Devin Finzer, CEO and Co-founder of NFT marketplace OpenSea, has confirmed that they have been issued with a Wells notice by the U.S. Securities and Exchange Commission (SEC).
A Wells notice is a letter sent by the SEC at the conclusion of an investigation, notifying the company in question that the agency plans to bring an enforcement action against them.
Finzer shared his initial reaction on X, with OpenSea later publishing an expanded response from Finzer and, in anticipation of top artists and developers also receiving a Wells notice, OpenSea will be pledging $5M USD to cover legal fees should such a situation arise.
Source: Twitter (X)
What is a Wells notice?
As explained, a Wells notice is a letter of intent sent by the U.S. SEC, notifying them that an investigation has concluded, and enforcement action is likely to follow.
Details of the Wells notice have not been disclosed publicly, though in Finzers initial response on X, he states that the SEC is threatening to sue us. The exact substance of the SECs complaint, and the amount they are looking to claim, is not yet available.
This is not the first time the SEC has engaged in legal back-and-forth with a Web3 company. Consensys, the developers of the MetaMask wallet, have been at loggerheads with the U.S. SEC for most of 2024, and the SEC has reached settlements with two NFT issuers in the past: Impact Theory and Stoner Cats.
Source: OpenSea
What does this mean for NFTs?
OpenSea have made clear that they plan to vigorously defend their stance that NFTs are not securities.
Classifying NFTs as securities would not only misinterpret the law, but it would also jeopardize artists livelihoods, disempower collectors and gamers, and stifle innovation across the many promising use cases for NFTs, reads part of the statement from Finzer on the OpenSea website.
Nevertheless, with OpenSeas pledge of $5M USD to support any artists or developers that are also hit with a Wells notice, it is clear that they are taking this incredibly seriously, and are looking out not just for their best interests, but for the interests of the industry as a whole.
Finzer closed his statement with the following: We hope that the SEC will reconsider its stance and approach this issue with the open-mindedness it deserves. Until then, OpenSea remains committed to standing up for our vision of a better internetone that empowers individuals and fosters creativity, rather than stifling it with unnecessary regulatory burdens.
