The US Securities and Exchange Commission (SEC) has issued a Wells Notice to OpenSea, the largest NFT marketplace, alleging that certain NFTs on the platform could be classified as securities under US law.
The company made the announcement on August 28, making OpenSea the latest Web3 company to come under regulators’ scrutiny for alleged securities law violations.
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
The notice claims that NFTs on OpenSea’s platform could be considered securities, reflecting the SEC’s ongoing regulatory actions against the crypto industry.
While the news surprised many, OpenSea leadership quickly vowed to fight back, portraying the case as a defense of creative freedom in digital art.
OpenSea faces possible SEC lawsuit following Wells notice
Wells’ announcement came amid an increasingly aggressive regulatory environment for cryptocurrency and blockchain-related companies.
In the past, the SEC has focused on exchanges like Coinbase and Uniswap, as well as other crypto companies like Kraken and Robinhood.
However, by targeting NFTs – digital assets that represent unique items such as art, collectibles and digital property rights – the SEC is entering new regulatory territory.
According to Devin Finzer, co-founder of OpenSea, this move could have far-reaching consequences for hundreds of thousands of artists, developers and creatives who rely on NFTs to monetize their work.
He expressed concern that treating NFTs as securities would stifle innovation and place an undue burden on small artists and developers, many of whom do not have the means to defend themselves legally.
“It would be a huge loss if artists stopped making digital art because of regulatory pressure,” Finzer said.
He further argued that NFTs are fundamentally creative goods and should not be regulated in the same way as traditional financial instruments.
OpenSea’s future is being questioned by the SEC
OpenSea has played a pivotal role in developing a marketplace for digital art and collectibles. With over 80 million different types of NFTs available for trading, the platform has had a major impact on student artists, indie game developers, and collectors worldwide.
OpenSea has received a Wells notice from the SEC.
We're shocked that the SEC would make a move that threatens creators and artists, and we're ready to stand up and fight for our industry. https://t.co/7FyFH3NLdm
— OpenSea (@opensea) August 28, 2024
To support its community, OpenSea announced a $5 million fund to cover legal fees for NFT creators and developers who may be affected by similar SEC actions.
Finzer stressed that OpenSea is ready to “stand up and fight” to protect its industry from what it perceives as regulatory overreach.
This year alone, more than two well-known crypto companies have been sued by the SEC, with each case starting with a Wells announcement.
In April, Uniswap Labs, the creator of the decentralized exchange Uniswap and the issuer of the UNI token, also received a Wells notice but vowed to fight back.
Finzer expressed hope that the SEC would reconsider its position and take a more open approach toward digital assets.
