In a significant development for the cryptocurrency landscape, the Moskowitz Law Firm has filed a class-action lawsuit against OpenSea, alleging that the platform sold non-fungible tokens (NFTs) as unregistered securities. The lawsuit, initiated in a Florida federal court, claims that two Florida residents suffered damages after purchasing NFTs during the 2021 and 2022 market boom, when OpenSea emerged as a premier marketplace for digital art and collectibles.
Moskowitz Law Firm Managing Partner Adam Moskowitz emphasized the need for a well-regulated environment for NFT sales, stating, “We have learned a great deal in our extensive crypto litigation. With today’s ever-changing regulation, there should be a process to sell NFTs in a well-regulated environment.” This lawsuit is part of a broader effort by the firm, which is currently engaged in various high-profile litigations against several crypto firms, including the notorious FTX and celebrity endorsers like Shaquille O’Neal and Cristiano Ronaldo.
The lawsuit accuses OpenSea of misleading investors and enriching itself through transaction fees on NFTs. According to the complaint, the plaintiffs believed that the NFTs traded on the platform were registered securities based on OpenSea’s representations. Although the lawsuit does not specify the damages incurred, it asserts that NFTs qualify as securities under the definition of investment contracts. The U.S. Securities and Exchange Commission (SEC) has echoed similar sentiments in its enforcement actions, stating that NFT buyers invest money in a common enterprise with the expectation of profits derived from others’ efforts.
This legal action follows OpenSea’s recent receipt of a Wells notice from the SEC, indicating that the agency intends to sue the platform over its NFT offerings. OpenSea CEO Devin Finzer voiced concerns on Twitter, arguing that regulating digital art similarly to collateralized debt obligations could endanger artists and the broader NFT community. “The SEC is threatening to sue us because they believe NFTs on our platform are securities,” he stated. “We should not regulate digital art in the same way we regulate collateralized debt obligations.”
In a response that highlights the tension between regulators and the NFT market, SEC Commissioners Hester Peirce and Mark Uyeda criticized the agency’s approach, calling it “misguided and overreaching.” Their comments came in the wake of the SEC’s aggressive stance against an NFT-gated restaurant chain, further complicating the regulatory landscape for digital assets.
Moskowitz’s latest lawsuit aligns with a broader narrative of legal scrutiny within the cryptocurrency space. The firm recently scored a partial victory in its case against O’Neal, with a Florida judge permitting some allegations to move forward. Notably, the complaint also references NFTs from O’Neal’s Solana-based project, Astrals, available on OpenSea.
As the lawsuit unfolds, it raises critical questions about the future of NFTs and their classification under securities law. With regulatory bodies and legal firms actively seeking to define the parameters of this burgeoning market, the implications for artists, collectors, and platforms like OpenSea remain to be seen. This case is sure to be a touchstone in the evolving discourse surrounding NFTs and regulation, highlighting the need for clarity in a fast-changing industry.
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