Opensea employee attempting to dismiss charges.

Continuing to plague the industry is the unknown of where the actual NFTs themselves stand in regulation. Not knowing the outcomes of cases such as the XRP vs SEC case which still is unknown, would help to clarify many questions such as securities asset classification, etc.

Lawyers for former OpenSea head of product Nathaniel Chastain filed a motion to dismiss an indictment against him, according to court documents. Chastain was indicted by a grand jury on wire fraud and money laundering charges in June, after an insider trading scandal.

Chastain is accused of using confidential OpenSea business information to secretly purchase NFTs shortly before they were featured on the company’s homepage. After he bought the NFTs, Chastain allegedly sold them for a profit. He is also accused of conducting purchases using anonymous digital currency wallets and anonymous OpenSea accounts. The company acknowledged the incident in a blog post.

The defendant’s lawyers argue in the motion that NFTs are neither securities nor commodities, and wire fraud cases require trading in securities or commodities. The lawyers also claim that the government cannot prove whether the specific crypto transactions it cites qualify as financial transactions under money laundering rules. 

“The government has brought the instant prosecution using ill-founded applications of criminal law to set precedent in the digital asset space,” Chastain’s lawyers wrote in the motion to dismiss the indictment.  Brings up the issue that is there a hard point to prove for the actual charges that can be made considering all of these unanswered guidelines.

Cointelegraph reported in June that former Securities and Exchange Commission lawyer Alma Angotti said the case could open the doors to NFTs being labeled as securities. Chastain was one of the first individuals to be charged in the United States in a case related to the insider trading of NFTs in the crypto space. Should Chastain’s legal team reach an agreement with prosecutors or lose the case, it could embolden the SEC to expand its regulatory and enforcement powers over certain cryptocurrencies. The SEC made a similar move to label nine crypto assets as securities in an insider trading case against former Coinbase product manager Ishan Wahi, his brother and an associate.