OpenSea slams Wells announcement, crypto community reacts

• OpenSea founder Devin Finzer revealed that the company received a Wells notice from the SEC.
• The announcement states that the SEC is seeking legal action against OpenSea, claiming that the NFTs sold on its platform are securities.
• Members of the crypto community have criticized the SEC for claiming that NFTs are securities.

OpenSea revealed on Wednesday that it was hit with a Wells notice from the Securities & Exchange Commission (SEC). The company claimed that the regulator claimed that non-fungible tokens (NFTs) on its platform were securities. The report led to an outcry from members of the crypto community who have expressed concern about the SEC’s crackdown approach to the crypto industry in recent months.

OpenSea joins the list of crypto companies under fire with the Wells notification

NFT marketplace OpenSea disclosed on Wednesday that it received a Wells notification from the SEC regarding the sale of NFTs on its platform. The company’s CEO, Devin Finzer, initially announced the development on the X platform, indicating that the announcement came as a shock to the company.

A Wells Notice is a document indicating that the SEC has concluded its investigation of a company and intends to take enforcement action. It also allows the accused to respond to the regulator’s claims before enforcement action is taken.

Devin revealed that the announcement suggests the SEC considers the NFTs on its platform to be securities and affirms the company’s willingness to “stand up and fight.” He argues that the SEC’s probe into the NFT community is “a move into uncharted territory” and could hurt innovation on a larger scale, putting artists at risk.

“It would be a terrible outcome if creators stopped producing digital art because of regulatory saber rattling,” Devin added.

In line with their determination to fight, OpenSea has pledged to commit $5 million in legal support to NFT creators and developers who may encounter a Wells notice during the process.

Members of the crypto community have not been silent on the matter, as many have expressed displeasure with the SEC’s claim that NFTs are securities. Some also argue that this is a political agenda by the SEC, citing that Donald Trump only revealed his NFT cards yesterday. Other key industry voices also added their views on the SEC’s action.

Brian Quintenz, Global Head of Policy at a16z, posted:

“The news that OpenSea received a Wells notice shows plain and simple that the SEC’s current crusade against the crypto industry continues unabated.”

Nick Ducoff, Head of Institutional Growth at the Solana Foundation, added:

“As a securities attorney, I am of the opinion that the SEC should not have sent OpenSea a notice to Wells. As a stoic, I think OpenSea shouldn’t be shocked that the SEC did it.”

Uniswap Labs CEO Hayden Adams added:

“In crypto an SEC Wells notification means you are a legitimate company building an important product in the US. SECs are clowns who adopt the idiotic attitude that digital art magically turns into a security when put on a blockchain.”

Meanwhile, OpenSea saw a steady decline in revenue from the NFT craze in 2021. Revenue fell from $365 million in 2021 to around $171 million in Q2 2024, reflecting less activity from creators.

Additionally, its trading volumes hit record lows last year, falling from $14 billion in 2021 to around $49 million in October 2023.

Open Sea’s Well notice places it among other crypto companies that have recently faced legal action from the SEC, including Kraken, Uniswap, Coinbase, Robinhood, and Binance.

SEC Chairman Gary Gensler has repeatedly suggested that much of the crypto industry falls under his agency’s purview. However, the Commodity & Futures Trading Commission (CFTC) has argued otherwise, stating that several key cryptocurrencies are commodities.