The SEC Is Coming for OpenSea, and Hundreds of Thousands of Online Artists Feel Under Attack

Coinbase, Uniswap, Robinhood, Kraken, and Consensys are the names the digital asset industry has grown used to watching receive the dreaded Wells Notices from the United States Securities and Exchange Commission.

Coinbase, Uniswap, Robinhood, Kraken, and Consensys are just a few of the companies that have received Wells Notices from the United States Securities and Exchange Commission. These companies operate digital asset exchanges that offer a wide range of tokens, many of which appear to be investment vehicles that promise future profits thanks to the work of centralized teams. It stands to reason that some of the offerings on these platforms could be classified as securities.

However, a new and surprising name was added to the list last week: OpenSea, the largest online NFT marketplace. Hundreds of thousands of online artists now feel as if they are being targeted. But it's likely that the true artists don't need to be concerned. An NFT project created for the sake of art is probably not the type of project that the SEC is interested in.

The majority of NFTs are not considered securities

Most NFTs are clearly not securities, which came as a major surprise to the SEC—they're just art that people buy and sell. And there is a long history of people—indeed, investors—buying art that the SEC does not classify as a security and therefore does not regulate. As a result, there is little legal basis for the SEC to pursue OpenSea.

NFTs have typically been viewed as a consumer product up until this point, not a financial product, which prevents the SEC from exercising any regulatory authority over them. Of course, there are some exceptions, such as fractionalized ownership in ventures—although OpenSea did attempt to keep projects promising returns off the platform.

Despite these facts, the SEC is looking into filing a case against the NFT marketplace.

The facts support OpenSea and NFT artists

The facts of any case against OpenSea are that the platform generally allows users to buy and sell art, not securities.

The SEC would have no prior experience in pursuing NFT artists. In fact, any and all of the facts argue against categorizing art in any form as a security. It's illogical. Everyone is aware that individuals and organizations purchase and sell art that is not designated as a security. Typically, online NFTs follow this pattern.

Therefore, the SEC will have no legal standing to pursue any potential legislation regarding the majority of the projects on OpenSea.

The SEC will instead concentrate on NFTs that are marketed as investments and promise future profits due to the efforts of an NFT collection's founders rather than individual artists attempting to sell their work online in a novel and interesting way.

The SEC precedent for NFTs is similar to that for tokens

The SEC has established a clear pattern in prior NFT industry cases. The advertising techniques used for the NFTs were crucial to the case, along with the promise of future profits thanks to the work of the NFT collection's team.

Many non-NFT projects functioned as vaporware or vehicles for founders to collect investments, much like during the ICO period when many projects made grandiose promises without actually working on technology. Instead of innovation, many projects were driven by hype, particularly around the potential resale value of the project, which the SEC considers to be a red flag.

NFT initiatives with royalty schemes, revenue distribution, and related programs are likely to be targeted by the SEC. As a result, the majority of NFT artists can relax, leave the legal battle to OpenSea's attorneys, and resume creating.

Those who are attempting more complicated NFT structures must now play a waiting game. Indeed, if there is to be a benefit of the SEC's Wells Notice to OpenSea, it will long at least be for the possibility of regulatory clarity in the realm of NFTs.

Kadan Stadelmann is a blockchain developer, operations security expert, and Komodo Platform's chief technology officer. His experience spans from working in operations security in the government sector and launching technology startups to application development and cryptography. Kadan began his journey into blockchain technology in 2011 and joined the Komodo team in 2016.

The above is the detailed content of The SEC Is Coming for OpenSea, and Hundreds of Thousands of Online Artists Feel Under Attack. For more information, please follow other related articles on the PHP Chinese website!