OpenSea, one of the leading NFT marketplaces, is preparing for a lawsuit with the United States Securities and Exchange Commission (SEC).
OpenSea, one of the leading NFT marketplaces, is preparing for a lawsuit with the United States Securities and Exchange Commission (SEC). The platform's co-founder and CEO, Devin Finzer, revealed on Wednesday that the company has received a Wells Notice from the SEC, signaling the regulator's intent to bring enforcement action against the platform. The central issue: whether NFTs, or non-fungible tokens, should be classified as securities.
Finzer announced, "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."
The potential lawsuit raises questions about which NFT collections on OpenSea might be targeted. The marketplace hosts a vast array of digital assets, from independent on-chain artworks to high-profile profile picture (PFP) projects like CryptoPunks and Bored Ape Yacht Club, both of which have attracted significant speculative interest and high valuations. Despite this, neither the SEC nor OpenSea has provided specific details about the collections under scrutiny.
In response to the SEC’s actions, OpenSea has pledged $5 million to cover legal fees for NFT artists and developers who might also face similar challenges from the regulator. Finzer emphasized that this fund is intended to support creators who could be unfairly targeted, ensuring they can continue innovating without fear of legal repercussions.
This isn’t the first time the SEC has pursued an NFT-related case. Last September, the agency settled with the creators of Stoner Cats, an NFT-based cartoon series, for $1 million. The SEC's reasoning in that case revolved around the creators’ promotion of the NFTs as resellable assets, which the regulator interpreted as a sign of their potential as unregistered securities.
However, the application of securities law to NFTs is fraught with complexity. Critics argue that NFTs, particularly those representing digital art, are more akin to collectibles or fine art—categories that have never fallen under SEC regulation. Brian Frye, a law professor at the University of Kentucky specializing in NFTs and securities law, challenged the SEC’s stance, stating, "The NFT market is identical to the art market, which existed long before the SEC was created and which the SEC has never regulated. If the SEC thinks the art market is a securities market, it should say so and try to regulate it. If not, it should leave OpenSea alone."e
This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators.
This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice.
The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
