Coinbase’s advocacy group, Stand With Crypto, has launched a new initiative called the Creator Legal Defense Fund. This fund aims to support non-fungible token (NFT) projects.
Announced on September 13 via a post on X (formerly Twitter), the fund has a total of $6 million. It’s backed by venture capital firm a16z and NFT marketplace OpenSea.
This move comes as regulatory scrutiny increases. Recently, the US Securities and Exchange Commission (SEC) issued a Wells notice to OpenSea. Stand With Crypto emphasized the importance of defending the crypto community. They stated that creatives can now challenge “misguided actions from the SEC.”
The organizations explained, “With the SEC issuing OpenSea a Wells notice, as well as other attacks on artists and creators, it has become clear that those looking to build on blockchain technology will continue to face significant legal threats and challenges.”
The fund is supported by leading law firms like Fenwick & West LLP, Goodwin Procter LLP, and Latham & Watkins LLP. These firms will provide essential legal resources for those in the blockchain and NFT space. a16z has contributed $1 million, while OpenSea has pledged $5 million.
The SEC is facing criticism from the crypto community and US lawmakers for its “regulation by enforcement” approach. In 2022, the agency took action against an NFT issuer, accusing a Los Angeles-based media company of selling unregistered securities through NFTs. This led to a $6 million settlement.
The regulator has also targeted major platforms like Coinbase, Binance, and Kraken. They accuse these companies of violating securities laws. The SEC insists that crypto investors deserve the same protections as traditional investors, even when trading through intermediaries.
In response, Coinbase has stepped up as a strong advocate for the crypto sector. In 2023, they launched the Stand With Crypto initiative and invested millions in Fairshake, a political action committee supporting the crypto industry. These efforts show Coinbase’s commitment to promoting favorable policies and protecting crypto investors' rights.
These events unfold amid a downturn in the NFT market. After a surge during the crypto bull market of 2021, interest in NFTs has sharply declined.
A recent report revealed that 96% of NFT projects are inactive. Issues like rug pulls and wash trading have eroded trust in the NFT space. Increased regulatory pressure could worsen these challenges, making the situation even more difficult.