Democratic Congressman Slams SEC's 'Heavy-Handed Approach' Over OpenSea Threats

Pro-crypto Congressman Wiley Nickel (D-NC) took aim at the U.S. Securities and Exchange Commission’s (SEC) “heavy-handed approach” to enforcement after OpenSea said the regulator threatened a lawsuit against the NFT marketplace.

In a tweet, Nickel criticized the SEC’s “aggressive use of 'regulation by enforcement,'” calling it “a blatant abuse of power that erodes trust and transparency in our regulatory system.”

He accused the regulator of threatening to “derail the progress driving digital innovation in the United States,” and called on the SEC to work with Congress to create “clear, fair regulations” governing digital assets and Web3 technologies.

Crypto industry figures joined Nickel in criticizing the SEC, with Variant Fund’s Chief Legal Officer Jake Chervinsky accusing the regulator of having “fully lost the plot.”

Gemini co-founder Cameron Winklevoss, who donated $1 million to the presidential campaign of Republican nominee Donald Trump, argued that, “The 'reset' with crypto has turned into an expansion of the war on crypto.”

Winklevoss’ comments appeared to reference efforts from crypto grassroots and lobbying organizations to “reset” relations with the Democratic Party following the nomination of Kamala Harris as its presidential candidate.

The Trump campaign has accused the Biden administration of pursuing a “war on crypto,” with Trump promising to “fire” SEC chair Gary Gensler—though he lacks the authority to remove Gensler from his position without cause.

The SEC and OpenSea

NFT marketplace OpenSea revealed Wednesday that it had received a Wells notice from the SEC, notifying it of the regulator’s intent to bring an enforcement action against it.

The notice represents an expansion of the regulator’s scrutiny of digital assets, with NFTs representing a different asset class to the cryptocurrencies (or fungible tokens) that the agency has previously argued constitute securities.

Pro-crypto lobbying group the Blockchain Association issued a statement accusing the SEC of “using the threat of enforcement action to expand its jurisdiction and treat digital art as securities.”

“The idea that a financial markets regulator established in the 1930s would have jurisdiction over digital art in the 2020s defies not only common sense, but also the SEC's statutory authority,” Chervinsky wrote.

That question may be settled in another case, however. The SEC itself faces a lawsuit from law professor Brian Frye and musician Jonathan Mann, seeking to force the agency to define what types of NFTs it considers securities.

Edited by Andrew Hayward