Two OpenSea users dropped their complaint accusing the NFT marketplace of selling unregistered securities. This ruling came after a federal judge ruled in favor of Open Sea’s demand for arbitration, effectively halting the lawsuit.
On November 7, plaintiffs Anthony Shnayderman and Itai Bronshtein filed a voluntary dismissal motion against Ozone Networks, the firm that operates as OpenSea. Since the users had consented to OpenSea’s terms of service, which require resolution of disagreements outside of court, the court verdict in October permitted OpenSea to compel arbitration.
According to court records, OpenSea’s terms of service compel users to settle any legal disputes with JAMS, an arbitration company. In an earlier petition, OpenSea stated that if the court did not enforce arbitration, it would file an appeal, potentially postponing the case forever.
Adam Moskowitz, the plaintiffs’ attorney, expressed displeasure in the dismissal. He stated that the fundamental goal of the case was to create a framework for NFT marketplaces to function in a regulated, global context. Moskowitz declared that his firm would persist in exploring strategies to support NFT customers impacted by the industry’s growing problems, even after the case’s withdrawal.
Shnayderman and Bronshtein filed the initial lawsuit in September, claiming that the NFTs they purchased on OpenSea were unregistered securities under US law, rendering them virtually worthless due to their regulatory status. The lawsuit cited a previous Wells notice from the Securities and Exchange Commission (SEC) to OpenSea, indicating probable enforcement action regarding unregistered securities transactions.
The lawsuit asserted that OpenSea should have monitored its platform to stop the trade of unregistered securities, citing prior SEC actions against NFT projects that were considered securities.
In response to these charges, an OpenSea spokeswoman called the lawsuit’s assertions “baseless.” They claimed that targeting OpenSea’s business unfairly and citing an SEC letter as the basis for a class-action lawsuit was unfounded.
The case’s decision underscores the intricate legal framework that surrounds NFTs and the ongoing debate over their classification as securities. As regulatory agencies monitor the NFT sector, organizations like OpenSea may face more pressure to assure compliance while preserving customer trust.
