OpenSea urges SEC to exclude NFT marketplaces from regulator’s remit

Non-fungible token marketplace OpenSea has urged the US Securities and Exchange Commission to exclude NFT marketplaces from regulation under federal securities laws.

The SEC needs to “clearly state that NFT marketplaces like OpenSea do not qualify as exchanges under federal securities laws,” OpenSea general counsel Adele Faure and deputy general counsel Laura Brookover said in an April 9 letter to Commissioner Hester Peirce, who leads the agency’s Crypto Task Force.

Faure and Brookover argued that NFT marketplaces don’t meet the legal definition of an exchange under US securities laws as they don’t execute transactions, act as intermediaries or bring together multiple sellers for the same asset.

“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.

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

“In preparing this guidance, the Crypto Task Force should specifically address the application of exchange regulations to marketplaces for non-fungible assets, similar to the recent staff statements on memecoins and stablecoins,” Faure and Brookover added. 

Under a notice published on April 4, the SEC said stablecoins that meet specific criteria are considered “non-securities” and are exempt from transaction reporting requirements.

Meanwhile, the SEC’s division of corporation finance said in a Feb. 27 staff statement that memecoins are not securities under the federal securities laws but are more akin to collectibles.

Faure and Brookover argued the Crypto Task Force should also exempt NFT marketplaces like OpenSea from having to register as a broker, arguing they don’t give investment advice, execute transactions, or custody customer assets.

“We ask the SEC to clear the existing industry confusion on this issue by publishing informal guidance. In the longer term, we invite the Commission to exempt NFT marketplaces like OpenSea from proposed broker regulation,” they said.

Related: OpenSea pauses airdrop reward system after user backlash

Under the Trump administration, the SEC has slowly been walking back its hardline stance toward crypto forged under former Chair Gary Gensler.

The regulator has dismissed a number of enforcement actions it previously launched against crypto firms and has dropped probes into crypto companies over alleged securities law violations, including one into OpenSea.

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