NFT marketplace OpenSea received a Wells Notice from the U.S. SEC, indicating intent to sue the web3 startup.

The Securities and Exchange Commission’s crackdown on allegedly non-compliant crypto service providers has now targeted OpenSea, one of Ethereum’s (ETH) first and largest digital collectible trading platforms. 

SEC investigators issue Wells Notices as a precursor to potential lawsuits, although this step doesn’t always result in legal action.

Reacting to the news on Aug. 28 and alerting the community, OpenSea CEO Devin Finzer said the firm is “ready to stand up and fight” the SEC’s move to stifle innovation and unfairly scrutinize thousands of creators.

We should not regulate digital art in the same way we regulate collateralized debt obligations.

Devin Finzer, OpenSea CEO

Finzer echoed concerns within the crypto community regarding the SEC’s rigid approach to cryptocurrencies and now non-fungible tokens (NFTs), emphasizing that NFTs are fundamentally different from the investment contracts typically regulated by the Wall Street watchdog.

In an X post, Finzer indicated that OpenSea plans to join contemporaries like Coinbase, Consensys, Kraken, Robinhood, and Uniswap in defending against the SEC’s probes and securities allegations.

Finzer and OpenSea also committed $5 million to a legal fund to support creators and developers affected by the SEC’s Wells Notice.

It would be a terrible outcome if creators stopped making digital art because of regulatory saber-rattling.

The SEC has unleashed litigations against a swathe of crypto-related entities in the last two years, including NFT projects such as Ashton Kutcher and Mila Kunis’ owned Stoner Cats, but this was the first time federal prosecutors scrutinized a digital collectibles trading venue.