The United States Securities and Exchange Commission (SEC) has reportedly sent a Wells notice to the OpenSea marketplace, suggesting that non-fungible tokens (NFTs) are securities.
Finzer, CEO of the largest NFT marketplace OpenSea, reported the company had received a Wells notice from the US SEC, suggesting the first potential enforcement action against non-fungible token infrastructure.
Wells notice is a letter that the US securities regulator sends to businesses that potentially violate the securities laws according to the SEC’s preliminary conclusion. Typically, such a letter is followed by an enforcement action. Wells notice serves as a warning, providing the person or the firm involved with the opportunity to supply evidence and arguments as to why the enforcement action should not be brought. The applicable term for objections is about 30 days after receiving the notice.
According to the published statement, Devin Finzer and his firm are determined to stand their ground, believing that “NFTs are fundamentally creative goods” and “We should not regulate digital art in the same way we regulate collateralised debt obligations.”
The SEC has continuously targeted different providers of cryptocurrency services operating in the US. Crypto exchanges like Kraken, Binance, Coinbase, decentralized finance protocol Uniswap, and developers of separate digital assets, e.g. Ripple, have faced legal actions from the SEC with different results. However, the regulator has not previously suggested that NFT assets could be labelled unregistered securities.
The OpenSea CEO expressed his shock at the SEC’s action. “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 said. “It would be a terrible outcome if creators stopped making digital art because of regulatory saber-rattling,” – added Finzer.
The given post on X has received much support from the crypto community. Numerous users compared NFTs to different items of value like antiques, hand-made objects, collection cards, artwork, concert tickets, or vinyl records, stating that the SEC overreached its authority. “Haven’t seen NFT Land come together and be this unified since early-2020,” commented ‘matthew aka niftytime’ from Nifty Gateway Studio.
