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NFT marketplace OpenSea has received a Wells Notice from the U.S. SEC, signaling potential legal action against the web3 startup. The Securities and Exchange Commission has been intensifying its scrutiny of crypto service providers, and OpenSea, a major Ethereum-based digital collectible trading platform, is now under its radar.
SEC investigators issue Wells Notices as a step before potential lawsuits, though not all notices lead to legal actions. On August 28, OpenSea CEO Devin Finzer informed the community about the notice, asserting that the company is prepared to contest the SEC’s stance, which he believes hampers innovation and unfairly targets numerous creators.
We should not regulate digital art in the same way we regulate collateralized debt obligations.
Finzer has voiced concerns shared by the crypto community about the SEC’s stringent approach to cryptocurrencies and now non-fungible tokens (NFTs). He emphasized that NFTs are fundamentally different from traditional investment contracts typically overseen by the SEC.
In a post on social media, Finzer highlighted that OpenSea plans to align with other major crypto entities such as Coinbase, Consensys, Kraken, Robinhood, and Uniswap in addressing the SEC’s investigations and securities allegations.
Additionally, Finzer announced that OpenSea has allocated $5 million to a legal fund aimed at supporting creators and developers affected by the SEC’s Wells Notice.
It would be a terrible outcome if creators stopped making digital art because of regulatory saber-rattling.
Over the past two years, the SEC has initiated lawsuits against various crypto-related entities, including NFT projects like Ashton Kutcher and Mila Kunis’ Stoner Cats. However, this marks the first instance of federal prosecutors examining a digital collectibles trading platform.
OpenSea has received a Wells Notice from the SEC, which suggests that NFTs on their platform might be considered securities. The company expressed surprise at the SEC’s broad actions against creators and artists but affirmed their readiness to contest the allegations.
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