Two users of the leading non-fungible token (NFT) marketplace, OpenSea, have filed a class-action lawsuit accusing the platform of selling unregistered securities. The lawsuit, initiated by Anthony Shnayderman and Itai Bronshtein on September 19 in a Florida federal court, claims that certain NFTs, including items from the once-popular Bored Ape Yacht Club collection, have become worthless due to their purportedly illegal status.
Wells Notice at the Heart of the Lawsuit
Central to the case is OpenSea’s recent admission of receiving a Wells notice from the U.S. Securities and Exchange Commission (SEC). A Wells notice signals that the SEC has concluded an investigation and may take enforcement action. Shnayderman and Bronshtein argue that this notice indicates OpenSea’s potential culpability in facilitating the trade of unregistered securities—certain NFTs included.
The plaintiffs compare this situation to other SEC actions against NFT projects, such as Stoner Cats 2 and Impact Theory, both of which were charged with selling unregistered securities. The lawsuit asserts that the NFTs in question meet the criteria of an investment contract under the Howey test, a legal framework used to determine whether a transaction qualifies as a security.
Allegations of Misleading Listings and Unjust Enrichment
Shnayderman and Bronshtein claim that OpenSea misrepresented the nature of the NFTs listed on its platform, causing them to invest in what they describe as “worthless and unlawful unregistered securities.” They also allege that OpenSea breached user warranties by failing to properly moderate the marketplace and allowed the sale of unregistered securities, ultimately enriching itself through transaction fees and payments it collected.
Falling NFT Values and Market Exodus
The lawsuit comes at a time when the NFT market has seen steep declines in value. One high-profile example occurred in August when a CryptoPunk NFT, initially purchased for $23.2 million in 2022, was resold at an 80% discount for just 1,500 ETH (approximately $3.9 million). The seller, Deepak Thapliyal, bid farewell to the token on X (formerly Twitter), while the new buyer, VOMBATUS, equated the low price to acquiring a “free” token.
Companies Scaling Back NFT Involvement
The NFT space has also seen several companies retreat from their ventures. Starbucks terminated its NFT rewards program in March 2024, and GameStop shut down its NFT marketplace earlier in the year after reducing its crypto operations. More recently, X, under Elon Musk’s ownership, discontinued a feature that allowed premium users to display NFTs as their profile pictures, marking a broader decline in corporate interest in the NFT sector.
This class-action lawsuit against OpenSea may further complicate the landscape for NFTs, especially as regulatory scrutiny intensifies.
