OpenSea CEO Devin Finzer announced that the firm received a Wells Notice from the US Securities and Exchange Commission (SEC) because the regulator considers the NFTs on its platform securities.
In an Aug. 28 statement on X, Finzer expressed surprise at the SEC’s broad action against creators and artists. He stated:
“We’re shocked the SEC would make such a sweeping move against creators and artists. But we’re ready to stand up and fight.”
$5 million fund
Finzer emphasized that the SEC’s move ventures into uncharted territory. He warned that targeting NFTs could stifle innovation on a larger scale, jeopardizing the livelihoods of hundreds of thousands of online artists and creators.
He also noted that many do not have the resources to defend themselves. Due to this, OpenSea is pledging $5 million to help cover legal fees for NFT creators and developers who receive a Wells Notice from the financial regulator.
Finzer argued that NFTs are fundamentally creative products, including art, collectibles, video game items, domain names, and event tickets. He asserted that digital art should not be regulated like financial instruments such as collateralized debt obligations.
The OpenSea CEO expressed concern that regulatory threats could discourage creators from making digital art.
Wells notice
The Wells Notice issued to OpenSea signals a continued regulatory crackdown on digital assets in the US.
Jonathan Mann, also known as Songadayman, recently filed a lawsuit against the SEC regarding its potential treatment of NFTs as securities. He is concerned that the SEC’s approach could stifle creativity and innovation. He told CryptoSlate,
“This is exactly why we are suing. Regulating by enforcement doesn’t work. It’s so unjust.”
A Wells Notice is a preliminary announcement by the SEC indicating its intent to recommend enforcement action. This notice allows the recipient to respond before charges are formally proposed.
Over the past year, the SEC has issued similar notices to several crypto-related firms, including Robinhood, Paxos, and Uniswap Labs. However, the notice to OpenSea is the first directed at an NFT-related company, showing that the regulator is closely scrutinizing NFT markets.
The outcome of this case could set a significant precedent for how NFTs are treated under US securities law, potentially affecting a wide range of digital artists and collectors.
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