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Securities And Exchange Commission Sets Its Sights On NFTs As “Securities” In Emerging OpenSea Lawsuit

Updated: Sep 30




As reported by TheStreet via Yahoo Finance, the U.S. Securities and Exchange Commission (SEC) has issued a warning to OpenSea, a prominent non-fungible token (NFT) marketplace, signaling a potential lawsuit over alleged violations of securities laws. This development has sparked backlash from the crypto community and Democratic congressman Wiley Nickel, who criticized the SEC's actions as a "blatant abuse of power" through regulatory enforcement.


So far, the SEC has maintained ambiguity regarding the classification of NFTs, leading many NFT marketplaces to operate under the assumption that NFTs are not within the SEC's regulatory scope. However, targeting OpenSea suggests the SEC's intentions to assert authority over NFTs, potentially disrupting numerous businesses built around digital collectibles.


OpenSea CEO Devin Finzer | Source: LinkedIn

OpenSea CEO Devin Finzer took to social media to disclose the SEC's issuance of a Wells Notice, a precursor to potential enforcement actions. His announcement garnered support from the crypto industry, which perceives the SEC's actions as unfounded attempts to suppress an industry under siege.


Critics argue that classifying NFTs as securities is akin to treating physical artworks the same way, contradicting established legal norms.




Brian Frye, an NFT and securities law expert at the University of Kentucky, likened the NFT market to the art market, asserting that the SEC should either regulate both or refrain from intervening. 


“The NFT market is identical to the art market, which existed long before the SEC was created and which the SEC has never regulated,” Brian Frye, an NFT and securities law expert at the University of Kentucky, stated to Decrypt in an interview. “If the SEC thinks the art market is a securities market, it should say so and try to regulate it. If not, it should leave OpenSea alone.”


In response, OpenSea has declared its commitment to challenging the SEC's classification and has pledged $5 million to support independent artists, creators, and developers who might face legal entanglements due to the SEC's actions.




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