The SEC's Retreat From OpenSea Investigation Hails a Paradigm Shift for NFT Innovators

Visualize a world where creators—from ambitious start-up artists to established digital pioneers—breathe a collective sigh of relief. The SEC's retreat signals a cessation in its high-profile scrutiny of NFTs, a space teeming with potential and creativity.

The Securities and Exchange Commission (SEC) has quietly closed its investigation into OpenSea, a leading non-fungible token (NFT) marketplace, multiple sources close to the matter told Blockworks.

The development marks a pivotal moment in the burgeoning NFT landscape, as the regulator had signaled its intent to classify NFTs as securities just over a year ago.

OpenSea faced the threat of having to register with the SEC and disclosing key financial and operational information, a move that many feared would have stifled innovation in the space.

However, Blockworks’ sources said that the SEC has dropped the probe without taking any enforcement action, a decision that will come as a major relief to NFT creators and marketplaces.

The SEC declined to comment. OpenSea did not immediately respond to a request for comment.

The NFT market exploded in popularity in 2021, with sales volume surging past $40 billion, according to data from NonFungible. However, the astronomical rise in the market also attracted the attention of regulators, who expressed concerns about potential fraud, market manipulation and the lack of transparency.

In March 2022, the SEC put NFT marketplaces on notice by sending Wells notices to OpenSea and Dapper Labs, the company behind NBA Top Shot. The notices signaled the regulator’s intent to classify NFTs as securities, a designation that would subject marketplaces to stringent oversight and disclosure requirements.

Blockworks’ sources said that the SEC investigation into OpenSea focused on whether specific NFT collections were securities and if the marketplace should have done more to prevent fraud and market manipulation on its platform.

However, the regulator ultimately decided not to pursue enforcement action against OpenSea, a move that will likely clear the way for the NFT marketplace to go public. OpenSea was last valued at $13.3 billion in a secondary funding round in January.