OpenSea, a major non-fungible token (NFT) marketplace, has received a Wells notice from the U.S. Securities and Exchange Commission (SEC). This indicates the SEC’s intention to sue the platform, as it considers the NFTs sold on the platform as securities.
Devin Finzer, co-founder and CEO of OpenSea, disclosed this development in an X (Twitter) post on August 28. He wrote, “We’re shocked the SEC would make such a sweeping move against creators and artists,” and added that OpenSea is prepared to “stand up and fight.”
Finzer also pointed out that targeting NFTs as securities could have serious consequences for many creators and collectors, as they may lack the resources to defend themselves in legal battles.
In response, Finzer announced that OpenSea would pledge $5 million to help cover legal fees for NFT creators and developers who may receive similar Wells notices from the SEC.
Finzer argued that NFTs should not be regulated in the same way as traditional financial instruments like collateralized debt obligations. He described NFTs as “fundamentally creative goods: art, collectibles, video game items, domain names, event tickets, and more.”
The question of whether NFTs should be classified as securities has been a topic of ongoing debate. Recently, in light of the increasing regulatory scrutiny, two artists filed a lawsuit against the SEC, seeking clarification on whether NFTs should be considered securities, and whether creators need to register their assets and disclose potential risks to buyers.
Several companies have already faced legal challenges related to NFTs. On July 31, DraftKings ended its Reignmakers NFT game and marketplace due to legal concerns related to NFTs being considered unregistered securities.
In August, the SEC took its first enforcement action in the NFT sector against Impact Theory, a Los Angeles-based media company. It was fined $6.1 million for offering unregistered NFT securities known as “Founder’s Keys.”
In September, the SEC also penalized the Stoner Cats NFT project with a $1 million fine for selling unregistered securities. More recently, Dapper Labs settled a lawsuit over its NBA Top Shot NFTs, agreeing to pay $4 million.
These legal challenges and uncertainties have raised concerns not only among individual artists and collectors but also among major companies, some of which have already taken steps to reduce their involvement in the space.
For example, Starbucks ended its NFT rewards beta program, Odyssey, in March 2024, and GameStop shut down its NFT marketplace in January 2024 after two years of operation.
