In this illustration, the OpenSea logo is displayed on a smartphone with stock market percentages behind it.
Omar Marques | Lightrocket | Getty Images
Cryptocurrency exchange OpenSea has been added to the SEC’s target list as the regulator expands its crackdown on the sector.
The company’s general director said in a post on X On Wednesday, the U.S. Securities and Exchange Commission issued a notice of action against Wells OpenSea.
The Wells notice is typically one of the final steps before the SEC files formal charges. The notice typically outlines the framework of the regulatory argument and provides the potential defendant with an opportunity to rebut the SEC’s claims.
The letter alleges that non-fungible tokens, or NFTs, sold on its platform are securities, according to OpenSea’s director. OpenSea is a popular platform that allows users to create, sell, and buy NFTs.
OpenSea CEO Devin Finzer wrote in a post that the company is “shocked that the SEC is taking such a strong action against creators and artists” but that they are “ready to stand up and fight.”
Finzer calls it “a step into uncharted territory.”
“By targeting NFTs, the SEC will stifle innovation at a much broader scale: hundreds of thousands of artists and online creators are at risk, and many do not have the resources to protect themselves,” he added, noting that the company has pledged $5 million to cover the legal costs of NFT creators and developers who receive Wells’ notice.
OpenSea directed CNBC to a blog post from Finzer, in addition to the social media post, in which the OpenSea CEO added that classifying NFTs as securities would be a “misreading of the law” and that he believes his company is “operating legally” and that “users are not trading securities.”
So far this year, the SEC has sent notices to Wells, filed lawsuits or reached settlements with several cryptocurrency companies focused on ethereum and decentralized finance, including ShapeShift, TradeStation and Uniswap. The agency also reported Investigation into the Ethereum Foundation.
Exchanges and centralized exchanges CryptocurrencyKraken, Binance and Robinhood has also been involved in legal battles with regulators.
In May, investment platform Robinhood announced it had received a notice from Wells about the company’s cryptocurrency activities. The SEC has also sued Coinbase and Binance. Meanwhile, a California judge ruled Friday that the commission’s lawsuit against Kraken will proceed to trial.
With multiple legal challenges pending from regulators and lingering uncertainty about the future of cryptocurrency regulation in the United States, some crypto businesses say they are considering leaving the country.
SEC Chairman Gary Gensler has said in multiple interviews that he believes much of the industry already falls under the SEC’s jurisdiction and that SEC lawsuits are forcing the industry into compliance. Cryptocurrency companies say recent legal battles have not brought the regulatory clarity the industry has sought for years.
Republican presidential candidate and former president Donald Trump, who has positioned himself as a pro-crypto candidate for president, has pledged to “fire” Chairman Gensler from his position, if he wins in November.
While the president does not have the power to fire appointed commissioners, even if Trump appoints a new, more crypto-friendly SEC chairman, Gensler would remain a commissioner of the independent agency.
