentially infringe on the rights of the real athletes.
Finally, Strikers will purchase special APIs allowing the use of real athletes' names and statistics. This suggests that Strikers has taken steps to ensure that they have the necessary rights and permissions to use the athletes' names in the game, thereby avoiding any potential infringement. The cards themselves will be numbered, not named. Each numbered card will track the performance of an athlete.
2. Could any of the NFTs (Strikers Passes, Founder Cards, Athlete Cards) be viewed as securities?
Howey Test Analysis. Anything that passes the Howey Test can be viewed as a security under the investment contract definition. The test involves four factors:
1. Investment of Money - Yes, people can purchase NFTs from Strikers. Howey Test: PASS
Common Enterprise - Even though Strikers is structured as a DAO, a reasonable argument could be made that pooling and tied fortunes occur in Strikers because customer funds are reinvested into the platform. The values of Strikers Passes and Founder Cards are tied to the success of the ecosystem and game. Howey Test: PASS
Expectation of Profits - This prong is subjective. If an investor has a reasonable expectation of profiting based on the entrepreneurial or managerial efforts of others, it will be deemed satisfied. If a purchaser is motivated by a desire to use or consume the item rather than by the profit motive, the securities laws should not apply. In addition, Strikers will remove all features of Strikers Passes and Founder Cards if their holders fail to participate in the governance of the platform through voting, meaning that the success of the platform is based on the efforts of NFT holders, not others. Howey Test: FAIL