Under Gary Gensler’s leadership, the U.S. Securities and Exchange Commission (SEC) is rapidly reshaping the crypto landscape through enforcement. This approach is now reaching deeper into the industry, with the latest target being the NFT marketplace OpenSea.
SEC Intensifies Regulation in the Crypto Space
The SEC has made its presence felt in the crypto industry, issuing Wells notices to more crypto entities than ever before. A Wells notice serves as a prelude to legal action, informing the entity of alleged securities law violations and offering a chance to respond before the SEC takes formal action. The term gained prominence last year as the SEC ramped up actions after the FTX collapse.
OpenSea Faces SEC Scrutiny
Recently, OpenSea’s co-founder and CEO, Devin Finzer, announced that the SEC had issued a Wells notice. This notice suggests that certain NFTs on their platform may be considered securities. Finzer expressed surprise at the SEC’s expansive view, which he believes unfairly targets creators and artists. Nevertheless, he emphasized that OpenSea is ready to defend its position.
Other Crypto Entities in the SEC’s Crosshairs
Before the SEC sued Coinbase, the company revealed it had received a Wells notice focusing on its asset listings and staking services. Since then, the SEC’s scrutiny has expanded to include Uniswap, a decentralized exchange, and Robinhood, a trading platform. However, no formal charges have been filed against them yet.
It’s important to note that a Wells notice does not automatically lead to enforcement. It simply signals the SEC’s Division of Enforcement is considering action, which must still be reviewed and approved by the Commission.
Record Number of Wells Notices in 2023
In 2023, the SEC sent a record number of Wells notices to crypto-related entities. This resulted in 46 enforcement actions, a 53% increase compared to the previous year. Under Gensler, the SEC’s Cyber Unit—renamed in 2022 to include “Crypto Assets“—has doubled its staff to 50. This expanded team is tasked with regulating digital asset offerings, exchanges, DeFi platforms, NFTs, and stablecoins.
SEC’s Focus Under Gary Gensler
When asked about the SEC’s broader approach, a spokesperson pointed to a 2023 speech by Gensler. He highlighted token issuers, crypto intermediaries, and staking services as key areas of concern. Meanwhile, Gurbir Grewal, Director of the SEC’s Division of Enforcement, clarified that some actions target blatant scams. Others, however, deal with more complex issues, like unstable stablecoins and manipulable smart contracts. Grewal acknowledged the innovation in blockchain but stressed the SEC’s duty to enforce federal securities laws.
