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Journalist
Sead Fadilpašić
Journalist
Sead Fadilpašić
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In a letter to the US Securities and Exchange Commission (SEC), NFT marketplace OpenSea detailed why non-fungible token (NFT) platforms should not be categorized as securities exchanges or brokers and how it could provide regulatory clarity on the matter.
OpenSea’s general counsel Adele Faure and deputy general counsel Laura Brookover argue that NFT marketplaces like OpenSea are not exchanges or brokers under the Securities Exchange Act of 1934. They further provided two key steps they find the Commission should take to “confirm this non-regulated status.”
The letter, dated 9 April, states that the SEC’s earlier move to extend exchange and broker regulations to OpenSea seems to be more about expanding the regulator’s jurisdiction, instead of addressing any potential risks.
“OpenSea encourages the Commission to reject that approach,” Faure and Brookover write. The two ask the regulator to provide clarity and regulatory solutions based on actual issues.
“We therefore urge the Commission to remove this uncertainty and protect the ability of US technology companies to lead in this space,” the letter reads.
OpenSea provided two proposals. The first one is that the SEC clearly states that NFT marketplaces like OpenSea do not qualify as exchanges under federal securities laws.
Furthermore, it should issue informal guidance in the near future to clarify points related to this matter. The guidance should address the application of exchange regulations to NFT marketplaces.
“This clarification would offer immediate benefits to NFT collectors, buyers, and sellers, as well as the broader NFT ecosystem, by removing regulatory uncertainty,” the letter states.
Finally, the SEC should ensure a permanent solution through revisions or additions to the relevant rules, as part of any rulemaking for blockchain-based platforms. This way, it would “specifically exempt” NFT marketplaces.
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‘Clearing the Existing Industry Confusion’
The second proposal to the SEC is to clarify that marketplaces are not brokers under the Exchange Act based on two characteristics.
First, the marketplace aggregates and presents information about NFTs via a website, app, or other interface. However, it does not provide valuations, solicitations, or investment advice. Promoting NFTs and providing information does not constitute solicitation or investment advice, OpenSea says.
Second, the marketplace provides a website, app, or other interface that facilitates offers to buy and sell NFTs between users. It also transmits transaction instructions to blockchains. However, it does not execute transactions, nor does it control, hold, or direct the use of users’ digital assets.
Therefore, marketplaces like OpenSea “function as exploration tools,” Faure and Brookover argue.
Finally, the two ask the SEC “to clear the existing industry confusion” on this issue as well by publishing informal guidance in the near term, and exempting NFT marketplaces like OpenSea from proposed broker regulation in the long term.
Meanwhile, in February this year, the SEC officially ended its investigation into OpenSea. The investigation began in August 2024 when the regulator issued a Wells notice, alleging the platform functioned as an unregistered securities marketplace.
The SEC closing its investigation is “a win for everyone who is creating and building in our space,” OpenSea founder Devin Finzer said.
Finzer stated that classifying NFTs as securities could have significantly obstructed innovation within this sector.
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