Crypto marketplace OpenSea has been added to the SEC’s list of targets, as the regulator extends its crackdown on the sector.
The company’s CEO said in a post on X on Wednesday that the U.S. Securities and Exchange Commission issued a Wells notice against OpenSea.
A Wells notice is typically one of the final steps before the SEC issues formal charges. It generally lays out the framework of the regulatory argument and offers the potentially accused an opportunity to rebut the SEC’s claims.
The letter, according to the OpenSea chief, alleges that the nonfungible tokens, or NFTs, sold on its platform are securities. 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 was “shocked the SEC would make such a sweeping move against creators and artists” but that they are “ready to stand up and fight.”
Finzer calls it a “move into uncharted territory.”
“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,” he added, noting that the company has pledged $5 million to cover legal fees for NFT creators and developers who receive a Wells notice.
OpenSea directed CNBC to a blog post by Finzer, in addition to the social media post. In it, the OpenSea CEO adds that classifying NFTs as securities would “misinterpret the law” and that he is confident his company “operates legally” and that its “users aren’t trading securities.”
So far this year, the SEC has sent Wells notices, filed lawsuits, or reached settlements with a host of crypto firms focused on ethereum and decentralized finance, including ShapeShift, TradeStation and Uniswap. The agency is also reportedly investigating the Ethereum Foundation.
Centralized exchanges and trading platforms Coinbase, Kraken, Binance, and Robinhood have also all been engaged in legal battles with the regulator.
In May, investment platform Robinhood announced it received a Wells notice for the company’s crypto operations. The SEC has also sued Coinbase and Binance. Meanwhile, a California judge on Friday ruled that the commission’s case against Kraken would proceed to trial.
With multiple pending legal challenges from the regulator and enduring uncertainty about the future of crypto regulation in the U.S., some crypto businesses have said they are considering decamping from the country altogether.
SEC chair Gary Gensler has, in multiple interviews, repeatedly shared that he believes much of the industry already belongs under SEC jurisdiction, and its lawsuits are bringing the industry under compliance. Crypto firms argue that the recent legal battles haven’t given the regulatory clarity the industry has been seeking for years.
Republican presidential nominee and former president Donald Trump, who has branded himself as the pro-crypto candidate for president, has pledged to “fire” Chair Gensler from his post, should he win in November.
While the president does not have the power to fire appointed commissioners. Even if Trump were to appoint a new and more crypto-friendly SEC chairman, Gensler would remain a commissioner on the independent agency.