SEC Issues A Wells Notice To OpenSea, Claiming NFTs On Its Platform Are Securities

Updated: 03 September 2024

Disclosure

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OpenSea, one of the world’s first and largest web3 marketplaces for non-fungible tokens and crypto collectibles, has received a legal notice from the United States Securities and Exchange Commission, claiming that non-fungible token collections on its market platform are illegal securities. The move is a big blow to creators, collectors, and other market players.

SEC Issues A Wells Notice To OpenSea

In an August 28 blog post, Davin Finzer, the co-founder and the chief executive officer of the OpenSea marketplace, confirmed that they had been served with a legal notice by the United States Securities and Exchange Commission (SEC) that claims NFTs in its platform are securities. The fate of creators and artists now lies in the corridor of justice.

OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities.

We're shocked the SEC would make such a sweeping move against creators and artists. But we're ready to stand up and fight.

Cryptocurrencies have long…

— Devin Finzer (dfinzer.eth) (@dfinzer) August 28, 2024

OpenSea is a non-fungible token marketplace where users can buy, sell, or create NFTs. It is a non-custodial platform, allowing users complete control and access to cryptocurrency wallets. Users interact directly with each other to buy or sell NFTs individually or in bundles. OpenSea is one of the most traded and adopted NFT marketplaces in the NFT market.

The SEC has issued wells notice to OpenSea, claiming NFTs on its platform are securities. By description, securities are fungible and tradable financial instruments used to raise capital in public and private markets. There are primarily three types of securities: equity, which provides ownership rights to holders; debt, essentially loans repaid with periodic payments; and hybrids, which combine aspects of debt and equity.

SEC And Crypto Companies Legal Fight Continues

The SEC attack on crypto is not new. Crypto companies like Coinbase, Uniswap, Robinhood, Kraken, and Consensys have been fighting against the SEC’s single-track approach of “regulation by enforcement.” But, according to Finzer, the SEC would stifle innovation on an even broader scale by targeting NFTs. Moreover, hundreds of thousands of online artists and creatives are at risk.

Finzer has once again clarified that NFTs are fundamentally creative goods: art, collectibles, video game items, domain names, event tickets, and more. In that case, the SEC should not regulate digital art in the same way it regulates collateralized debt obligations. The regulatory concern now threatens the future of student artists, who are finding full-time careers in selling their digital art, and Indie game developers, enabling open markets for their in-game items.

In the meantime, the OpenSea NFT market platform boss has assured the crypto and non-fungible token community that he and his legal team are ready to stand up and fight to the end for the sake of creators and creatives. Finzer hopes the regulatory commission will come to its senses sooner rather than later and that they’ll listen to the case with an open mind.