The revelation that an OpenSea employee was using inside information to profit on NFTs rocked the community last week, with many hoping it would lead to further regulatory scrutiny.
Nate Chastain, OpenSea’s head of product, resigned last week amid the scandal, which was spurred by community members investigating a web of wallets he had created. Chastain was purchasing NFTs he knew would be featured prominently by OpenSea and selling when the added attention created a price spike.
Many were quick to shout “insider trading,” but lawyers contacted by Crypto Investor were skeptical any crimes had been committed. This is primarily because NFTs are not registered securities, a necessary element to the law.
“Now that OpenSea has a huge community of artists and users that rely on it, I think they have an elevated role to be responsible players in the ecosystem,” said Moish Peltz, an attorney who deals with intellectual property issues. “Arguably, they did that here once the issue was brought to their attention and apparently quickly asked for and received Chastain’s resignation in response to the publication of his trades.”
Peltz noted absent regulation, “buyer beware” remains the mantra when trading on NFT marketplaces. Some saw the scandal as a need for additional regulatory oversight, but major players in the space are lukewarm.
“The space is still in the early stages of development, and I think regulation would slow down the experimentation process,” said Alex Salkinov, co-founder of NFT marketplace Rarible. “I believe the space regulates itself adequately so far — the community helps spot unethical behavior — however, in the future we may need regulation in order to welcome larger players into the space.”