For their part, OpenSea has been at the forefront of the fight against SEC regulation. The corporation recently claimed that its own non-fungible token (NFT) marketplace doesn’t meet the definitions of an exchange or broker according to existing securities regulations. The company maintains that the regulatory framework designed for traditional securities exchanges is ill-suited for the unique characteristics of NFT marketplaces.
OpenSea’s position is that NFTs are non-fungible by their very nature. Like most NFTs, they are unique digital assets, and thus there can only be one current seller. Arguing against the lawsuit, the company highlights that it has never given investment advice, engaged in transaction execution or negotiation, or provided custody of user assets. It further makes clear that it does not provide financing or paperwork services customary to broker business.
The fintech startup focused on this point, arguing all transactions take place on the blockchain itself. They utilize smart contracts, which function entirely outside of the OpenSea platform. It argues that it merely:
"allows people to discover NFTs and connect with buyers and sellers" - OpenSea
OpenSea argues that it has the character of an interface rather than a financial intermediary. Requiring disclosure of the SEC’s corresponding Wells notice, warning the company of impending enforcement action. In OpenSea’s defense, the SEC v. Coinbase ruling as legal precedent.
OpenSea stated that simply displaying a listing or spotlighting a trending NFT does not constitute investment advice. Further, they clarified that they are not serving in the role of an intermediary. The firm pointed out that its marketplace is very different from other exchanges focused on fungible securities with many sellers.
OpenSea has called on the SEC to formally acknowledge that NFT marketplaces are neither exchanges nor brokers under U.S. securities laws.
"We propose that the SEC clearly state that NFT marketplaces like OpenSea do not qualify as exchanges under federal securities laws" - OpenSea
"This clarification would offer immediate benefits to NFT collectors, buyers, and sellers, as well as the broader NFT ecosystem, by removing regulatory uncertainty" - OpenSea
