FameEX Hot Topics | Digital Chamber Presses Congress to Respond to SEC Actions on NFTs

In August, OpenSea’s CEO reported receiving a Wells notice from the SEC, signaling that the regulatory body may be shifting its stance on NFTs. This action has prompted the Digital Chamber, a leading crypto and blockchain advocacy organization, to call on the U.S. Congress to pass legislation that clearly defines certain NFTs as consumer products, exempting them from federal securities laws. On September 10, the Digital Chamber issued a notice criticizing the SEC’s potential actions against OpenSea, describing it as an “overreach into the digital asset industry.” While no lawsuit had been filed by the SEC at the time, the Wells notice suggested that enforcement action could be forthcoming.

The Digital Chamber is urging lawmakers to establish that NFTs should not be categorized as “financial products” or securities under the SEC’s jurisdiction. The group raised concerns about SEC Chair Gary Gensler’s regulation-by-enforcement strategy, which, paired with Congress's lack of legislative clarity, could endanger the industry. According to the Chamber, most NFTs are not designed to function as investment contracts or speculative financial instruments, even though they can occasionally be resold for profit. They likened NFTs to traditional collectibles or artwork, which are typically classified as consumer goods rather than securities.

Devin Finzer, CEO of OpenSea, described the Wells notice received on August 28 as “a move into uncharted territory.” However, similar enforcement actions have been taken against other platforms. Dapper Labs faced enforcement over its NBA NFTs, and DraftKings was similarly targeted with allegations of selling unregistered securities.

In 2023, the SEC charged entertainment company Impact Theory with unregistered securities sales through its Founder’s Keys NFTs, ultimately requiring the company to pay over $6 million in penalties.

The SEC’s regulatory approach to NFTs could change depending on the outcome of the 2024 U.S. elections. Republican candidate Donald Trump has vowed to dismiss SEC Chair Gary Gensler if re-elected, while some speculate that Democratic nominee Kamala Harris might adopt a different regulatory stance compared to the current Biden administration. These leadership and policy changes could lead to significant shifts in how the SEC oversees NFTs, potentially starting in January 2025.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.