August 30, 2024

If the SEC Sues OpenSea, Here's Why the NFT Platform Could Win Easily - Ep. 696

36 minutes

The SEC’s latest enforcement action is targeting NFTs, and OpenSea is in the crosshairs. In this episode, crypto lawyer Preston Byrne joins to unpack the implications of the SEC's Wells Notice to OpenSea and what it might mean for the platform and the broader NFT market. Could Section 230 of the Communications Decency Act provide a unique defense for OpenSea? Preston also dives into other recent SEC moves, including cases against Stoner Cats, Impact Theory, and more.

Lastly, with the 2024 elections looming and political divides sharpening, is the SEC overreaching in its approach to crypto?

Show highlights:

Why Preston believes that the SEC will go after OpenSea for being an unregistered securities exchange

What the Stoner Cats case was about and why it was not a strong enforcement action, according to Preston

Why OpenSea's defense against the SEC may hinge on Section 230 protections for user-generated content, setting it apart from traditional exchanges like Coinbase or Binance

How the clear-cut promises made by Impact Theory about potential returns made their NFTs resemble securities, unlike the typical art-focused NFTs on OpenSea

Why Nate Chastain’s NFT insider trading case is unlikely to impact the SEC’s potential lawsuit against OpenSea

Whether the $4 million settlement by Dapper Labs over NBA Top Shot NFTs likely represents little relevance to OpenSea's SEC issues

What a Wells notice signals about the SEC's likelihood of suing OpenSea and why they might feel confident about winning this case

How Jonathan Mann and Brian Frye's lawsuit for clarity on NFTs as securities highlights the SEC's potentially overreaching stance in its possible case against OpenSea

How Trump's careful language around his NFT collection likely minimizes SEC risk by avoiding investment promises and focusing on their use as digital collectibles

Whether the SEC's actions could reinforce the divide among crypto voters, with Trump promising a crypto-friendly stance and Harris likely continuing a more adversarial approach

Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com

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Guest

Preston Byrne, Managing Partner at Byrne & StormLinks

Wells notice

Original announcement by X by OpenSea’s CEO Devin Finzer

Unchained: OpenSea's Wells Notice From the SEC Could Prove ‘Disastrous’

Recent cases

Unchained: Are NFTs Securities Offerings? Two Artists Sue the SEC to Find Out

The Defiant: NFTs Are Securities? All Eyes Turn to Top Shot Case

Reuters:

US regulator fines Stoner Cats creator for offering NFTs

Ex-OpenSea manager sentenced to 3 months in prison for NFT insider trading

Hester Peirce’s dissent on the Stoner Cats case

Others

Paper: The Economic Reality of NFT Securities.

Mondaq: Defining NFTs: Property, Securities, Or Commodities?

National Post: Trump’s newest NFTs show him as superhero, boxer and motorcyclist

Timestamps:

00:00 - Introduction

02:11 - SEC targets OpenSea: Unregistered exchange?

03:58 - Stoner Cats case: Weak for SEC?

07:42 - OpenSea's defense: Section 230 protections

13:15 - Impact Theory's promises vs. OpenSea's NFTs

15:34 - Nate Chastain's case

17:15 - Dapper Labs settlement: Relevance to OpenSea

18:56 - Wells notice: SEC's confidence to sue

19:48 - Mann & Frye's lawsuit: SEC overreach?

22:39 - Trump’s NFT strategy: Minimizing SEC risk

24:53 - What this Wells notice says about the presidential election

58:25 - News Recap

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By Laura Shin

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