Cryptocurrency marketplace OpenSea could be the target of a regulatory investigation.
Devin Finzer, the company’s CEO, posted on social platform X Wednesday (Aug. 28) that the Securities and Exchange Commission (SEC) issued a Wells notice against OpenSea.
Wells notices are not formal charges or lawsuits but traditionally one of the final steps before the SEC files charges against a company. They provide a regulatory argument and give the company a chance to respond to the regulator’s allegations.
In this case, Finzer wrote, the SEC is alleging that the non-fungible tokens (NFTs) sold on its marketplace count as securities.
“We’re shocked the SEC would make such a sweeping move against creators and artists,” Finzer wrote in the post. “But we’re ready to stand up and fight.”
OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities.
We’re shocked the SEC would make such a sweeping move against creators and artists. But we’re ready to stand up and fight.
Cryptocurrencies have long…
— Devin Finzer (dfinzer.eth) (@dfinzer) August 28, 2024
The SEC declined to comment when reached by PYMNTS.
The SEC has so far this year sent Wells notices, filed lawsuits or reached settlements with several crypto firms, including ShapeShift, TradeStation and Uniswap, CNBC reported Wednesday. The regulator is also said to be investigating the Ethereum Foundation, that report added.
The SEC has also issued Wells notices to Coinbase and more recently Robinhood, which earlier this month issued its response to the agency.
“But this is a move into uncharted territory,” Finzer wrote in the post on X. “By targeting NFTs, the SEC would stifle innovation on an even broader scale: Hundreds of thousands of online artists and creatives are at risk, and many do not have the resources to defend themselves.”
NFTs, he added, “are fundamentally creative goods,” such as art, collectibles, video game items, domain names or event tickets. Digital art should not be regulated “in the same way we regulate collateralized debt obligations.”
Regulatory compliance remains the elephant in the room for the cryptocurrency sector. Earlier this month, for instance, Pennsylvania-based Customers Bank, one of the only crypto-friendly banks left in the United States, was handed a 13-page regulatory enforcement action by the Federal Reserve.
Although cryptocurrencies are designed to function outside the traditional banking system, the reality is that crypto businesses still depend heavily on banks for a range of essential services.