Does California Regulate Finfluencing?

A week ago, the United States Securities and Exchange Commission charged Kim Kardashian with touting on social media a crypto asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion.   According to the SEC, Ms. Kardashian has "agreed to settle the charges, pay $1.26 million in penalties, disgorgement, and interest, and cooperate with the Commission’s ongoing investigation".

Perhaps it will come as no surprise that two days later, California's Department of Financial Protection & Innovation issued an investor alert entitled "Social Media Finfluencers – Who [sic] Should You Trust?".   The alert cautions that the "DFPI licenses investment advisors [sic], they do not license finfluencers or the crypto asset products and services they often promote.  These products and services are currently not insured or regulated and are considered very high risk".

However, advertisements of crypto assets may be subject to regulation by the DFPI if they are found to be securities under the California Corporate Securities Law of 1968.   In the case of Ms. Kardashian, the SEC took the position that the crypto asset involved met the federal definition of a security.  As explained in this post from about five years ago, the DFPI's securities advertising rule in part requires that if an advertisement contains any endorsement or recommendation of the securities by any public figure, whether express or implied (for example, by the inclusion of such person's photograph or name in the advertisement), full disclosure shall be made of any compensation or other benefit given or promised by the issuer or any person associated with the issuer to such person, directly or indirectly.  10 CCR § 260.302.