NFT Marketplace OpenSea Under Fire for Allegedly Selling Unregistered Securities
NFT Marketplace OpenSea – Two users of the popular NFT marketplace OpenSea have filed a class-action lawsuit in the United States, alleging that the platform sold unregistered securities in the form of non-fungible tokens (NFTs). The plaintiffs, Anthony Shnayderman and Itai Bronshtein, filed their suit on Sept. 19 in a federal court in Florida, arguing that NFTs they purchased on OpenSea, including from the once prestigious Bored Ape Yacht Club collection, are now worthless due to their supposed illegal nature.
OpenSea’s Wells Notice and SEC Scrutiny
In their legal claim, Shnayderman and Bronshtein pointed to OpenSea’s recent disclosure of a Wells notice from the U.S. Securities and Exchange Commission (SEC). A Wells notice is a formal communication from the SEC, indicating that the agency has conducted an investigation and may soon bring an enforcement action. According to the plaintiffs, this notice implies that OpenSea could be held liable for facilitating the exchange of unregistered securities in violation of U.S. law.
Previous SEC Actions Against NFT Projects
The lawsuit also cites two recent SEC enforcement actions against NFT projects, Stoner Cats 2 and Impact Theory, both of which were found to have conducted unregistered securities sales. The plaintiffs argue that these cases set a precedent, further suggesting that OpenSea’s NFT offerings could be classified as unregistered securities.
The Howey Test and NFT Investment Contracts
A key part of the plaintiffs’ argument relies on the Howey test, a legal standard used to determine whether a financial transaction qualifies as an investment contract under U.S. securities law. Shnayderman and Bronshtein claim that the NFTs they purchased on OpenSea meet the criteria of the Howey test: they invested in a common enterprise and expected profits based on the efforts of others, which they say makes the NFTs investment contracts and, therefore, securities.
Allegations of Deception and Unjust Enrichment
The lawsuit alleges that OpenSea’s NFT listings were deceptive, misleading Shnayderman and Bronshtein into buying worthless and unlawful unregistered securities. The plaintiffs argue that OpenSea had represented that it moderates the NFTs on its platform, which includes vetting for real-world financial instruments such as securities. Moreover, the suit claims that OpenSea unjustly enriched itself by charging transaction fees on these sales, knowing—or at least suspecting—that the NFTs were unregistered securities.
Legal Representation and Industry Implications
In an emailed statement to Cointelegraph, Adam Moskowitz, managing partner of The Moskowitz Law Firm and counsel for the plaintiffs, emphasized the need for regulatory clarity in the NFT space. He stated, “With today’s ever-changing regulation, there should be a process to sell NFTs in a well-regulated environment.” Moskowitz also expressed optimism about working with OpenSea to develop a more transparent and structured process for selling NFTs that benefits both consumers and the crypto industry.
OpenSea’s Response
As of the time of writing, OpenSea has not issued a public response to the lawsuit or to the specific claims regarding the alleged sale of unregistered securities.
Final Thoughts: The Future of NFTs and Regulation
This lawsuit is yet another reminder of the regulatory uncertainty surrounding NFTs and the broader crypto market. While NFTs have seen a surge in popularity and financial speculation over recent years, the legal classification of these digital assets remains a contentious issue. As the SEC continues to take action against unregistered securities in the NFT space, platforms like OpenSea may need to adapt their business models to ensure compliance with existing laws.
This case will likely be closely watched by the crypto community and could have significant implications for the future of NFT marketplaces, regulatory frameworks, and investor protection.
FAQ: OpenSea Class-Action Lawsuit
What is the basis of the lawsuit against OpenSea?
The lawsuit alleges that OpenSea sold unregistered securities in the form of non-fungible tokens (NFTs), making the NFTs purchased by the plaintiffs worthless due to their illegal nature.
Who are the plaintiffs in the case?
The plaintiffs are Anthony Shnayderman and Itai Bronshtein, who filed the class-action lawsuit in a federal court in Florida on September 19.
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