When the NFT marketplace OpenSea signaled that it was braced for a regulatory crackdown last month, the disclosure delivered a jolt to Magic Eden CEO Jack Lu.
“It all happened very suddenly,” he said in an interview with Decrypt (video below), adding that the San Francisco-based firm has not received a so-called Wells notice from the U.S. Securities and Exchange Commission (SEC).
OpenSea said it received a letter from the SEC alleging that NFTs trading on its platform are securities. The NFT marketplace’s co-founder and CEO Devin Finzer, meanwhile, said that the firm is prepared to “stand up and fight.”
While the regulator has brought enforcement actions against NFT projects before, OpenSea’s revelation represented something new. It signaled that the SEC has begun scrutinizing entities that provide trading platforms for NFTs, and not just those that initially offer them.
Before Magic Eden emerged as the leading NFT marketplace by volume, OpenSea was the go-to venue for digital art and profile picture (PFP) collections. Projects like the Bored Ape Yacht Club and Art Blocks, which trade on Magic Eden too, catapulted OpenSea to the forefront of the buzzy market in 2021 and 2022.
OpenSea Expecting SEC Lawsuit Over NFTs Being Securities, Says CEO
Prominent NFT marketplace OpenSea is expecting a lawsuit from the United States Securities and Exchange Commission (SEC), co-founder and CEO Devin Finzer said Wednesday, due to what he said is scrutiny over whether NFTs should be considered securities. "OpenSea has received a Wells Notice from the SEC threatening to sue us because they believe NFTs on our platform are securities," Finzer tweeted. "We're shocked the SEC would make such a sweeping move against creators and artists. But we're ready...
Magic Eden isn’t currently in the SEC’s crosshairs, but Lu acknowledged that a lawsuit against OpenSea could have broad implications for a corner of crypto that’s been left relatively untouched by regulators compared to exchanges or cryptocurrency issuers.
“The lack of regulatory clarity basically comes with the territory,” Lu said. “To the extent that this incident is going to create more clarity in the space, I welcome that.”
Magic Eden Reveals ME Token That Can Be Claimed Through Its Wallet
Leading NFT marketplace Magic Eden is shaking up its token plans. Months after revealing plans to launch a fungible token with the NFT ticker in alliance with a mysterious organization called the Non-Fungible DAO, Magic Eden announced Thursday that it will stick with its existing branding instead: an ME token from the rebranded ME Foundation. Details on when the ME token will launch and how it will be distributed—including through a potential airdrop to Magic Eden traders who have earned Diamond...
From unique works of digital art to human-readable blockchain addresses, NFTs can represent ownership in a myriad of things. Some lawyers have argued that the SEC would face challenges in exerting authority over the NFT space because the regulator doesn’t have a pronounced role in policing markets for physical fine art or collectibles.
Regardless of what could happen to OpenSea, Lu said that Magic Eden’s business has been guided by a desire to do right by regulators. He said, “The general principle for us is we want to be good actors and really be compliant in the ecosystem.”
When the SEC filed high-profile lawsuits against Coinbase and Binance last year, the regulator provided a list of cryptocurrencies trading on the exchanges that it believes are securities. Shortly after, firms like eToro and Robinhood dropped support for them.
SEC Is Coming After OpenSea—These Are the NFTs That Could Be in Trouble
When NFT marketplace OpenSea announced last week that it anticipates a lawsuit from the U.S. Securities and Exchange Commission (SEC), bells of panic rang far and wide through the cryptosphere. The U.S. government was opening up a major new front in its war on crypto: It was finally coming for the heart of the NFT market. But what does the development actually mean? Is every major NFT project now about to be labeled an illegal, unregistered security as some fear? Or might only particularly cash...
When asked whether Magic Eden is prepared to delist NFTs that the SEC might label as securities, Lu demurred, suggesting the firm would view any charges first.
“A lot of these things rest on nuances and the factual circumstances of the case,” Lu said, adding that “it may not be helpful to apply hypothetical things to the future.”
Edited by Andrew Hayward
