Two NFT market OpenSea customers have launched a class-action lawsuit claiming the platform sold unregistered securities. Claiming that the NFTs they bought—including those from the Bored Ape Yacht Club collection—are now useless because of their alleged unlawful character, Anthony Shnayderman and Itai Bronshtein started the complaint on September 19 in a Florida federal court.
Their case revolves mostly on OpenSea’s recent revelation of getting a Wells notice from the Securities and Exchange Commission (SEC), indicating that the platform would be vulnerable to enforcement action for enabling the trade of unregistered securities. A Wells notice indicates that the SEC has finished looking into things and could decide to sue the receiver.
The complaint draws attention to past SEC proceedings against other NFT initiatives including Stoner cats 2 and Impact Theory where the NFTs were judged unregistered securities. The plaintiffs argue that the NFTs they bought fit the legal definition of an investment contract under U.S. securities law—the Howey test—which guides whether a transaction qualifies as one.
Shnayderman and Bronshtein claim OpenSea deceived them into buying NFTs they now see as “worthless” by exaggerating their influence on the market. They say OpenSea broke its assurance to guarantee regulatory compliance by failing to stop the selling of unregistered securities. Moreover, they claim that OpenSea charged fees on unregistered securities sales, therefore unfairly profiting from them.
Representing Shnayderman and Bronshtein, managing partner of The Moskowitz Law Firm, Adam Moskowitz underlined the necessity of a better legislative framework for NFT sales. He underlined the need of establishing a properly-regulated environment that advances the developing crypto sector as well as customers.
The action signals another chapter in the continuous legal issues confronting the NFT market as regulatory scrutiny rises, even although OpenSea rejected the accusations, claiming the complaint is unfounded and misguided.
