Popular NFT marketplace OpenSea has been issued with a Wells notice by the U.S. Securities and Exchange Commission (SEC), as confirmed by CEO and Co-founder Devin Finzer.
This informs OpenSea that the SEC plans to bring enforcement action against them, under the suspicion that OpenSea is facilitating the trading of a security: NFTs.
Via an expanded response published on the OpenSea Blog, Finzer states that he is confident that OpenSea “operates legally”, and that “our users aren’t trading securities when they buy or sell NFTs using our platform.”
In anticipation of top NFT artists and developers being targeted directly, OpenSea has pledged $5M USD towards the legal fees of any individual issued with a Wells notice directly.
What is a Wells notice?
A Wells notice is a letter of intent sent by the U.S. SEC to an affected company, notifying them of the conclusion of an investigation, and that enforcement action against them is likely to follow.
Details of the Wells notice issued to OpenSea have not been disclosed publicly, and therefore the exact substance of the SEC’s complaint, and the amount they are looking to claim, is as yet unknown.
This is the latest in a busy year for the US regulator against the blockchain industry, as they have spent the majority of this year in a legal battle with MetaMask developers Consensys.
What happens next?
OpenSea plan to vigorously defend the legality of their marketplace, and further, that NFTs are not securities.
“Classifying NFTs as securities would not only misinterpret the law, but it would also jeopardize artists’ livelihoods, disempower collectors and gamers, and stifle innovation across the many promising use cases for NFTs,” says Devin Finzer, in the full statement on the OpenSea Blog.
With OpenSea’s $5M pledge to support any NFT artist or developer hit with a Wells notice, it would appear that they believe this could impact the wider industry, and are taking proactive steps to defend both their own operations, and the integrity of the NFT industry as a whole.
Finzer and OpenSea still hope for a change in approach, ending their full statement with the following: “We hope that the SEC will reconsider its stance and approach this issue with the open-mindedness it deserves. Until then, OpenSea remains committed to standing up for our vision of a better internet—one that empowers individuals and fosters creativity, rather than stifling it with unnecessary regulatory burdens.”
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