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

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

Thank you to our sponsors!

• iTrustCapital
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• Token 2049
• Mantle’s FBTC
• Gemini

Guest

• Preston Byrne, Managing Partner at Byrne & Storm

Links

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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