- OpenSea is accused of marketing unregistered securities via its NFT listings.
- The lawsuit follows an SEC Wells notice that warned of probable regulatory action.
Two OpenSea customers, Anthony Shnayderman and Itai Bronshtein, have filed a class-action lawsuit in the United States against the popular NFT marketplace, alleging that it offered unregistered securities in the form of NFTs. The action, filed on September 19 in a Florida federal court, clearly refers to NFTs from collections such as Bored Ape Yacht Club, arguing that these tokens have become worthless due to their illegal status as unregistered securities.
SEC Wells Notices Fuels Concerns
The plaintiffs claim that OpenSea is responsible for regulating its platform and ensuring that NFTs, which they believe meet the definition of securities, are not traded without proper registration. The complaint refers to a Wells notice given to OpenSea by the Securities and Exchange Commission (SEC), which suggests that the platform may face legal ramifications for enabling the trade of unregistered securities.
A Wells notice is a formal statement from the SEC stating that it has completed an investigation and may take enforcement action. The lawsuit also refers to prior SEC lawsuits against NFT ventures such as Stoner Cats 2 and Impact Theory, which were found to have marketed unregistered securities.
OpenSea has denied the charges and stated that the lawsuit’s claims are without merit. An OpenSea spokeswoman said that inventing a fake class-action lawsuit based on our revelation of an SEC Wells notice will not prove the allegations in the complaint. The corporation said it will vigorously defend itself against the charges.
Shnayderman and Bronshtein further claim that the Howey test, a legal framework for determining what constitutes security, applies to NFTs. They maintain that the NFTs they purchased on OpenSea met the conditions for investment contracts since they were investments in a joint enterprise with the expectation of returns from the labor of others.
Furthermore, the plaintiffs argue that OpenSea unfairly profited itself by charging fees for these transactions while knowing or having cause to know that they involved unregistered securities. The plaintiffs’ counsel, the Moskowitz Law Firm, stated a desire to collaborate with OpenSea to develop a well-regulated mechanism for future NFT sales.
