OpenSea Makes Creator Royalties Optional

Check out the biggest breaking crypto market updates for today:

Court Sides With Government In Coinbase-Backed Lawsuit Over Tornado Cash Sanctions

Judge Robert Pitman, the federal judge overseeing the Tornado Cash Sanctions lawsuit funded by Coinbase, has reportedly granted the United States Department of the Treasury’s motion for summary judgment. 

This means they have gone against the six plaintiffs who said that the agency exceeded its authority when it sanctioned crypto mixer Tornado Cash last year. 

Judge Pitman ruled, 

“The DAO is an entity unto itself that, through its voting members, has demonstrated an agreement to a common purpose. As the government notes, the structure is not unlike that of stockholders of a corporation who may not intend to vote in a shareholder meeting, without this affecting the structure of the entity […] The Court finds that Tornado Cash is an association within the ordinary meeting of the term and is, therefore, an entity that may be designated per OFAC regulations.” 

Tornado Cash is an open-source software that can be used to anonymize transactions on the Ethereum blockchain. 

The Treasury Department sanctioned Tornado Cash last year and its Office of FOreign Assets Control added the mixer to its Specially Designated Nationals list, which bars people in the U.S. and firms looking to operate in the U.S. from financial interactions with them. 

The six plaintiffs argued that the designation exceeded statutory powers because Tornado Cash is not a person and is software, which Pitman disagreed with. Pitman said Tornado Cash has founders, developers, and a decentralized autonomous organiztion which governs the platform. 

“The court finds that Tornado Cash is an association within the ordinary meaning of the term and is therefore an entity that may be designated per OFAC regulations,” Pitman said. 

Paul Grewal, Coinbase’s chief legal officer, seemingly suggested that an appeal would be coming. 
“We continue to believe Plaintiffs’ challenge to OFAC’s Tornado Cash action is right. We’ve always known that Fifth Circuit review is required to resolve these issues, and we continue to support them on appeal,” Grewal wrote on Twitter. “Rights are rarely secured on a path that is always ⬆️ and ➡️.”

OpenSea Will Make Creator Royalties Optional For NFT Trades

NFT marketplace OpenSea is reportedly shutting down ‘Operator Filter’- its on-chain royalty enforcement tool on Aug. 31. 

The platform has stated that it has chosen to make creator fees optional for new collections after Aug. 31. Artists will now only be able to indicate their preferred creator fee, which buyers can choose to pay effectively as a tip.

In a blog post, OpenSea founder and CEO Devin Finzer stated, 

“In November 2022, we launched the Operator Filter: a tool designed to give creators more control by restricting the sale of their collections to web3 marketplaces that enforce creator fees in secondary sales. It was meant to empower creators with greater control over their web3 business models, but it required the buy-in of everyone in the web3 ecosystem, and unfortunately, that has not happened. So, we’re making a few changes to our approach to creator fees.” Adding, “To be clear, creator fees aren’t going away – simply the ineffective, unilateral enforcement of them.” 

Creator fees typically range from 2.5% to 10% and are tacked on to secondary sales of NFTs and pocketed by creators. 

Existing collections on non-Ethereum blockchains, and projects that opted to use OpenSea’s Operator Filter – a controversial tool that prevented collections from being sold by competing platforms that themselves made creator fees optional, and rewarded that loyalty with enforced creator fees on OpenSea – will be able to guarantee creator fees until February 29, 2024. 

At that point, NFT creator fees will be fully optional, platform-wide. 

This is the latest shift in a long-escalating disruption of the NFT industry, spurred by the arrival last fall of upstart NFT marketplaces that slashed creator royalties. 

Some, like leading marketplace Blur, generated massive amounts of trading volume with the gamified deployment of lucrative token airdrops that were valued in the hundreds of millions of dollars and benefited loyal users. 

In a November 2022 interview with Decrypt, Finzer defended OpenSea’s decision at the time to stick with creator royalties and enforce them, despite the emergence of competing platforms that undercut such artist protections. 

At the time, he pointed to OpenSea’s “leadership in the space” in support of creators. 

Though OpenSea had reigned for years as the unchallenged behemoth of NFT marketplaces, Blur’s aggressively free-market approach soon upended that status quo. By February, Blur overtook OpenSea as the top NFT trading platform by trading volume, prompting OpenSea to reduce its royalty fee protections to remain competitive. 

OpenSea’s elimination of enforced creator fees altogether signals the company’s enduring struggle to retain users in the face of challengers who are content to do away with certain cultural norms in the crypto community – namely, the prioritization of the rights of creators. 

There are several matters beyond creator royalties that complicate OpenSea’s offering. 

For one, the company still takes a 2.5% platform fee from every NFT transaction. Blur levis no such fee. 

The more recent OpenSea Pro version of the marketplace skips the platform fee, however, albeit with conditions tied to paying creator fees. 

Furthermore, NFT marketplaces are fighting more and more aggressively over a steadily shrinking pie. OpenSea has generated about $82 million worth of trading volume in the last month, while Blur has generated $271 million in the same period, according to DappRadar. Just months ago, in March, those figures were $424 million and $1.35 billion, respectively.

SEC Set To Greenlight Ether-Futures ETFs In Win For Crypto Industry

According to a Bloomberg report, the United States Securities and Exchange Commission (SEC) is set to approve the first exchange-traded funds (ETFs) based on Ether Futures. 

While it couldn’t immediately be determined which funds would get the green light, nearly a dozen firms, including Volatility Shares, Bitwise, Roundhill and ProShares, have filed to launch the ETFs. 

The regulator has refused to allow an ETF based on cryptocurrency, but in late 2021, it started allowing trading in a fund that involves Bitcoin futures contracts that trade on the Chicago Mercantile Exchange. 

Speculation has been mounting that a product with Ether futures, which also trade on CME, would be next. 

Despite that buzz, SEC approval for a product involving derivatives in the second-biggest cryptocurrency has been slow. Bitcoin commands a market value of roughly $152 billion, while Ether’s is $195 billion, according to CoinGecko. 

Meanwhile, the SEC remains locked in a battle with the industry over its pushback against ETFs based on Bitcoin itself. In one high-stakes case, a panel of US federal appellate court judges is set to make a decision on a lawsuit by Grascale Investments LLC challenging the SEC’s rejection of an application to convert its bitcoin trust into an ETF. 

Several firms, including BlackRock Inc., recently filed applications to list ETFs based directly on Bitcoin. The BlackRock filing in June helped push the token’s price above $31,000. It has since spent the majority of July and August hovering around $29,000. On Thursday, Bitcoin traded near $26,000. Ether, at 1,600, has dropped about 11% so far this month.

Luke Baldwin

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