OpenSea Users Withdraw Lawsuit After Arbitration Ruling

Two users of OpenSea, the non-fungible token (NFT) marketplace, have decided to withdraw their class-action lawsuit alleging the sale of unregistered securities. This decision came after a judge permitted OpenSea to compel arbitration.

On November 7, Anthony Shnayderman and Itai Bronshtein filed a voluntary dismissal of their case against Ozone Networks, the company behind OpenSea, in a Florida federal court. This occurred after Judge Cecilia Altonaga ruled in favor of OpenSea's motion to enforce arbitration.

OpenSea's Stance on Arbitration

OpenSea maintained that it would require the two users to enter arbitration, referencing their acceptance of terms of use which stipulate that all disputes would be resolved by an arbitrator. This includes the determination of whether the claims should indeed be arbitrated.

In a filing from October, OpenSea stated its intention to promptly move to compel arbitration and indicated it would appeal any court ruling that denied this request, effectively pausing the case.

Legal Representation Comments

Adam Moskowitz, the attorney representing Shnayderman and Bronshtein from The Moskowitz Law Firm, expressed that they had no choice but to dismiss the case. He explained that their primary objective was to establish a framework that would allow for the creation of a viable global marketplace for NFTs, especially considering the evolving political and legislative environment.

Moskowitz emphasized the potential for OpenSea to play a significant role in overseeing and monitoring NFTs traded on its platform, from which it profits. He also indicated that the investigation into aiding victims of unsuccessful NFTs and other crypto products would continue.

OpenSea's Response

An OpenSea spokesperson expressed satisfaction with the plaintiffs' decision to withdraw the lawsuit, labeling it as lacking merit. They asserted confidence that OpenSea operates within legal boundaries and that users are not trading securities when engaging with NFTs on their platform.

Background of the Lawsuit

Shnayderman and Bronshtein initially filed the lawsuit in September, claiming that the NFTs purchased on OpenSea were unregistered securities in the United States and were deemed worthless due to their illegal status. They pointed to an August disclosure from OpenSea regarding a Wells notice from the Securities and Exchange Commission (SEC), which suggested potential liability for facilitating the exchange of unregistered securities.

The lawsuit also referenced the SEC's successful actions against NFT projects such as Stoner Cats 2 and Impact Theory, arguing that these NFTs were unregistered securities.

At the time, OpenSea's representatives dismissed the allegations as baseless, asserting that the lawsuit's foundation was unfounded and that merely alleging a class-action lawsuit based on an SEC disclosure does not validate the claims made.

The recent developments highlight the ongoing complexities within the NFT marketplace and the legal landscape surrounding it. OpenSea's commitment to arbitration may set a precedent for how similar disputes are handled in the future.