TLDR
- OpenSea has urged the SEC to exclude NFT marketplaces from regulation under federal securities laws
- The company argues NFT marketplaces don’t meet the legal definition of an exchange as they don’t execute transactions or act as intermediaries
- OpenSea’s lawyers requested the SEC issue informal guidance similar to recent statements on memecoins and stablecoins
- The request follows the SEC dropping a probe into OpenSea earlier this year
- Under the Trump administration, the SEC has been walking back its hardline stance toward crypto established under former Chair Gary Gensler
OpenSea, one of the largest NFT marketplaces, has formally requested that the U.S. Securities and Exchange Commission (SEC) exclude NFT platforms from regulation under federal securities laws. In an April 9 letter addressed to Commissioner Hester Peirce, who leads the agency’s Crypto Task Force, OpenSea’s legal team argued that NFT marketplaces don’t fit the legal definition of exchanges or brokers.
The request comes as the crypto industry experiences a shift in regulatory approach under the Trump administration. The SEC has recently been softening its stance on digital assets, moving away from the stricter position established under former Chair Gary Gensler.
OpenSea general counsel Adele Faure and deputy general counsel Laura Brookover authored the letter. They emphasized that NFT marketplaces operate differently from traditional securities exchanges.
Their main argument centers on how NFT platforms function. They state that these marketplaces don’t execute transactions, act as intermediaries, or bring together multiple sellers for the same asset.
Legal Classification Concerns
OpenSea’s legal team described their platform more as a “digital bazaar” than a trading floor. They say it simply allows people to discover NFTs and connect with buyers and sellers rather than facilitating trades in the traditional sense.
The lawyers also pushed back against classifying NFT marketplaces as brokers. They stated these platforms don’t provide investment advice, execute transactions, or custody customer assets.
“The Commission’s past enforcement agenda has created uncertainty. We therefore urge the Commission to remove this uncertainty and protect the ability of US technology companies to lead in this space,” Faure and Brookover wrote in their letter.
They requested the SEC issue informal guidance on NFT marketplaces. This would be similar to recent clarifications the agency provided for other digital assets.
Recent Regulatory Developments
The request follows recent regulatory developments for other crypto assets. On April 4, the SEC published a notice stating that stablecoins meeting certain criteria are considered “non-securities” and exempt from transaction reporting requirements.
Earlier this year, on February 27, the SEC’s division of corporation finance stated that memecoins are not securities under federal laws. The agency classified them as more similar to collectibles.
OpenSea’s letter also comes after the SEC dropped several high-profile investigations into crypto companies. This included shelving a probe into OpenSea’s alleged violation of federal securities laws.
These decisions reflect the changing regulatory landscape under the current administration. The SEC has dismissed various enforcement actions it previously launched against crypto firms.
NFT Market Challenges
OpenSea’s push for regulatory clarity comes during a challenging period for the NFT market. Despite Bitcoin’s record-breaking rally and growth in the DeFi sector, NFTs have struggled to maintain momentum.
In 2024, NFT trading volumes and sales counts dropped to their weakest levels since 2020. Annual trading volumes fell by 19%, while sales decreased by 18% compared to the previous year.
This downturn makes regulatory certainty even more important for companies operating in the NFT space. Clear rules could potentially help stabilize the market and encourage new participants.
OpenSea’s lawyers specifically asked for exemption from proposed broker regulation in the longer term. They believe this would allow NFT marketplaces to operate without unnecessary regulatory burdens.
The company hopes that explicit guidance from the SEC will help remove existing industry confusion. This clarity would allow U.S. technology companies to continue innovating in the NFT space without regulatory concerns.
As the SEC reviews its approach to digital assets, OpenSea’s request highlights the ongoing need for tailored regulations that account for the unique characteristics of different crypto sectors.
In their letter, the OpenSea legal team urged the Crypto Task Force to “specifically address the application of exchange regulations to marketplaces for non-fungible assets.” This approach would be similar to the recent staff statements on memecoins and stablecoins.
The SEC’s response to this request may set an important precedent for how NFT marketplaces are regulated in the United States going forward.
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