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OpenSea CEO Devin Finzer announced that the company has received a Wells Notice from the U.S. Securities and Exchange Commission (SEC) because the regulator is considering NFTs as securities on its platform.
On Aug. 28 on X, Finzer expressed surprise at the SEC’s sweeping crackdown on creators and artists. He said:
“We are shocked that the SEC would take such drastic action against creators and artists. But we are ready to stand up and fight.
$5 million fund
Finzer stressed that the SEC’s decision ventures into uncharted territory. He warned that targeting NFTs could stifle innovation on a larger scale, putting the livelihoods of hundreds of thousands of artists and online creators at risk.
He also pointed out that many don’t have the resources to defend themselves. For that reason, OpenSea is pledging $5 million to help cover the legal fees of NFT creators and developers who receive a Wells notice from the financial regulator.
Finzer argued that NFTs are fundamentally creative products, including artwork, collectibles, video game items, domain names and event tickets. He argued that digital art should not be regulated like financial instruments such as collateralized debt obligations.
OpenSea’s CEO expressed concern that regulatory threats could discourage creators from creating digital art.
Well Notice
Wells’ notice to OpenSea signals continued regulatory crackdown on digital assets in the United States.
A Wells Notice is a preliminary announcement by the SEC indicating its intention to recommend enforcement action. This notice allows the recipient to respond before a fee is formally proposed.
Over the past year, the SEC has issued similar notices to several crypto-related companies, including Robinhood, Paxos, and Uniswap Labs. However, the notice to OpenSea is the first to an NFT-related company, showing that the regulator is keeping a close eye on NFT markets.
The outcome of this case could set an important precedent for how NFTs are treated under U.S. securities law, potentially affecting a broad range of digital artists and collectors.
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