U.S. securities regulators reportedly are considering a lawsuit against the NFT marketplace OpenSea.

OpenSea, a leading non-fungible token (NFT) marketplace, has been warned of a possible securities case, according to an Aug. 28 announcement.

The company said that it received a Wells notice from the U.S. Securities and Exchange Commission (SEC), which indicates the agency is considering a lawsuit.

OpenSea said that it is confident that it operates legally and that its users do not trade securities when they use the platform. It added that designating NFTs as securities would “misinterpret the law.” Such an outcome could put creator income at risk and harm innovation within the industry, OpenSea warned.

OpenSea urged the SEC to adjust its stance on the matter so it does not impose “unnecessary regulatory burdens.”

The company added that it has pledged $5 million to cover legal fees in case NFT artists and developers receive their own Wells notices.

OpenSea describes itself as the largest NFT marketplace. According to community data from Dune Analytics, OpenSea has handled over $39 billion in volume to date, concentrated largely within the peak NFT market of 2021 and 2022. The company saw $43.6 million in monthly volume in August 2024.

OpenSea CEO Devin Finzer said in a separate statement that the company was “shocked” by the SEC’s notice, adding that it is prepared for a legal fight.

He called actions against the NFT sector “uncharted territory” and distinguished such actions from the SEC’s other focuses, stating:

“We should not regulate digital art in the same way we regulate collateralized debt obligations.”

Finzer acknowledged that several other crypto companies have recently been targeted by the SEC, including Coinbase, Uniswap, Robinhood, Kraken, and ConsenSys. Those firms have received Wells notices or are engaged in active SEC lawsuits; some have reached previous settlements with the securities regulator.

Finzer and OpenSea also noted that musician Jonathan Mann and artist Brian L. Frye, both of whom work with NFTs, have filed suit against the SEC based on the concern that their work could be treated as unregistered securities offerings.

OpenSea also referenced an earlier settlement between the SEC and another NFT project, Stoner Cats, as one example of enforcement. The case saw internal resistance within the SEC: though the SEC and the NFT company reached a $1 million civil settlement, two SEC commissioners dissented to the outcome and said that NFTs sold for money are not automatically securities.