OpenSea Users Assert NFTs Qualify as Securities in Proposed Class Action Lawsuit

Two OpenSea users have proposed a class-action suit in the United States against non-fungible token (NFT) marketplace OpenSea, claiming it sells unregistered securities contracts.
Anthony Shnayderman and Itai Bronshtein claimed in a Sept. 19 suit filed in a Florida federal court that
NFTs
they purchased on OpenSea — including from the once high-priced Bored Ape Yacht Club collection — are worthless “due to their illegal nature.”
In their arguments, the pair pointed to OpenSea’s
disclosure of a Wells notice
from the Securities and Exchange Commission last month which they claimed “suggests that OpenSea is in the hot seat and may be found liable for facilitating the exchange of unregistered securities.”
A Wells notice is a warning that the SEC has conducted an investigation and could bring an enforcement action against the notice’s receiver.
The suit also points to successful SEC action against NFT projects
Stoner Cats 2
and
Impact Theory
, where the regulator said the NFTs were unregistered securities sales.
An OpenSea spokesperson told Cointelegraph, “Conjuring from thin air a purported class-action lawsuit based on our disclosure of an SEC Wells notice won’t make the allegations in the complaint true.”
“We refute these allegations and look forward to defending against this baseless lawsuit,” the spokesperson said.
Shnayderman and Bronshtein claimed the securities-defining Howey test shows the NFTs they bought on OpenSea were investment contracts under US
securities laws
, alleging they were an investment in a common enterprise and reasonably expected profits from other’s efforts.
OpenSea’s NFT listings were “deceptive and misled the Plaintiffs into purchasing worthless and unlawful unregistered securities” as OpenSea said it “moderates the NFTs on its exchange, including ‘real-world financial instruments…securities,’” the suit alleged.


Highlighted excerpt of the lawsuit’s arguments claiming OpenSea was responsible for removing securities from its platform. Source: PACER
Shnayderman and Bronshtein claimed OpenSea breached a user warranty that said it “would moderate the OpenSea exchange for unregistered securities.”
Related:
Pudgy Penguins CEO unfazed by SEC actions against NFT sector
They also alleged it unjustly enriched itself by charging fees and accepting funds “that it knew, or should have known, were derived from the sale of unregistered securities.”
In an emailed statement, Shnayderman and Bronshtein’s counsel, The Moskowitz Law Firm managing partner Adam Moskowitz, told Cointelegraph, “With today’s ever-changing regulation, there should be a process to sell NFTs in a well-regulated environment.”
“We look forward to working with OpenSea, to structure the best avenue and future process, for both consumers and the crypto industry,” Moskowitz added.
Magazine:
NFT Creator — ‘No matter how bad it gets, there’s a lot going on with NFTs’: 24 Hours of Art
Update (Sept. 23, 10:30 pm UTC): This article has been updated to add a response from OpenSea.