OpenSea pushes SEC to clarify that NFT marketplaces are not exchanges or brokers under US federal securities laws

OpenSea, the leading centralized NFT marketplace, is pushing the U.S. Securities and Exchange Commission to clarify that NFT marketplaces do not qualify as exchanges or brokers under federal securities laws, according to a letter sent to Commissioner Hester Peirce, the Crypto Task Force chair, on Wednesday.

In February, the SEC dropped an investigation of OpenSea amid a wave of regulatory reversals under a more crypto-friendly administration. As part of President Trump’s first official acts, he directed the agency to clarify its position on crypto and set up a "Crypto Task Force" to engage with the industry on drafting guidelines.

For years, the SEC had been criticized for its policy of “regulating by enforcement” and failing to state actionable rules. Under former Chairman Gary Gensler, the agency operated as if all cryptocurrencies — barring Bitcoin — were under its remit and subject to securities laws.

"The Division of Enforcement’s previous move to extend exchange and broker regulations to OpenSea appeared to be focused more on expanding the Commission’s jurisdiction than on addressing the particular risk profiles of NFT marketplaces and considering whether existing regulations are relevant to those risks," OpenSea General Counsel Adele Faure and Deputy General Counsel Laura Brookover wrote in Wednesday’s letter.

"OpenSea encourages the Commission to reject that approach and instead let the actual issues guide the regulatory solutions. In addition, the Commission’s past enforcement agenda has created uncertainty. We therefore urge the Commission to remove this uncertainty and protect the ability of U.S. technology companies to lead in this space," they add.

Faure and Brookover argue that the broker designation is "superfluous" for exchanges like OpenSea because "the underlying risks" of "conflicts of interest, financial instability, and misconduct" are absent in the crypto ecosystem.

"NFT marketplaces do not hold or facilitate the flow of funds or assets and thus cannot commingle them, making capital requirements and financial recordkeeping irrelevant. Moreover, OpenSea does not recommend investments or execute transactions on behalf of users," Faure and Brookover write. 

Likewise, OpenSea should not be regulated as a “Trading Facility” like the New York Stock Exchange because transaction execution is handled by immutable smart contracts, and the platform does not meet the Exchange Act’s “multiple sellers” requirement.

Pierce’s crypto task force has met with a number of industry players, including Jito Labs, which recommended that the SEC approve staking ETFs.