SEC Threatens Legal Action Against OpenSea Over NFTs
The SEC’s move is the latest in its crackdown on the crypto industry, which has often clashed with the agency over the classification and regulation of digital assets.
The U.S. Securities and Exchange Commission (SEC) has issued a Wells notice to OpenSea, one of the leading marketplaces for non-fungible tokens (NFTs), signaling its intent to potentially pursue legal action against the company. OpenSea's co-founder and CEO, Devin Finzer, revealed the news on social media platform X (formerly known as Twitter) on Wednesday, stating that the SEC believes NFTs traded on OpenSea's platform are securities.
OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities.
— Devin Finzer (dfinzer.eth) (@dfinzer) August 28, 2024
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…
A Wells notice is a formal notification that SEC staff intend to recommend enforcement action, often a precursor to a lawsuit. The SEC has not commented on the matter, maintaining its policy of not confirming or denying the existence of ongoing investigations.
The SEC’s move is the latest in its crackdown on the crypto industry, which has often clashed with the agency over the classification and regulation of digital assets. The SEC argues that many crypto assets, including some NFTs, meet the criteria of securities and should therefore be subject to securities regulations designed to protect investors.
Michael Ashley Schulman, a partner, and CIO at Running Point Capital Advisors, hinted that the SEC's attention might be on the treatment and trading of NFTs on platforms such as OpenSea, evaluating if they mirror investment contracts—a principal factor in determining security.
The timing of the SEC's actions comes as the NFT market continues to struggle in the wake of the broader crypto downturn. Attitudes towards NFTs have been severely impacted, and this latest regulatory challenge could further hinder their recovery.
