OpenSea Argues NFTs Aren’t Securities In Letter To SEC

OpenSea, the online marketplace for non-fungible tokens (NFTs), has formally sought an exemption from regulation under the Securities and Exchange Commission (SEC).

In a letter sent to Crypto Task Force Chairman Commissioner Hester M. Peirce on April 9, 2025, the company laid out its rationale.

It stated why it believes NFT marketplaces don’t amount to operating as a securities exchange and securities broker under the Securities Exchange Act of 1934.

The correspondence is in response to a Wells Notice that the SEC Division of Enforcement sent OpenSea in 2024.

Per the note, the firm had been operating as an unregistered securities broker and exchange.

OpenSea is filing to the Crypto Task Force in order to contextualize the firm’s position and to seek the SEC’s guidance on its regulation in relation to digital assets.

OpenSea explains NFT transactions to the SEC

OpenSea’s letter explains the technical workflow of NFT transactions to support its argument against exchange classification.

According to the company, NFTs exist on blockchains with smart contract functionality, such as Ethereum, Solana, or Polygon.

The minting process, or creation process, is the smart contract activation used to produce a unique token ID with embedded metadata.

The firm highlights that after minting, NFT transfers are carried out directly on the blockchain without OpenSea mediating the transactions. The letter states,

“This decentralized transfer happens without a central intermediary, such as OpenSea, performing the transaction.”

OpenSea argues that it is not an exchange under the Exchange Act. The Act requires consolidation of more than one buyer’s and one seller’s orders through pre-determined, non-discretionary rules.

There are two primary reasons, the company argued, that it is not an exchange. Firstly, OpenSea contends that marketplaces for NFTs do not pool together several sellers of the same item.

Since each NFT is unique, there can only be one potential seller—the owner in question.

The company cited SEC remarks in an effort to give that marketplaces with one seller for each instrument are not exchanges.

Second, OpenSea insists that it does not operate as a trading facility or dictate terms of trades.

OpenSea contends that blockchain protocol and smart contracts, not OpenSea, dictate terms for NFT transfers and that OpenSea is only assisting users in formatting instructions for transactions that are executed on-chain.

OpenSea Argues Against being Classified as a Broker

The Exchange Act defines a broker as any person engaged in the business of effecting transactions in securities for the account of others.

The company points to the court’s dismissal of similar claims in SEC v. Coinbase as instructive for its case.

The letter outlines several characteristics that differentiate OpenSea from traditional brokers:

“OpenSea does not act as a broker for many of the same reasons [as Coinbase’s wallet software], including because its marketplace features no solicitation or investment advice… no negotiation or execution of transactions… no custody of customer assets… [and] no financing arrangements, processing trade documentation, performing valuations, or other hallmarks of broker services.”

At a more fundamental level, OpenSea maintained that NFTs themselves are not securities under the Exchange Act.

The company argued that most NFTs are collectibles or art, purchased primarily for consumption, novelty, or aesthetic value rather than for investment.

The letter acknowledged that even if some NFT transactions were deemed securities, classifying NFT marketplaces as securities exchanges or brokers would constitute regulatory overreach.

This stance reflects OpenSea’s position that the unique nature of non-fungible assets requires distinct regulatory consideration rather than applying frameworks designed for traditional securities markets.

OpenSea’s Letter Gives NFT Recommendations

OpenSea’s letter concluded with specific recommendations for the SEC to address regulatory uncertainty in the NFT marketplace sector.

The company suggested that previous enforcement actions appeared more focused on expanding the Commission’s jurisdiction than addressing the actual risk profiles of NFT platforms.

To resolve this uncertainty, OpenSea proposed several concrete regulatory steps. First, it requested that the SEC clearly state that NFT marketplaces do not qualify as exchanges under federal securities laws.

The company suggests the Commission should issue informal guidance in the near term, such as an interpretive release or staff bulletin, clarifying how Rule 3b-16 applies to NFT marketplaces.

Regarding broker classification, OpenSea urges the Commission to clarify that marketplaces with certain characteristics are not brokers under the Exchange Act.

These characteristics involve platforms that provide various kinds of information about NFTs.

However, they do not provide valuations or advice about investing in NFTs, and platforms that facilitate communication between users but do not facilitate a transaction or custodian of digital assets.

This highlights that these clarifications would be beneficial to the NFT ecosystem overall, as they would eliminate regulatory uncertainty.