Non-fungible tokens (NFT) trading platform OpenSea and venture capital firm Andreessen Horowitz have pledged $6 million to a legal defense fund for NFT creators in partnership with the crypto advocacy group backed by Coinbase, StandWithCrypto. The move follows the recent Wells notice from the Securities and Exchange Commission (SEC) to OpenSea.
According to the announcement from OpenSea CEO Devin Finzer, the company pledged $5 million, while a16z promised $1 million to the fund. A16z crypto also announced it on its website, noting that it expects more companies to join the initiative to support artists and creators. The firm’s general counsel, Mile Jennings, explained that NFTs are simply blockchain-based tools that can serve multiple purposes for artists and fans, enabling innovation.
He said:
“The fear of potential legal repercussions should not hold back well-meaning artists from experimenting with new technologies that may better serve their fans and families.”
Meanwhile, information on the StandWithCrypto website explains that the Creator Legal Defense Fund initiative will cover the legal costs of any NFT creator targeted by regulatory authorities and provide them with free legal consultation and other services when they request it.
It said:
“If you’re an artist or creator facing legal challenges or simply need help navigating the unclear regulatory environment, we’re here to help.”
In addition to the crypto firms, the initiative enjoys the support of multiple law firms, including Cooley LLP, Fenwick & West LLP, Goodwin Proctor LLP, and Latham and Watkins LLP, highlighting the strength of the legal team.
Digital Chamber criticizes SEC’s approach to NFTs
Meanwhile, The Digital Chamber (TDC) also criticized the SEC’s recent moves on NFTs, including its securities lawsuits against Dapper Labs and DraftKings, describing them as an overreach and outside the SEC’s powers. TDC said that most uses of NFTs are not for speculative trading or investment contracts, noting that even though some users sell for profit, this also happens with physical collectibles.
This group claimed that its in-depth study of the NFT ecosystem in 2023 shows that popular applications of NFTs include digital arts, video games, unique digital experiences, and collectibles. Therefore, nothing about NFTs suggests why they should be regarded as securities.
TDC wrote:
“Many NFT applications are clearly not designed as investment contracts or financial tools for speculation, even if consumers occasionally sell NFTs for a profit, much like traditional collectibles or artwork. This secondary market feature does not make them financial products.”
The group has now called on lawmakers to classify NFTs as consumer goods and provide more regulatory clarity on the status of the asset, saying:
“Congress must act now to ensure that this burgeoning industry remains within the US, for the benefit of the US economy, and not move overseas to more favorable regulatory environments.”
It added that protecting NFT creators is essential, as the SEC’s current approach has affected several people’s livelihoods and negatively impacted multiple companies in the industry. Besides, allowing the SEC to continue with its crusade against the NFT industry would send the wrong message to consumers about how American agencies must act within the scope of their authority.
OpenSea releases free NFTs in solidarity
OpenSea has also launched a free NFT project, “Rising Tides Lift All Boats,” on Coinbase layer-2 network Base to commemorate its decision to join the Creator Legal Defense Fund. Finzer announced the launch, stating that NFT artist Jhekub designed it.
The public mint for the collection opened on September 13 at 1:30 PM GMT+1 and will end by September 15 at 1:30 PM GMT+1. According to OpenSea data, over 9,000 wallets have already claimed the NFTs, and the floor price is around 0.0001ETH.
Meanwhile, NFT trading activity is down over the last 24 hours, with sales falling 8.6% to $11.36 million, buyers declining 19% to barely 72,000, and transactions dropping 22% to just over 203,000.
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