The U.S. Securities and Exchange Commission (SEC) sets its targets on the digital art world, declaring it will sue the NFT marketplace OpenSea. In a bold move that surprises the crypto community, OpenSea was handed a Wells notice by the regulator on Aug. 29.
OpenSea’s co-founder and CEO Devin Finzer said he was stunned by the SEC’s sweeping move against creators and artists. The regulator argues that the NFTs on the platform are securities a position Finzer vehemently opposes. “NFTs are fundamentally creative goods,” he argued, giving instances such as art, collectibles, and event tickets.
As a reaction to this, OpenSea has decided to set aside $5 million to support legal costs for NFT artists and developers who have received Wells notices. Finzer, however, did not hesitate to bring attention to the possible chilling effect on innovation, giving the examples of student artists working full-time and indie game developers getting a benefit from NFT markets.
Expert’s perspective on OpenSea challenging SEC
Crypto expert Adam Cochran provided useful information via X post. He asserts that OpenSea could challenge the SEC in a manner that would be unique to them. He suggested that the firm file a writ of mandamus, which would force the regulator to either stop the investigation or make it cover traditional collectibles sellers such as Amazon, Walmart, and Disney.
Cochran has accepted that this way is a long shot but at the same time presented precedents such as Massachusetts v. EPA (2007) and FCC v. Fox Television Stations, Inc (2009) that could use to support OpenSea’s position. He thinks that the sudden attention the SEC gives to digital collectibles, without policy changes, may imply a violation of well-known legal principles.
The crypto industry has had to deal with regulatory uncertainty for a long time. Companies such as Coinbase, Uniswap, and Kraken having to face similar problems. Nevertheless, the SEC’s move against NFTs marks a new level of enforcement. It can cover a wider group of creators and innovators. However, the outcome of this could be the reason for a great change in NFTs future.
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