An Open Letter to OpenSea
More like ClosedSea, amirite?
On Tuesday July 11th we launched ether.fan, which is an NFT collection backed by staked ETH and focused on Ethereum decentralization.
By all measures it was wildly successful. We minted out all 3k NFTs within a day, with over 6200 ETH staked.
We immediately started to see listings pop up on OpenSea and we directed our users to the listing so they could trade.
Then we got hit with a gut punch. All listings on OpenSea disappeared. New listings were seemingly disabled (with a cryptic error message.) We didn’t get any notice or warning. None of the many people we’d been speaking with at OpenSea had reached out. The collection was just inexplicably disabled.
Our users started reaching out to us on our Discord and support channels asking what was going on, and we didn’t have any answers to give them.
We reached out to OpenSea immediately through half a dozen channels and got radio silence for a few days. Then, finally, we got a form letter response from the generic OpenSea support email:
Apparently OpenSea doesn’t allow NFT collections that “carry out any financial activities subject to registration or licensing.”
ether.fan NFTs are just wrapped staked ETH with a PFP. So the implication is that OpenSea is taking the stance that staked ETH is subject to licensing and registration. A stance so conservative that even the SEC hasn’t explicitly stated it.
We had been talking to OpenSea before launch to make sure ether.fan was compatible with their market, to integrate their API so that the metadata was always up to date, to make sure the collection looked right. We had spent weeks leading up to the launch on this.
Through that whole process we didn’t get any indication that anything we were doing would be an issue. Why would it be? This was frankly an intentionally prosaic non-speculative project in the NFTfi category of utility NFTs.
OpenSea has been running a de facto unlicensed casino where people engage in ruinous gambling and spend millions on pictures of monkeys and such. This is all great and ok apparently, but listing a collection that actually has utility is disallowed because it has utility.
I actually don’t think OpenSea being malicious here. I don’t think anyone intentionally did anything wrong. I think there’s nobody home. They’re a 300+ person company now, and there are probably many teams who don’t know what other teams are doing.
The tendency when companies grow large is for them to be effectively run by their legal and accounting teams, and to stop doing anything even a tiny bit risky.
I know this all too well. The first startup I founded grew to around 500 employees and by the end of it there was a constant struggle to stay nimble and fight against entropy and conservatism. It’s a tough job and I have tremendous respect for the level of execution it took to get OpenSea to where it is today.
That being said I think there are many examples of companies in the crypto space that are willing to take a stand. Coinbase being the prime example. I think that’s the right approach. Otherwise what’s the point of the whole thing?
