OpenSea Faces Class-Action Lawsuit Alleging Sale of Unregistered Securities NFTs

Two users have filed a class-action lawsuit against OpenSea, accusing the NFT marketplace of selling unregistered securities. The case centers on NFTs like Bored Ape Yacht Club, which plaintiffs argue are now worthless.

OpenSea, one of the largest non-fungible token (NFT) marketplaces, is under fire as two users filed a class-action lawsuit accusing the platform of selling unregistered securities. The plaintiffs, Anthony Shnayderman and Itai Bronshtein, initiated the legal action on September 19 in a Florida federal court, alleging that certain NFTs sold on OpenSea, including popular collections like the Bored Ape Yacht Club, are now deemed worthless due to their illegal nature.

Key Allegations and SEC Wells Notice
At the heart of the lawsuit is OpenSea’s disclosure that it received a Wells notice from the U.S. Securities and Exchange Commission (SEC). A Wells notice is a formal warning indicating that the SEC may bring enforcement actions against the recipient. The plaintiffs argue that this notice implies OpenSea could be liable for facilitating the sale of unregistered securities, which they believe includes certain NFTs listed on the platform.

Shnayderman and Bronshtein cite parallels between OpenSea’s case and previous SEC actions against NFT projects such as Stoner Cats 2 and Impact Theory, both of which were charged with selling unregistered securities. They claim that the NFTs they purchased meet the criteria of an “investment contract” under the Howey test, which determines whether a transaction qualifies as a security.

The lawsuit alleges that OpenSea misled users with its listings, causing them to invest in NFTs they now describe as “worthless and unlawful unregistered securities.” The plaintiffs further accuse OpenSea of breaching user warranties by failing to moderate its marketplace and knowingly profiting from these sales through transaction fees.

NFT Market Trends and Industry Impact
This legal action comes as several high-profile NFT projects face value depreciation. For instance, a CryptoPunk NFT sold for $23.2 million in 2022 recently resold for just $3.9 million, marking an 80% loss for the original buyer. The lawsuit also coincides with companies like Starbucks and GameStop discontinuing their NFT initiatives, signaling a downturn in the once-buzzing NFT market.

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