The U.S. SEC issues Wells notice again, and OpenSea responds strongly.

On August 28th, Devin Finzer, the CEO of the NFT marketplace OpenSea, announced that the company had received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), indicating potential enforcement action. Devin Finzer stated on X platform that the SEC had issued a Wells Notice, alleging that NFTs traded on its platform may be considered unregistered securities. OpenSea is prepared to "fight" against any potential enforcement action and mentioned that the SEC targeting NFTs would stifle innovation on a larger scale, putting hundreds of thousands of digital artists and creatives at risk, many of whom do not have enough resources to protect themselves. NFTs are essentially creative goods: artworks, collectibles, in-game items, domain names, event tickets, etc., and should not be regulated like mortgage-backed securities. It would be a terrible outcome if creators stopped producing digital art due to threats from regulatory authorities. Additionally, Devin Finzer pledged to provide 5 million dollars to help cover legal fees for NFT creators and developers who received Wells Notices. Generally, a Wells Notice does not mean that the SEC will immediately file a lawsuit, but it discloses an investigation into the company. So far this year, the SEC has issued Wells Notices to several crypto companies, including Uniswap, Consensys, and Robinhood. Despite a recent Supreme Court ruling that may limit regulatory agencies' power to crack down on crypto companies, several cases are still pending. The reaction in the crypto industry to Wells Notices has been intense, with almost unanimous support for OpenSea. Tyler Winklevoss, co-founder of the crypto exchange Gemini, stated on X platform: "The SEC is now trying to claim that NFTs are securities. What's next? Baseball cards? Comic books? Gary Gensler's malice towards cryptocurrencies is expanding. Digital Web3 creators and artists are now under attack." Sheila Warren, CEO of the trade organization Crypto Council, stated that the latest round of enforcement regulation is driven by the "anti-crypto army" led by Gary Gensler. We stand with OpenSea and creators worldwide and commend Devin Finzer's leadership. Jake Chervinsky, Chief Legal Officer of Variant Fund, believes that NFTs should not be constrained by laws established decades ago (the Securities Act of 1933). "Financial market regulatory agencies established in the 1930s will have jurisdiction over digital art in the 2020s, which not only defies common sense but also violates the statutory powers of the U.S. Securities and Exchange Commission." Ryan Sean Adams, co-founder of Bankless, expressed concerns about the "future of America" in a lengthy post. "I got into cryptocurrency because I believe it is the greatest freedom technology of our generation. Over the past few years, seeing my country systematically trying to stifle cryptocurrency has been one of my deepest disappointments as an adult. Cryptocurrency will be fine; what worries me is the future of America." Regulatory agencies began intervening in NFTs as early as 2023. In 2023, the SEC first charged the entertainment company Impact Theory with conducting unregistered securities sales, one of the first cases involving NFTs handled by the SEC. The SEC demanded the company to pay over 6 million dollars in illegal proceeds, prejudgment interest, and civil penalties. SEC Commissioner Hester Pierce stated at the time: "This enforcement action raises many thorny issues. The Commission should have addressed these issues long ago and provided guidance when NFTs first began to surge. Some artists and creators have realized that NFTs are in a regulatory gray area in the U.S. In July of this year, two artists who released their works in NFT form filed a lawsuit against the SEC, seeking clarification on whether unregistered digital art would trigger enforcement action, stating that if they continued to sell art without permission, they would face a "real threat of SEC enforcement action." The case is still ongoing. One of the artists suing the SEC, Brian Frye, stated: "The Wells notice against OpenSea is precisely why we filed a declaratory judgment lawsuit against the SEC."