SEC 1976 Art Gallery Ruling Resurface Amid OpenSea NFT Case

Ripple’s Chief Legal Officer Stuart Alderoty has revealed a decades-old SEC ruling that could have major implications for the ongoing debate over NFTs and securities law.

Alderoty tweeted a “fun fact” about a 1976 SEC decision that exempted art galleries from registration requirements, even when selling to buyers with investment motives.

This historical precedent becomes more relevant as the SEC threatens legal action against OpenSea, alleging that NFTs on its platform may be securities.

Fun fact: In 1976, the SEC ruled that art galleries, even when promoting and selling to buyers that had investment motives, didn’t need to register with the SEC. https://t.co/CtQJ3mlPkh pic.twitter.com/oR8EgGpXoo

— Stuart Alderoty (@s_alderoty) August 29, 2024

Will the Document Impact SEC vs. OpenSea NFT Battle?

The 1976 document, shared by Alderoty, details the SEC’s response to an art gallery’s proposed sale of lithographs. The SEC advised that it would not recommend enforcement action if the lithographs were sold without registering them as securities.

This ruling hinged on several factors, including the gallery’s providing authenticity guarantees, independent appraisals, sales literature about the artist, and potential tax benefits.

OpenSea’s co-founder has expressed shock at the SEC’s stance, arguing that NFTs are fundamentally creative goods, not financial instruments. He highlighted the diverse impact of the tokens, from empowering student artists to enabling indie game developers to create open markets for in-game items.

In response to the regulatory pressure, OpenSea has pledged $5 million to cover legal fees for NFT creators and developers who receive Wells notices from the SEC.

Also Read: SEC Served OpenSea a Wells Notice; NFT Considered Securities