Mumbai: Days after the Advertising Standards Council of India (ASCI) rolled out guidelines for the advertising of virtual digital assets, celebrities have started inserting indemnity clauses in their contracts with crypto exchanges.
These celebrities have hired lawyers who are drawing out these indemnity contracts where any future liability or other penalty would be taken care of by the exchange.
The indemnity clauses seek to insulate the celebrities from any future or even reputational risks, legal experts said.
“Many celebrities and influencers who are promoting crypto assets or NFTs (non-fungible tokens) have now started ensuring that there are strong indemnity clauses in their contracts with cryptocurrency exchanges. The fear is that they could face claims, damages, including reputational risks going ahead due to the recent guidelines around advertising and legal ambiguity surrounding digital assets,” said Priyanka Sinha, partner at law firm A&P Partners.
“The indemnity clauses cover breaches of contractual provisions, third-party claims and sometimes the obligation to defend all litigations including against the talent … Every contract involving virtual digital assets, including endorsements by celebrities include similar protective clauses for celebrities,” said Chandrima Mitra, partner, DSK Legal, a law firm.
A top Bollywood star who endorses NFTs, for instance, has drawn up a new contract to insulate him from any future litigation.
Under the terms, the crypto exchangethat hired him is not only responsible for reimbursing “legal” expenses, but also has to cough up additional money if the actor’s name is dragged into any investigation by government agencies.
In another case, a 40-year-old female actor who has tied with a crypto platform to sell her own NFTs, has also drawn up an “ironclad” indemnity clause that protects her against customer claims as well.
Many cryptocurrency exchanges and platforms offering crypto assets including NFTs had roped in celebrities for promotion.
The ASCI in late February rolled out advertising guidelines for virtual digital assets. They essentially cover all cryptocurrency exchanges and those selling or trading in NFTs.
The guidelines, applicable from April 1 this year, are aimed at safeguarding consumers and stopping “misleading” communication.
A sudden spurt of cryptocurrencies in India saw actors such as Salman Khan, Ranveer Singh and Ayushmann Khurrana, and influencers like DJ Nikhil Chinappa promoting cryptocurrencies and crypto exchanges.
Exchanges had earlier faced flak from the government for “irresponsible” advertisement that hit its peak during the Cricket World Cup.
The ASCI can penalise an advertiser and forward its recommendation to the relevant government authority. It can also direct suspension of an advertisement and initiate investigations in certain cases.
Indian cryptocurrency exchanges collectively spent more than Rs 50 crore during the ICC T20 World Cup last year, ET first reported in November.
The blitz, dominated by CoinDCX, may have heightened government and regulatory concerns over virtual currencies and the commercials that promote them, said industry trackers.
Cryptocurrency exchanges that had suspended ads for a while amid criticism from various quarters restarted advertising and marketing campaigns, albeit not as aggressive as earlier, said industry insiders.
In most cases, the advertisements are aired on social media and digital platforms.
While the government announced a tax regime for crypto investors, the asset is still not considered “legal” as per government announcements. The government is looking to roll out additional regulations through a cryptocurrency Bill this year.