OpenSea has received a Wells Notice from the US Securities and Exchange Commission [SEC]. The regulator intends to sue the NFT marketplace because it believes that NFTs on the platform are securities.
A Wells Notice is a formal communication from regulators that indicates they are considering enforcement actions against an individual or entity.
The notice serves as a preliminary warning, giving recipients an opportunity to respond and present their case before any formal charges are pressed.
Devin Finzer, the Co-Founder and CEO of the platform said,
“We're shocked the SEC would make such a sweeping move against creators and artists.”
Time and again, the regulator has targeted several firms from the crypto space. Coinbase, Binance, Unsiwap, and Ripple Labs have been a few of the many victims.
The OpenSea executive said that with the latest move, the SEC has stepped into an “uncharted territory.” He added,
“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.”
Of late, several NFT-related firms have fallen prey to class-action suits filed by investors. Earlier this year, Dapper Labs agreed to pay $4 million to settle a case against it.
Investors allegedly claimed that Dapper Labs’ NBA Top Shot Moment NFTs were unregistered securities. Getting into a settlement prohibited the plaintiffs from associating the securities tag with the NFTs.
Meanwhile, last month, sports gambling company DraftKings wound up its NFT business owing to “legal developments.” A judge denied the company’s motion to dismiss a class action lawsuit that yet again claimed that the NFTs issued by the company were unregistered securities.
Opensea’s Finzer highlighted that it would be a “terrible outcome” if creators stopped making digital art owing to regulatory saber-rattling. He added,
“We should not regulate digital art in the same way we regulate collateralized debt obligations. But we're ready to stand up and fight.”
OpenSea has also pledged $5 million to help NFT creators and developers who receive a Wells notice to cover legal fees. Finzer exclaimed, “Every creator, big or small, should be able to innovate without fear.”
