OpenSea agrees to provide $5 million for a legal defence after the SEC accuses it of selling NFTs as unregistered securities in a Wells Notice.
TakeAway Points:
- The SEC sent OpenSea a Wells Notice, warning of possible legal action for allegedly providing unregistered securities.
- In the wake of sanctions against firms like Coinbase and Kraken, the SEC is still closely monitoring the NFT market.
- OpenSea continues to be a top NFT marketplace with more sales volume over the past 30 days, despite regulatory obstacles and market share losses to competitors.
- CME Group is launching Bitcoin Friday futures, priced at one-50th of a Bitcoin, to attract retail investors starting Sept. 30.
SEC Seeks Out OpenSea
The U.S. Securities and Exchange Commission (SEC) has issued a Wells Notice to OpenSea, the largest non-fungible token (NFT) marketplace, indicating its intention to sue the company. The SEC alleges that the NFTs traded on OpenSea’s platform are unregistered securities, a claim that has sent ripples through the crypto community. OpenSea CEO Devin Finzer expressed shock at the SEC’s move, stating, “We’re shocked the SEC would make such a sweeping move against creators and artists.” The Wells Notice is typically one of the final steps before the SEC issues formal charges, laying out the regulatory argument and offering the accused an opportunity to rebut the claims.
Historical Background and Previous Cases
This action against OpenSea is part of a broader crackdown by the SEC on the crypto industry. In recent years, the SEC has targeted several high-profile crypto firms, including Kraken, Coinbase, Consensys, and Uniswap. The agency has also charged Impact Theory LLC and settled with Stoner Cats 2 LLC for offering unregistered securities in the form of NFTs. The latter agreed to pay a $1 million fine and to a cease-and-desist order. OpenSea’s situation is not unique but adds to the growing list of crypto entities facing regulatory scrutiny.
Impact on the Market and OpenSea’s Reaction
In response to the Wells Notice, OpenSea has pledged $5 million to cover legal fees for NFT artists and developers who receive similar notices. Finzer emphasized the company’s commitment to defending its platform and the broader NFT community, stating, “By targeting NFTs, the SEC would stifle innovation on an even broader scale: hundreds of thousands of online artists and creatives are at risk.” He also noted that classifying NFTs as securities would “misinterpret the law” and expressed confidence that OpenSea operates legally. Despite the regulatory challenges, OpenSea remains a dominant player in the NFT market, posting higher sales volumes than rivals like Blur and Magic Eden in the last 30 days, according to DappRadar.
New Bitcoin Futures from CME
CME Group Inc. is set to launch a new Bitcoin futures contract aimed at retail investors. Dubbed Bitcoin Friday futures (BFF), these contracts will be priced at one-fifth the size of one Bitcoin. This move is designed to make Bitcoin futures more accessible to retail investors who may find the current offerings too expensive. The cash-settled product is expected to be available starting September 30, pending regulatory review. As of now, Bitcoin is trading at around $62,500, making the new BFF contracts significantly more affordable.
Appeal to Retail Investors
Giovanni Vicioso, CME Group’s global head of cryptocurrency products, emphasized the need for smaller-sized contracts to attract retail investors.
“When you look at, say, a retail individual, an active trader, they’re looking for something smaller,” Vicioso said.
CME already offers Bitcoin and Ether futures, as well as “micro” versions of each, which are sized at a tenth of each coin. These micro futures were launched in 2021 and have seen a significant uptick in trading volumes. Specifically, volumes for CME’s micro-Bitcoin futures have surged by about 200% this year compared to 2023 levels, indicating a growing retail interest.
