decrypt.co
The Moskowitz Law Firm filed another class-action lawsuit against a crypto firm Thursday, this time alleging that OpenSea’s customers were sold NFTs as unregistered securities.
The lawsuit brought in a Florida federal court claims that two residents of the Sunshine State sustained damages as a result purchasing NFTs on the platform, which served as a go-to place to purchase digital art and collectibles when the NFT market ran red-hot in 2021 and 2022.
“We have learned a great deal in our extensive crypto litigation,” Moskowitz Law Firm Managing Partner Adam Moskowitz told Decrypt in a statement. “With today's ever-changing regulation, there should be a process to sell NFTs in a well-regulated environment.”
The Miami-based law firm is currently litigating against a wide range of crypto firms and their associates, including FTX and 11 celebrities who endorsed the collapsed crypto exchange. It has also sued basketball legend Shaquille O’Neal over his Solana-based NFT project Astrals, and soccer star Cristiano Ronaldo over his promotion of the crypto exchange Binance.
The latest lawsuit alleges that OpenSea engaged in a scheme “to mislead and deceive investors” while unjustly enriching itself by charging fees on NFT transactions. The Florida residents believed that NFTs traded on OpenSea were registered securities due to OpenSea’s representations, a copy of the case’s complaint shared with Decrypt states.
While the lawsuit does not list damages resulting from NFT purchases, it asserts that NFTs fall under the definition of a security as investment contracts. In various enforcement actions, the SEC itself has asserted similar claims, stating that NFT purchasers invested money in a common enterprise with the expectation of profit derived from the efforts of others.
Moskowitz’s lawsuit follows OpenSea’s disclosure of receiving a Wells notice in August, signaling that the Securities and Exchange Commission (SEC) is likely to sue the marketplace. On Twitter (aka X), OpenSea CEO Devin Finzer described the prospect of an enforcement action against OpenSea as a step into uncharted territory that puts artists at risk.
“The SEC [is] threatening to sue us because they believe NFTs on our platform are securities,” Finzer, a resident of Miami, said. “We should not regulate digital art in the same way we regulate collateralized debt obligations.”
As Finzer pointed out, NFTs can represent ownership in many things, including domain names, trading cards, and event tickets. Earlier this week, SEC Commissioners Hester Peirce and Mark Uyeda described the regulator’s approach to NFTs as “misguided and overreaching.”
Though the commissioners accused the SEC of an overzealous application of securities laws while targeting an NFT-gated restaurant chain, Moskowitz’s lawsuit argues that “the SEC’s stance on cryptocurrency has always been consistent.”
Last month, the law firm notched a partial win in its case against O’Neal, when a Florida judge ruled that the case could proceed on some accusations. In Thursday’s complaint, Moskowitz pointed to OpenSea as a platform where NFTs from O’Neal’s Astrals project were available.
OpenSea did not immediately respond to a request for comment from Decrypt.
Edited by Andrew Hayward