Intro/Disclaimer: In late 2022 I started preparing updates for the attorneys at my firm practicing in the Web3 space regarding what legal stories people were talking about the prior week. I believe eventually we are going to do monthly or bi-weekly posts on the award winning BitBlog summarizing the top stories with tl;dr breakdowns on the stories’ importance and general thoughts on their ripple effects on the industry. In the meantime, I thought I would start putting the weekly updates on my personal blog as well on Tuesdays. Note, any opinions from these (or any of my other) blogs are mine alone, and are not adopted or endorsed by my firm.
It was either a slow week in crypto-law, or I was just too busy hopping around events and speaking sessions at Consensus. At the end of the conference, Congressman Patrick McHenry said he expects the House to pass some (including potentially comprehensive) digital asset legislation in the next few months. It would still need to pass a seemingly less crypto-friendly Senate and be signed into law by an outright crypto-hostile Executive, but still more movement than I expected this year.
Here’s everything else that happened in Web3 law this past week:
Coinbase Files for Writ of Mandamus Against SEC
On Monday, days after meeting with the SEC, Coinbase filed what they have described as “a narrow action in federal court to compel the SEC to do one simple thing: respond yes or no to Coinbase’s pending rulemaking petition that asks the SEC to provide overdue guidance for the crypto industry.” The filing is available here. Coinbase’s original Petition for Rulemaking filed in July, 2022 (which gives rise to this filing), is available here.
Tl;dr– This is an exceedingly well written Petition, and it is nice to see action towards getting judicial intervention as administrative agencies have taken an unspoken policy of roadblocking any requests for legal clarity. The Coinbase video about the Wells Notice was equally well done. That said, it does come off as slightly desperate by Coinbase? It seems like they are tired of waiting to get to the potential firing squad and are pushing the issue. Big risk, but also potentially a big reward if they can put more money towards actual product development and less towards constant legal spend. Also, this is clearly a well thought-out part of the Coinbase overarching legal strategy so I’m not going to second guess that too much.
Other Stories
Visa is looking to add backend developers familiar with public blockchains and stablecoin “to help us drive mainstream adoption of public blockchain networks and stablecoin payments.” With Mastercard also increasing crypto integration, it seems inevitable that in the very near future PoS payments will include options for payments in various forms of crypto.
The House Financial Services digital assets subcommittee met again this week in a hearing entitled “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure.” While I am not hopeful for substantial digital asset regulation to be put into place this year (or potentially next) due to lack of support in the Executive branch, maybe the growing sentiment that the US is falling behind European rivals will spur legislative action.
California has introduced a DAO bill which modifies the existing California Unincorporated Association law for DAOs. It is supported by a16z, which is unsurprising as they have long been outspoken over the use of UAs to avoid the Corporate Transparency Act conflicts with anonymously run businesses. Seems unlikely the bill passes in its current form, but if it does that is a huge win for DAOs looking to have a US nexus going forward.
The criminal case against former OpenSea employee Nate Chastain started and ended this past week (with closing arguments happening this week). You can read our the summary on the Bitblog which we provided when the charges were first announced almost a year ago. One week seems like a quick trial for a seemingly complicated financial crime. We should have a decision this week, one would think.
Paradigm filed an Amicus Brief in the SEC v. Terra lawsuit, in support of neither party but advocating against the SEC’s classification of the algorithmic stablecoin, UST (amongst other cryptocurrencies) as a “crypto asset securities.” Bad facts make bad law, and Do Kwon/his company did some undeniably bad and scummy things. But industry advocates like Paradigm are needed to remind courts that their rulings go beyond the bad actors being prosecuted.
Former CoinBase employee Ishan Wahi is set to be sentenced in the wire fraud criminal case he pled guilty to back in February. With the SEC case against him also having a pending settlement, it is possible there will be certainty for him and his brother in the upcoming weeks.
While various record labels are doing their best to take down AI generated bangers using the vocal styles of artists like Drake, Grimes has been crowdsourcing ways to allow others to split profits with her on AI generated songs using her voice/style.
The DOJ charged two U.S. citizens and a South African national with conspiring to manipulate the market for HYDRO, a virtual asset created by the Hydrogen Technology Corporation. This comes the same day the SEC won (via settlement) in their civil case against the individuals. While there is very little precedential value in merely bringing charges/settling the SEC case, it’s something market makers should be aware of when directly selling tokens on their platforms.
Despite brands like Nike, Starbucks, Adidas, Budweiser, and many others jumping feet first into Web3, other more conservative brands are still waiting for regulatory clarity to enter the space.
In Web3 gaming, Animoca Brands is developing a mobile MMA game with NFT assets, and Yuga Labs further beefed up their C-suite hiring an EA veteran as CTO.
Senators Warren and Marshall have decided not to re-submit their crypto surveillance bill due to lack of support this time around, which is a win. That said, the CFTC and others are warning industry participants against use of technology which provides heightened privacy protections for users. Zero knowledge proofs can’t come quickly enough.
Venmo is actually going to allow users to send cryptocurrencies both to users and external wallets. So you will actually be buying and owning crypto and not a number on a screen representing crypto. Robinhood also appears to be moving toward more actual crypto usage.
Conclusion
If you have any questions or would like me to write about anything else, let me know on either of my twitter pages! As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.
The NFTtorney 