OpenSea Calls on SEC to Exclude NFT Marketplaces from Regulatory Oversight

Non-fungible token (NFT) marketplace OpenSea has formally urged the U.S. Securities and Exchange Commission (SEC) to exclude NFT marketplaces from its regulatory framework under federal securities laws. OpenSea's legal team argues that NFT platforms, such as their own, do not meet the definition of an exchange or broker and should not be subject to the same rules as traditional securities exchanges.

In a letter dated April 9, OpenSea's general counsel, Adele Faure, and deputy general counsel, Laura Brookover, called for the SEC to “clearly state that NFT marketplaces like OpenSea do not qualify as exchanges under federal securities laws.” The letter was addressed to Commissioner Hester Peirce, who leads the SEC’s Crypto Task Force.

OpenSea's Argument: NFT Marketplaces Are Not Exchanges

Faure and Brookover argue that NFT marketplaces like OpenSea do not fit the SEC’s definition of an exchange. According to the SEC, an exchange is typically an entity that facilitates the buying and selling of assets, acts as an intermediary, and brings together multiple sellers for the same asset. However, OpenSea’s legal team contends that NFT marketplaces do not execute transactions in the traditional sense. Rather, they provide a platform for users to list, buy, and sell non-fungible assets, which, they argue, does not equate to the activities of a traditional exchange.

OpenSea’s legal team has asked the SEC to issue informal guidance on NFT Marketplaces. Source: SEC

The letter highlights the uncertainty created by the SEC’s previous enforcement actions, noting that these have left the industry unsure of how NFT marketplaces are to be regulated. OpenSea’s legal team is urging the SEC to remove this uncertainty to ensure that U.S. technology companies can continue to lead in the evolving NFT and Web3 space.

Clarification on Broker Regulation

Further, Faure and Brookover emphasized that NFT marketplaces should also be exempt from SEC regulations concerning brokers. The pair argued that OpenSea does not act as a broker, as the platform does not give investment advice, execute trades, or hold customer assets. They have called on the SEC to publish informal guidance to clarify this issue, offering more certainty to the industry. In the long term, OpenSea is asking the SEC to officially exempt NFT marketplaces from broker registration requirements.

Recent Developments in SEC Crypto Oversight

The SEC’s stance on crypto has shifted under the Biden administration, especially when compared to the aggressive posture taken under former Chair Gary Gensler. The SEC has dropped several enforcement actions against crypto firms, including investigations into potential securities law violations involving OpenSea.

The letter also referenced the SEC’s recent guidance on other digital assets, noting that the commission had already taken steps to clarify the treatment of certain crypto assets. For instance, a notice published on April 4 clarified that stablecoins meeting certain criteria are "non-securities" and therefore exempt from transaction reporting requirements. Similarly, a February 27 staff statement indicated that memecoins are more akin to collectibles than securities under federal laws.

Conclusion

OpenSea’s request represents a broader push within the crypto and NFT space to ensure clearer and more favorable regulatory guidelines. The outcome of this debate could significantly influence how the NFT market evolves in the U.S., potentially setting the stage for greater innovation while minimizing regulatory burdens. As the SEC continues to refine its approach to digital assets, the discussions around NFT marketplaces will likely remain a key area of focus.