OpenSea has received a Wells notice from the SEC threatening to sue because they believe NFTs on are securities

"OpenSea has received a Wells notice from the SEC, threatening legal action because they believe NFTs on our platform are securities," said OpenSea co-founder and CEO Devin Finzer. A Wells notice is a formal statement indicating the SEC’s staff plans to recommend an enforcement action.

The SEC declined to comment on the potential investigation, according to a spokesperson's statement to Reuters. The regulatory body and the crypto industry have been at odds in recent years over whether crypto assets should be classified as securities and regulated accordingly.

"We're shocked that the SEC would take such a broad stance against creators and artists. But we're prepared to stand up and fight," Finzer continued. Crypto companies have criticized the SEC for overreaching its jurisdiction, while the regulator argues that the industry is bypassing securities laws meant to protect investors and other market participants.

"Although NFTs aren't typically seen as securities, the SEC may be looking into how they were treated and traded, potentially resembling an investment contract," said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors. He added, "Attitudes toward NFTs were already impacted by the last crypto crash, and they're struggling to recover."

Prominent crypto companies, such as Coinbase and Robinhood, have repeatedly pushed for clearer regulations and updated laws. NFTs, which gained popularity in 2017, are digital assets recorded on a blockchain, acting as a public ledger to verify authenticity and ownership. Each NFT has a unique digital signature that cannot be replicated.