The Digital Chamber (TDC) stated that the U.S. Securities and Exchange Commission (SEC) sending a notice of an upcoming enforcement action to OpenSea is a regulatory overreach. TDC shared its statement in an August 28 post on its website.
"The Digital Chamber (TDC) unequivocally condemns the SEC's latest overreach in issuing a Wells notice to OpenSea," said TDC. "The notice, which alleges that NFTs listed and sold on the platform are securities, represents a significant and troubling expansion of the SEC's enforcement actions into the digital economy. TDC has consistently advocated that certain NFTs, particularly those representing consumer products, are not securities nor financial products and should be outside of the SEC's jurisdiction. The SEC's current approach of regulating by enforcement, as evidenced by this Wells Notice, threatens to stifle innovation, disrupt vibrant markets, and undermine the economic opportunities that NFTs provide to creators and entrepreneurs."
Non-fungible tokens (NFTs) are unique digital tokens stored on a blockchain and cannot be duplicated, Entrepreneur reported. NFTs can serve as tickets to events, proof of membership, collectible memorabilia, or rewards for customers.
OpenSea CEO Devin Finzer
| LinkedIn/dfinzer
According to CoinTelegraph, NFT marketplace OpenSea received a Wells notice from the SEC, alleging that OpenSea may be operating as an unregistered securities exchange and signaling that the company may be subject to an enforcement action. On August 28, OpenSea CEO David Finzer said the company is prepared to "stand up and fight" the enforcement action if it comes. "By targeting NFTs, the SEC would stifle innovation on an even broader scale: hundreds of thousands of online artists and creatives are at risk, and many do not have the resources to defend themselves," Finzer said.
Federal Newswire previously reported that two SEC Commissioners, Hester Peirce and Mark Uyeda, dissented from the SEC's first enforcement action in the NFT sector last year. The SEC charged Los Angeles-based Impact Theory with offering unregistered crypto asset securities in the form of NFTs and fined the company more than $6.1 million. The SEC said that in 2021, Impact Theory generated approximately $30 million from hundreds of investors who purchased "Founder's Keys" NFTs. Impact Theory did not admit or deny the SEC's findings but agreed to pay the fine.
Peirce and Uyeda wrote in their explanation of dissent that while they "believe strongly that adults should be able to spend their money as they choose," they understand the SEC's concern about the Impact Theory case. However, they said this concern "is not a sufficient basis to pull the matter into our jurisdiction." They noted that the SEC does not typically bring enforcement actions against individuals or companies that sell other items like paintings or watches with similar "vague promises" that the items will increase in value and result in profits for the purchaser. "Because it is the first NFT settlement, this enforcement action raises many difficult questions," Peirce and Uyeda said. "The Commission should have grappled with these questions long ago."
According to its website, TDC advocates for pro-innovation policies in the digital asset and blockchain industries. Members of TDC include crypto exchanges, banks, consulting firms, and law firms.
