SEC Wells notice targets NFTs on OpenSea

OpenSea received a Wells notice from the Securities and Exchange Commission regarding NFTs being traded and sold on the platform. 

The NFT marketplace CEO Devin Finzer said in a post on X that the company is “ready to stand up and fight.”

“OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities,” Finzer said. “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.”

A Wells notice doesn’t mean that the SEC will file a complaint against the company, but it discloses an investigation into the firm.

So far this year, the SEC has targeted a handful of crypto companies with Wells notices, including Uniswap, Consensys and Robinhood. 

Read more: A busy crypto lawsuit season looms

“NFTs are fundamentally creative goods: art, collectibles, video game items, domain names, event tickets, and more,” Finzer continued. “We should not regulate digital art in the same way we regulate collateralized debt obligations.

“…By targeting NFTs, the SEC is diving into new, uncharted waters, with potentially harmful consequences for consumers, creators and entrepreneurs alike,” OpenSea said in a blog post. “We’re confident that OpenSea operates legally and that our users aren’t trading securities when they buy or sell NFTs using our platform.”

The SEC didn’t immediately return a request for comment. 

OpenSea will also pledge $5 million to “help cover legal fees for NFT creators and devs that receive a Wells notice.”

“Classifying NFTs as securities would not only misinterpret the law, but it would also jeopardize” the livelihoods of artists, OpenSea argued.

Earlier this summer, two NFT creators filed a lawsuit against the SEC seeking clarity on the regulator’s approach to NFTs. The case is still ongoing. 

Jonathan Mann and Brian Frye filed the suit out of “deep frustration” against the lack of clarity.

“It would be crazy to think that Bob Dylan, Janis Joplin, the Rolling Stones, Ray Charles, Jimi Hendrix, Madonna or Louisiana’s own Louis Armstrong should have retained attorneys to examine the SEC’s Form S-1 to see how to register their music for sale to the general public,” the complaint said.

Updated August 28, 2024 at 10:13 am ET: Added comments from OpenSea.

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