US SEC issues notice to OpenSea over pits and NFTs under threat

x.com/dfinzer” target=”_blank” rel=”noopener”>Devin FinzerCEO and co-founder of nft marketplace OpenSea, x.com/dfinzer/status/1828791832009953706″ target=”_blank” rel=”noopener”>has confirmed who have received a Wells Notice from the U.S. Securities and Exchange Commission (SEC).

A Wells Notice is a letter sent by the SEC at the conclusion of an investigation, notifying the company in question that the agency plans to take enforcement action against it.

Finzer shared his initial reaction on x, and OpenSea later published an expanded response from Finzer and, anticipating that top artists and developers will also receive notice from Wells, OpenSea will pledge to donate $5 million to cover legal fees should such a situation arise.

What is a Wells Notice?

As explained, a Wells Notice is a letter of intent sent by the U.S. SEC to notify you that an investigation has been concluded and that enforcement action is likely to be taken.

The details of Wells’ notice have not been made public, though in Finzer’s initial response to x, he states that the SEC is “threatening to sue us.” The exact content of the SEC’s complaint and the amount they intend to claim are not yet available.

This isn't the first time the SEC has been involved in a legal exchange with a Web3 company. Consensys, the developers of the MetaMask wallet, have been at odds with the U.S. SEC for most of 2024, and the SEC has reached settlements with two nft issuers in the past: Impact Theory and x.com/stonercatstv” target=”_blank” rel=”noopener”>Drug addicted cats.

What does this mean for nfts?

OpenSea has made it clear that it plans to vigorously defend its stance that nfts are not securities.

“Classifying nfts as securities would not only be a misinterpretation of the law, but would also jeopardize artists’ livelihoods, disempower collectors and gamers, and stifle innovation in the many promising use cases for nfts,” Finzer’s statement reads in part on OpenSea’s website.

However, with OpenSea promising to donate $5 million to support any artist or developer who is also affected by a Wells notification, it's clear that they're taking this incredibly seriously and looking out for not just their own interests, but the interests of the industry as a whole.

Finzer concluded his statement with the following: “We hope that the SEC will reconsider its stance and approach this matter with the open-mindedness it deserves. Until then, OpenSea remains committed to upholding our vision for a better Internet – one that empowers people and fosters creativity, rather than stifling it with unnecessary regulatory burdens.”