- The latest action is drawing criticism from the cryptocurrency world.
- Venture capitalist Katie Hahn said artwork should not be considered a security.
- The SEC’s decision is the latest headache for OpenSea.
Gary Gensler really knows how to piss people off.
Crypto luminaries reacted to the news that OpenSea had become the latest target of the U.S. Securities and Exchange Commission and its aggressive chairman with a mixture of outrage and bewilderment.
“This is obviously absurd on its face,” Kraken co-founder Jesse Powell tweeted.
“Gensler made another mistake,” billionaire investor Mark Cuban wrote on X.
“Congratulations and welcome to the club,” Coinbase CEO Brian Armstrong joked. “I’m very interested in companies.”
Are NFTs Securities?
After a quiet summer during the SEC’s three-year crackdown on cryptocurrencies, OpenSea, the second-largest NFT marketplace, said Wednesday it had received notification — known as a Wells notice — that it was the target of an investigation.
The problem, OpenSea CEO Devin Finzer told X, is that the agency is reviewing whether NFTs sold on the site should be registered as securities.
The move would be consistent with Gensler’s long-standing assertion that most cryptocurrencies are regulated by the same 90-year-old laws that govern stocks, bonds and other securities.
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While the SEC has accused Coinbase, Kraken, and Binance, among other companies, of offering unregistered securities, it now appears ready to designate NFTs in the same way.
OpenSea’s revelation is just the latest dose of bad news as NFTs struggle to recover from a bear market. Volume on OpenSea has dropped 82% this year, to 240.6 ETH, according to data from DefiLlama.
OpenSea, which was valued at $13 billion after a fundraising round in 2022, has lost its market leadership position to its larger rival Blur, according to data from DefiLlama.
“Artworks and collectibles are not securities, whether painted on a canvas or encoded on a blockchain.”
— Katie Haun, Haun Ventures
Unsurprisingly, cryptocurrency proponents were enthusiastic about the idea that nonfungible tokens, which tend to be digital images, should be regulated in the same way as securities.
Katie Haun, Founder and CEO of Haun Ventures, also picked up on this thread.
“Artworks and collectibles are not securities, whether they are painted on a canvas or encoded on a blockchain,” Haun said on X. His firm is an investor in OpenSea.
As it happens, museums and art auction houses like Sotheby’s and Christie’s have continued to use NFTs even as their popularity has waned.
Anthony Scaramucci, a hedge fund manager and cryptocurrency investor, said he was surprised by the development.
“Gary Gensler, are US Open digital tickets now a security?” he tweeted, referring to the professional tennis tournament currently taking place in New York.
THE @SECGov is now trying to claim that NFTs are securities. What’s next? Baseball cards? Comic books? @GaryGenslerThe bad faith and anti-American war against cryptocurrencies is spreading. The creators and artists of the digital Web3 are now in the crosshairs. https://t.co/boCbFI0O3p
— Tyler Winklevoss (@tyler) August 28, 2024
Tyler Winklevoss, Gemini co-founder and CEO, said the news was the latest sign that “the SEC’s war on crypto is expanding.”
“Web3 digital creators and artists are now in the firing line,” he said.
“They are not stupid.”
Kraken’s Powell, for his part, speculated that the SEC was simply trying to derail the industry and had little regard for the merits of its actions.
“They’re not that stupid. The goal is not to win,” Powell complained. “The goal is to distract, to waste resources, to spread fear, uncertainty and doubt, and to slow us down.”
An SEC spokesman said the agency would not comment on “the existence or nonexistence of a possible investigation.”
Osato Avan-Nomayo is our DeFi correspondent based in Nigeria. He covers DeFi and technology. To share tips or information on articles, please contact him at osato@dlnews.com.
