- OpenSea said it received a Wells notice from the SEC.
- 'They believe NFTs on our platform are securities,' CEO Devin Finzer said.
- The crypto community is aghast at the potential case.
OpenSea, one of the world’s largest marketplaces for NFTs, said on Wednesday that it was subject to pending litigation from the US Securities and Exchange Commission.
“OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities,” co-founder and CEO Devin Finzer wrote on X.
The agency may be poised to require OpenSea ensure some of the NFTs for sale on its site are registered as securities under the same laws that govern stocks and bonds.
That would be consistent with the lawsuits the SEC has filed against Coinbase, Binance, and Kraken.
Looming action
The SEC sends Wells notices to targets of investigations and they are typically an indication the agency is about to file an enforcement action.
A spokesperson for the SEC said the agency would not comment on the “existence or nonexistence of a possible investigation.”
The development is the latest in the securities regulator’s three-year campaign to rein in the crypto industry.
In April, Uniswap Labs, the company behind the eponymous decentralised exchange, said it had received a Wells notice, suggesting the SEC was on the cusp of filing its first lawsuit against a major player in decentralised finance.
The SEC has not filed a lawsuit against the company.
Last year, the SEC sued NFT issuers Impact Theory and Stoner Cats 2. It alleged that their NFT sales resembled the stock market debuts of traditional companies.
The companies settled and agreed to pay millions in fines and to destroy any NFTs still in their possession.
Two artists
Two artists who release their work as NFTs filed a preemptive lawsuit against the agency in July, saying they face “a genuine threat that the SEC will bring an enforcement suit” if they continue to sell artwork without its permission.
“This Wells notice against OpenSea is exactly why we filed our declaratory judgement action against the SEC,” Brian Frye, one of the artists suing the SEC, told DL News on Wednesday.
His co-plaintiff, the musician Jonathan Mann, echoed the sentiment.
“Suing OpenSea is like suing eBay for selling trading cards, or Sotheby’s for selling art,” he told DL News. “It shows that the SEC’s sole rubric for deciding if something is a security is: ‘is it on a blockchain?’”
OpenSea said it would set aside $5 million to cover the legal fees of any NFT artists or developers who receive a Wells notice.
Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.
