OpenSea Suspends Trading Of EtherFi NFTs

Liquid staking protocol EtherFi has released an open letter condemning OpenSea after the NFT marketplace suddenly halted the trading of the company’s EtherFan collection last week, featuring NFTs backed by staked ETH.

The two companies had been collaborating on the EtherFan launch for weeks prior to deployment of the collection, with a marketing strategy that hinged on secondary market sales and cross-promotion, The Defiant learned from EtherFi CEO Mike Silagadze.

“They seemed very positive and interested in it, and excited to host us. We talked about co-marketing efforts,” said Silagadze, adding, “The team members we were talking to didn’t give us any indication that there was going to be an issue.”

EtherFi’s first mint launched last Tuesday, with 1,000 NFTs minted out in minutes.

However, within 24 hours of EtherFan's deployment on OpenSea,, the team was dismayed to find that listings had inexplicably vanished from the marketplace, leaving them without any explanation or clarification.

Attempts by the team to list their own NFTs produced an error code, according to Silagadze.

The EtherFan collection is now trading on Rarible. OpenSea’s largest competitor, Blur, was not an option for EtherFi, as Blur’s platform currently lacks support for ERC1155 tokens, which is the token standard used by EtherFan NFTs.

EtherFi’s Open Letter

In an open letter to OpenSea exclusively obtained by The Defiant, EtherFi condemned the NFT marketplace’s actions.

“OpenSea has been running a de facto unlicensed casino where people engage in ruinous gambling and spend millions on pictures of monkeys and such. This is all great and ok apparently, but listing a collection that actually has utility is disallowed because it has utility,” said an excerpt from the letter.

The letter goes on to say, “I actually don’t think OpenSea is being malicious here. I don’t think anyone intentionally did anything wrong. I think there’s nobody home. They’re a 300+ person company now, and there are probably many teams who don’t know what other teams are doing.”

“Radio Silence” From OpenSea

“Having the EtherFan NFT listed on a marketplace was a fairly important part of our marketing strategy because we expected there would be a resale market,” said Silagadze.

“Unequivocally, we did not get any indication whatsoever from OpenSea that any of what we were doing was potentially in violation of their Terms of Service,” said Silagadze although he admitted that his team “did not ask specifically because we assumed it was fine, because our token is in our estimation not in any way a security, it’s just staked ETH.”

Despite verbal assurances and the creation of a telegram group promising a cross-promotional marketing campaign, “radio silence” is what the team got in response from OpenSea for nearly a week following after pulling trading support, said Silagadze.

OpenSea Responds

On July 13, OpenSea ultimately broke its silence with what Silagadze called “a templated response.”

OpenSea did not directly respond to The Defiant’s inquiry related to the EtherFan collection as to whether or not the company views staked ETH as a security. However, a spokesperson provided the following statement:

“While we don't offer details about enforcement actions on individual collections, I can share that our terms of service govern the type of content and behavior that's permissible on OpenSea. When we find collections or content to be in violation of our Terms of Service, we enforce our policy in various ways, including delisting collections and in some instances, banning accounts."

To Silagadze, the decision to suspend trading on the contention that the NFTs are securities is “infuriating on a number of levels. For one thing, staked ETH is clearly not a security.”

Silagadze said OpenSea’s stance was “frustrating as hell” and “the most aggressive stand that even the SEC hasn’t taken.” He pointed out that other government agencies such as the Canada Revenue Agency and Ontario Securities Commission have “explicitly said ETH staking is not a security.”