OpenSea Requests SEC to Exclude NFT Exchanges from the Definition of "Securities Exchange" and "Broker".
The leading NFT marketplace OpenSea has just sent an official letter to SEC Commissioner Hester Peirce, calling on the United States Securities and Exchange Commission (SEC) to exclude NFT exchanges from the definition of "securities exchange" under federal law. The letter, drafted by General Counsel Adele Faure and Deputy General Counsel Laura Brookover, emphasizes that the structure and operation of NFT marketplaces are completely different from traditional exchanges.
"NFT marketplaces do not execute trades, do not act as intermediaries, and do not provide a platform where multiple parties simultaneously exchange identical assets in a P2P manner - core elements that constitute an 'exchange'," the legal team argued.
Opposing Broker Regulations for NFT Exchanges
Not only opposing classification as an exchange, OpenSea also rejects any efforts to view NFT platforms as brokers. According to Faure and Brookover, OpenSea and similar platforms do not meet the definition of a "broker" because they do not provide investment advice, do not execute trades on behalf of users, and do not hold customer assets.
OpenSea suggests that the SEC's Crypto Task Force provide informal guidance on the legal status of NFT exchanges, similar to recent guidelines related to memecoins and stablecoins. "When developing these guidelines, the Crypto Task Force should specifically consider the application of exchange regulations to Non-Fungible Assets marketplaces, similar to recent statements about memecoins and stablecoins," the letter clearly states.
OpenSea's stance comes as the SEC has begun to adjust its approach to crypto assets. Recently, the SEC declared that some stablecoins and memecoins are not considered securities, and are exempt from transaction reporting rules if certain conditions are met, with memecoins classified as collectibles.
OpenSea's request for transparency came after the SEC officially concluded its investigation of the company without any legal action and without classifying NFTs as securities assets. CEO Devin Finzer called this "a victory not just for OpenSea but for the entire Web3 community and NFT users".
Nevertheless, the NFT market is currently experiencing a significant decline in trading activity. In 2024, NFT trading volume and number of transactions are at their lowest since 2020, with total trading volume decreasing by approximately 19% and the number of transactions dropping 18% compared to the same period last year.
