OpenSea Seeks SEC Exemption for NFT Marketplaces from Broker Regulation

OpenSea, the leading NFT marketplace, has formally requested the U.S. Securities and Exchange Commission (SEC) to exclude NFT platforms from regulation under federal securities laws. In a letter to Commissioner Hester Peirce, who leads the SEC’s Crypto Task Force, OpenSea’s legal team argued that NFT marketplaces do not fit the definition of exchanges or brokers. This request comes after the SEC dropped its investigation into OpenSea for alleged securities law violations, marking a broader policy shift towards a more crypto-friendly regulatory approach.

OpenSea’s general counsel Adele Faure and deputy general counsel Laura Brookover stated that NFT marketplaces do not meet the legal definition of an exchange. They argued that platforms like OpenSea do not execute transactions, act as intermediaries, or bring together multiple sellers for the same asset. The legal team described OpenSea more as a “digital bazaar” than a trading floor, allowing users to discover NFTs and connect with buyers and sellers rather than facilitating trades in the traditional sense. They also pushed back against the broker designation, stating that OpenSea does not provide investment advice, execute transactions, or custody customer assets. “NFT marketplaces do not hold or facilitate the flow of funds or assets and thus cannot commingle them, making capital requirements and financial recordkeeping irrelevant,” Faure and Brookover explained in their letter. They further stated that OpenSea should not be regulated as a “Trading Facility” like the New York Stock Exchange because transaction execution is handled by smart contracts. The platform also does not meet the Exchange Act’s “multiple sellers” requirement.

The request for clarification follows recent SEC actions on other crypto assets. The SEC published a notice stating that stablecoins meeting specific criteria are considered “non-securities” and exempt from transaction reporting requirements. In February, the SEC’s division of corporation finance also issued a statement that memecoins are not securities under federal securities laws but are more akin to collectibles. OpenSea is asking for similar clarity for NFT marketplaces. “In preparing this guidance, the Crypto Task Force should specifically address the application of exchange regulations to marketplaces for non-fungible assets, similar to the recent staff statements on memecoins and stablecoins,” the legal team wrote. The company wants the SEC to issue informal guidance in the short term. For the longer term, they’ve invited the Commission to exempt NFT marketplaces like OpenSea from proposed broker regulation.

The request comes at a challenging time for the NFT market. Despite the growth in the DeFi sector, NFTs have remained in a slump over the past couple of years. The broader regulatory environment for crypto has been shifting. President directed the SEC to clarify its position on crypto and established a “Crypto Task Force” to engage with the industry on drafting guidelines. This marked a departure from the approach under former SEC Chair, who had taken a more aggressive stance toward crypto regulation. The agency had previously been criticized for “regulating by enforcement” rather than providing clear rules. Commissioner Peirce’s crypto task force has been meeting with various industry players as part of its work to develop clearer guidelines. As the regulatory landscape continues to evolve, OpenSea’s request represents an important push for clarity in how NFT marketplaces fit into the broader crypto regulatory framework.