SEC Threatens Legal Action Against NFT Marketplace OpenSea

U.S. Securities and Exchange Commission (SEC) has issued a Wells notice to OpenSea, the leading non-fungible token (NFT) marketplace, threatening legal action over alleged securities violations. The SEC contends that NFTs traded on OpenSea's platform may constitute securities, a move that could have far-reaching implications for the digital art and collectibles industry. OpenSea CEO Devin Finzer denounced the SEC's action as an overreach that could stifle innovation and harm creators. The company pledged $5 million to cover legal fees for NFT creators and developers who receive Wells notices.

NFT = Art

[brunes69]

It doesn't matter whether or not you buy into the NFT hype or not. They aren't any more a "security" than a painting.

If the SEC goes forward with this, they had better be prepared to serve the same notice against Sothebys.

Re:NFT = Art

[pak9rabid]

Except it isn't a painting, it's a certificate for ownership of said painting (to use your analogy), which could very easily be looked at as a security.

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[account_deleted]

Comment removed based on user account deletion

Re:NFT = Art

[Dragonslicer]

Holding a certificate of ownership doesn't prove ownership either, it just proves that you have a piece of paper. A certificate of ownership is a good analogy for NFTs (I've also used certificate of authenticity as an analogy); you're buying a piece of paper, not the thing described by the piece of paper.

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[BringsApples]

I'm trying to extrude what you're saying out into the world where a deed or a title of a vehicle matters.

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[Dragonslicer]

If you break into somebody's house and steal the title for their car, do you now legally on their car?

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[Dragonslicer]

Own their car, that is.

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[classiclantern]

Sotheby's is an intermediary between a buyer of a real object and the seller of a real object. The moment Sotheby's starts buying a virtual Rembrandt and selling it at an inflated price, then the SEC should step-in and shut the place down. The link only tells OpenSea's side of the story so it is impossible to make any kind of judgment one way or the other.

Re:

[brunes69]

You mean like this?

https://www.sothebys.com/en/de... [sothebys.com]

Saying something is "real" because it is on a piece of cheap canvas and something is "fake" because it is digital is incredibly arbitrary.

Art is widely used as a funnel for money laundering and speculation. EVERYONE knows this.

Re:NFT = Art

[DarkOx]

I am not sure I agree here. I don't generally have much love for the SEC and am generally inclined to take a pretty limiting view of their authority.

However the reason we have courts is to answer questions like what is and isnt a security.

"[a]n instrument that evidences the holder's ownership rights in a firm (e.g., a stock), the holder's creditor relationship with a firm or government (e.g., a bond), or the holder's other rights (e.g., an option)." Black's Law Dictionary

I am not sure than an NFT isn't a security. First Black's law diction isn't us code; which has a more expansive definition, https://www.law.cornell.edu/us... [cornell.edu]. Even if we work with blacks law definition and just swap firm for something like entity; it could be a security IMHO.

Its not like a painting, the NFT isn't even the original image, it isn't even a signature added to the image, its a signature in a separate 'ledger' which asserts some sort of ownership right, to what if anything besides the ledger entry itself we can also all argue about in court. In any case I think an NFT is a way more like a certificate of title, than it is like a painting..

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[account_deleted]

Comment removed based on user account deletion

Re: NFT = Art

[Midnight_Falcon]

Usually, people own a painting or artwork themselves and don't own a small percentage of art as part of a collective. But with NFTs you can split up ownership of an item you don't possess and won't be allowed to even see, like the Wu-Tang album Once Upon a Time in Shaolin. The owner PleasrDAO is essentially a small corporation with eight full time employees. It starts to look a lot more like owning stock than owning art. Just like stock, when you add the DAO layer it's a human invention that lets you sell something in small pieces.

I thought NFT meant "Not Fucking Today".

[mmell]

Oh, wait . . .

Re:

[awwshit]

Not Fucking There

I looked in my NFT and the Art I purchased was Not Fucking There.

War on Crypto

[bill_mcgonigle]

Look at how the crowd goes wild when they're promised that SEC Chair Gensler will be fired on Day 1:

https://m.youtube.com/watch?v=... [youtube.com]

The idea that buying stupid art on OpenSea gives anybody voting rights or a bankruptcy creditor position is at the level where a five year old would call it retarded.

awkward defense best defense

[SethJohnson]

While OpenSea and everyone else involved in the NFT charade want to promote the concept as a moneymaking "investment," perhaps the best defense against scrutiny by the SEC would be to present the truth. There are exactly zero NFT's which have appreciated in value. The SEC can't regulate NFTs as a security when they have no potential for profit or generating interest.

Instead, I predict OpenSea will keep quiet on this detail and just pay whatever the fine will be.

call it what it is

[awwshit]

We need to start calling NFTs and maybe all crypto Collectibles and stop calling them currency or investments. Sure, you can invest in Collectibles but unless you are really good at it and have a long term plan there are better ways to invest.

https://www.investopedia.com/t... [investopedia.com]

Beware of artificial scarcity when investing in collectibles. Looks at the history of baseball cards and rare cards.

It's a good first step, although long overdue

[Arrogant-Bastard]

It's abundantly clear that these NFT "companies" are attempting to have it both ways: NFTs are securities (when they're marketing them) but not securities (when the SEC wants to enforce the law).

It's also clear that the biggest use cases for NFTs are fraud and money laundering. (Money laundering can also be done with physical objects, e.g.: art, exotic cars, yachts, etc., but as should be obvious on inspection, NFTs make it vastly easier to do and equally vastly harder to identify and prosecute.) This i

the what

[toxonix]

"digital art and collectibles industry"
This is still a thing? In a William Gibson novel I can see it being a thing, but the internet is mostly accessed via tiny mobile phone screens, not a shared hallucination of cyberspace.

Wait no!

[wakeboarder]

It's art!

Really hard to imagine...

[jddj]

...that anyone is still dicking around with this stuff.

Haven't people lost enough money? No? Really?