On Wednesday, the world’s largest non-fungible token (NFT) marketplace reported that the main financial regulator in the U.S., the Securities and Exchange Commission (SEC), hit OpenSea with a warning letter about an impending enforcement action after declaring NFTs “securities.”

Known as a “Wells Notice,” the SEC warnings tend to precede official enforcement actions from the regulator for securities law violations. They typically are filed after an SEC investigation and alert potential recipients of possible actions under consideration. OpenSea, like other companies, also receives an opportunity to contest potential charges the SEC is mulling prior to any official enforcement action.

"OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities," OpenSea CEO Devin Finzer acknowledged on Wednesday. “We're shocked the SEC would make such a sweeping move against creators and artists.”

The crypto industry has long been the target of several Wells Notices, with Coinbase, Kraken, and Robinhood all receiving Wells Notices in recent years. This spring, the SEC also hit Uniswap with a Wells Notice, arguing that the crypto exchange operated as an unregistered securities broker and exchange in violation of securities rules.

Finzer announced OpenSea would extend a $5 million legal defense fund to any NFT community members targeted by the SEC’s enforcement actions.

“I hope the SEC will come to its senses sooner rather than later, and that they'll listen with an open mind," Finzer said. "It would be a terrible outcome if creators stopped making digital art because of regulatory saber-rattling."