On August 28, Eastern Time , OpenSea disclosed that it had received a Wells notice from the U.S. Securities and Exchange Commission (SEC), which means that the top NFT company may be sued for violating securities laws.
There are tens of thousands of collectibles in the NFT market, ranging from on-chain art created by independent artists to digital and "physical" collectibles, as well as PFP projects such as CryptoPunks and Bored Ape Yacht Club, which have accumulated over the past few years. A huge valuation.
This is not the first time the SEC has taken action on the NFT project. In September last year, the NFT animated series Stoner Cats, voiced by many Hollywood stars such as Mila Kunis, reached a settlement with the regulator for US$1 million. The SEC accused the production entity Stoner Cats 2 LLC of conducting an unregistered crypto asset securities issuance.
But the potential lawsuit against OpenSea marks a broader crackdown on such centralized markets.
OpenSea CEO Devin Finzer responded that in order to "ensure that creators can continue to innovate without fear," the company has pledged to provide $5 million to pay legal fees to NFT artists and developers who may receive notices from the US SEC Wells. cost.
The encryption community responded fiercely, with many industry figures publicly speaking out in support of OpenSea.
Tyler Winklevoss, founder of Winklevoss Capital Management and Gemini Exchange, said:
“The SEC is now trying to claim NFTs are securities. What’s next? Baseball cards? Comic books? Gary Gensler’s malicious and un-American war on cryptocurrencies is expanding. Digital web3 creators and artists are now in the crosshairs.”
Sheila Warren, CEO of the Crypto Council, a trade organization, wrote:
"The latest round of regulatory enforcement was initiated by the "anti-crypto currency brigade" GG. We support opensea and creators around the world and commend @dfinzer for his leadership."
Variant FundCLOJake Chervinsky believes that NFTs should not be subject to laws written decades ago (the Securities Act was passed in 1933):
“The SEC has completely lost its opinion. The idea that a financial markets regulator founded in the 1930s would have jurisdiction over digital art in the 2020s defies not only common sense but the SEC’s legal authority. Thanks to Opensea for this Fight for justice".
Gwart, a self-proclaimed “crypto Twitter troll,” discussed the broader implications of the SEC’s crackdown on NFTs:
"If Opensea is the stock exchange, so is Etsy, and all the sellers of wooden art pieces engraved with "Life, Laughter, Love" for $800 should be jailed if consistency is to be maintained." .
Bankless co-founder Ryan Sean Adams wrote an angry essay:
“The SEC is now planning to sue OpenSea on the grounds that NFTs are securities, and apparently Gary Gensler does believe that tokenized Pokemon cards are securities. OpenSea is now the sixth successful U.S. crypto company the SEC has cracked down on this year — and they are cracking down now The FANNGs in the US Crypto Industry: Metamask, OpenSea, Coinbase, Kraken, Uniswap, Robinhood (MOCKUR for short), Gensler are destroying your constitutional right to own cryptocurrencies while attacking our healthiest, most legitimate companies. It’s ordinary American citizens. This is all happening under the Biden administration, and factions in the White House are orchestrating this, and they want to kill cryptocurrencies in the United States.
The audacity of the Biden administration (should we call it the Harris administration?) to do this less than 90 days before the election cannot be overstated, and if they plan to sue a sixth cryptocurrency company before the election What to do about cryptocurrencies after the election? Kamala Harris said nothing about cryptocurrencies.
No, she's not just vice president -- her campaign has huge sway as the presidential election approaches. If they want, they can stop Gensler. So at this point, we have to assume she acquiesced in this happening. If she wins it means she will continue to try to kill the life of crypto in America, enough is enough, I got into crypto because I believe it is the greatest freeing technology of my generation and have seen my home country transform in the past few years. Methodically trying to kill it was one of the deepest disappointments of my adult life.
We have been fighting hard this year. We can’t let our guard down now, cryptocurrencies will be fine — I’m worried about the future of America.”
VC Adam Cochrane:
“This is undoubtedly one of Gensler’s dumbest bets, and another reason why he must step down under any new administration. Obviously NFTs are art, can you sell art as a security? Masterworks can. OpenSea can do that. No? No.
And once their popularity, investment, and revenue decline, the SEC will target them, hoping to eliminate them like a wounded beast at the rear of a herd. If the SEC is concerned that NFTs are securities on OpenSea, then this issue should be addressed to "protect users" when celebrities pose with Bored Ape avatars on talk shows, not now. But if Gary continues to do this, he's going to get his ass kicked in court again because this is his weakest argument yet."
Former CFTC Commissioner Brian Quintenz (now working at a16z):
“The current SEC crusade against the cryptocurrency industry continues. This is in stark contrast to what Vice President Harris said two weeks ago when she announced her economic agenda.
Despite strong bipartisan support for clear crypto regulatory rules in the United States, and clear condemnation of the SEC’s approach to SAB 121 by both the House of Representatives and the Senate, the SEC’s legal war tactics against the industry have not diminished.
Multiple Democratic members of Congress have repeatedly said that a thoughtful legislative approach to cryptocurrencies is far better than arbitrary and capricious legal attacks on the nascent industry.
Vice President Harris needs to not only denounce the SEC’s actions but also lay out a detailed plan for how her future administration will support this innovation while providing customer protections. Now more than ever, she needs to clarify her strategy in this regard. "
Bitcoin holder Jameson Lopp believes that if the SEC’s intention is to protect investors, it is already several years too late.
Roham Gharegozlou, CEO of Dapper Labs, which supports multiple NFT projects, said:
"Non-financial NFTs are clearly not securities, and most legislators we have contacted understand this - we are working to provide legal clarity for NFTs through upcoming legislation in Congress and support OpenSea's fight."
Anthony Scaramucci said Gensler was undermining recent Democratic efforts to forge alliances in the cryptocurrency community, questioning the SEC chairman’s approach: “Gensler wants Harris to lose the election (?)
Some members of Congress and academics also expressed opposition to the SEC's approach
Democratic Representative Wiley Nickel (D-NC) called the SEC a "high-pressure enforcement approach" and criticized the SEC's "excessive use of 'enforcement supervision'", saying it "blatantly abused its power and eroded trust and transparency in the regulatory system."
Wiley Nickel accused the regulator of threatening to "undermine the program of digital innovation in the United States" and called on the SEC to work with Congress to develop "clear and fair regulations" governing digital assets and Web3 technology.
Brian Frye, a law professor at the University of Kentucky who specializes in NFT and securities law, said in an interview with Bloomberg: “The NFT market is exactly the same as the art market, which existed long before the SEC was established, and the SEC has never regulated it. If the SEC considers the art market to be a securities market, it should say so and try to regulate it. If not, it should allow OpenSea to continue to develop.”
