OpenSea Faces SEC Action Over Unregistered Securities Allegations

OpenSea, one of the largest NFT marketplaces, has said it received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), signaling the regulator’s intent to bring a lawsuit against the company for allegedly offering unregistered securities.

On Wednesday, OpenSea CEO Devin Finzer disclosed the notice in a blog post on the company’s website, asserting that the SEC’s targeting of tokens traded on its platform threatens the “creative expression” of its sellers.

The SEC has been clamping down on the crypto industry, bringing enforcement actions against major players like Kraken, Coinbase, Consensys, and Uniswap. The SEC previously charged Impact Theory LLC and Stoner Cats 2 LLC for similar offenses, with the latter agreeing to a $1 million fine.

In response to the Wells Notice, Finzer criticized the decision of the 2021 Stoner Cats case targeting the sale of NFTs for funding an adult animated television series, expressing concern over the SEC’s aggression toward digital collectibles and the companies overseeing their trading. OpenSea pledged $5 million to support legal defenses for NFT artists and other online developers who are vulnerable to similar actions.

“By targeting NFTs, the SEC would stifle innovation on an even broader scale: hundreds of thousands of online artists and creatives are at risk, and many do not have the resources to defend themselves,” Finzer said in an online statement, dismissing the government’s motives as “regulatory saber-rattling.”

He added: “We should not regulate digital art in the same way we regulate collateralized debt obligations.”