OpenSea Users File Class Action Suit Claiming NFTs Are Securities

Two users of the popular NFT marketplace OpenSea have initiated a class-action lawsuit, asserting that the non-fungible tokens (NFTs) they purchased are unregistered securities and thus worthless. This legal action raises significant questions about the regulatory status of NFTs and the responsibilities of platforms like OpenSea.

Key Takeaways

• Users claim NFTs purchased on OpenSea are unregistered securities.

• The lawsuit cites a Wells notice from the SEC as evidence of potential liability.

• Plaintiffs argue that the NFTs were marketed deceptively, leading to financial losses.

Background of the Lawsuit

On September 19, 2024, Anthony Shnayderman and Itai Bronshtein filed their lawsuit in a federal court in Florida. They allege that the NFTs they bought, including those from the once-coveted Bored Ape Yacht Club collection, are now worthless due to their illegal status as unregistered securities.

The plaintiffs reference a recent Wells notice issued to OpenSea by the Securities and Exchange Commission (SEC), which indicates that the platform may face enforcement actions for facilitating the sale of unregistered securities. A Wells notice serves as a warning that the SEC has conducted an investigation and may take further action.

Legal Arguments Presented

The lawsuit hinges on the Howey test, a legal standard used to determine whether certain transactions qualify as investment contracts under U.S. securities laws. Shnayderman and Bronshtein argue that their purchases meet this criterion, as they were made with the expectation of profits derived from the efforts of others.

The plaintiffs contend that OpenSea's NFT listings were misleading, claiming that the platform suggested it moderated the exchange of NFTs, including those that could be classified as securities. They assert that this misrepresentation led them to invest in what they now consider worthless assets.

Allegations Against OpenSea

The lawsuit includes several key allegations against OpenSea:

1. Breach of User Warranty: The plaintiffs claim that OpenSea violated a user warranty by failing to moderate its platform for unregistered securities.

2. Unjust Enrichment: They allege that OpenSea profited from fees and transactions that were derived from the sale of unregistered securities, which they argue is illegal.

3. Deceptive Practices: The plaintiffs assert that OpenSea's marketing practices misled them into believing they were purchasing legitimate investments.

Industry Implications

This lawsuit could have far-reaching implications for the NFT market and the broader cryptocurrency industry. If the court rules in favor of the plaintiffs, it may set a precedent that classifies NFTs as securities, leading to increased regulatory scrutiny and potential changes in how NFT platforms operate.

In a statement, Adam Moskowitz, managing partner at The Moskowitz Law Firm, which represents the plaintiffs, emphasized the need for a regulated environment for NFT sales. He expressed hope for collaboration with OpenSea to establish a clearer framework for the industry.

Conclusion

As the legal battle unfolds, the outcome of this case could reshape the landscape of NFT trading and regulation. Stakeholders in the cryptocurrency space are closely monitoring the situation, as it may influence future legislation and the operational practices of NFT marketplaces.

Sources

• OpenSea users claim NFTs are securities in proposed class suit, Cointelegraph.

• OpenSea users claim NFTs are securities in proposed class suit, ADVFN Brasil.

• OpenSea users claim NFTs are securities in proposed class suit: Guest Post by Cointelegraph | CoinMarketCap, CoinMarketCap.

• Pengguna OpenSea mendakwa NFT adalah sekuriti dalam saman kelas yang dicadangkan, Cointelegraph.