Two OpenSea users accusing the non-fungible token marketplace of selling unregistered securities have dropped their proposed class-action lawsuit after a judge allowed the firm to demand arbitration.
On Nov. 7, Anthony Shnayderman and Itai Bronshtein filed a voluntary dismissal of their securities suit against Ozone Networks, which does business as OpenSea, in a Florida federal court after Judge Cecilia Altonaga allowed OpenSea to file a motion to compel the pair into arbitration in an order last month.
OpenSea had held firm that it would compel the two users into arbitration, claiming in an October filing that they agreed to its terms of use that say all claims would be resolved by an arbitrator — including if the claims should be arbitrated in the first place.
In the October filing, the NFT marketplace added that it “intends to promptly move to compel Plaintiffs to arbitrate their claims in the agreed-upon forum,” and it would appeal any denial by a court, putting the case on pause.
An excerpt from OpenSea’s October argument claims users agree to resolve issues through alternative dispute resolution services provider JAMS. Source: CourtListener
Shnayderman and Bronshtein’s lawyer, Adam Moskowitz from The Moskowitz Law Firm, told Cointelegraph they “had no choice but to dismiss the pending case.”
He added their “main goal” for the case was to “create a framework, whereby our experts, and their experts, could accomplish what others have not been able to do, namely, try to create a workable global marketplace for NFTs [...] in light of the upcoming changing political and legislative changes.”
“We still think OpenSea could help, especially in supervising and monitoring NFTs traded on their own exchange, for which they directly profit,” Moskowitz said. “We will certainly continue to investigate how we can best help those victims of failed NFTs and other crypto products.”
Shnayderman and Bronshtein launched the proposed suit in September, claiming the NFTs they bought on OpenSea were unregistered securities contracts in the United States and were worthless “due to their illegal nature.”
They argued OpenSea’s August disclosure of a Securities and Exchange Commission Wells notice — a warning the agency could bring an enforcement action — “suggests that OpenSea is in the hot seat and may be found liable for facilitating the exchange of unregistered securities.”
The suit also pointed to the SEC’s successful action against NFT projects Stoner Cats 2 and Impact Theory, where it said the NFTs were unregistered securities. They claimed the NFT market breached a user warranty that said it “would moderate the OpenSea exchange for unregistered securities.”
At the time, an OpenSea spokesperson refuted the allegations, called the suit “baseless,” and told Cointelegraph, “Conjuring from thin air a purported class-action lawsuit based on our disclosure of an SEC Wells notice won’t make the allegations in the complaint true.”
OpenSea did not immediately respond to a request for comment on the voluntary dismissal.
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