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.
Hopefully you had a great Memorial Day weekend! If you missed it, last week I presented with Romaine Marshall and a couple people building products/services in the Web3 space. We talked about what is being done in the industry currently, legal issues, and where we see the industry going. You can watch the recorded video here and the rest of the Web3 Lives series that Romaine and Rob Lamb organized here. It is a great background for people who want to learn more about the industry.
Now that I am done self-promoting, here’s everything that happened last week in Web3 law:
Yuga Labs Gears Up for Trial in Trademark Dispute
I have previously covered the litigation between Yuga Labs and trademark infringers Ryder Ripps/Jeremy Cahen. I don’t need to say alleged trademark infringers, because at this point Yuga has already won summary judgment on that issue. However, while the Defendants’ attorney has already said they intent to appeal the ruling, the trial is still going forward on issues of damages and the remaining claims. This week, the parties filed their pretrial filings including proposed exhibit and witness lists and motions in limine.
Tl;dr– The biggest remaining issues are whether the Court allows Defendants to present arguments regarding the alleged racist imagery used in the Bored Apes’ images/lore, and whether Defendants will be permitted to present evidence regarding the artistic purpose of the “project” following the ruling against them on Rogers test issues. It still makes no financial sense for this case to continue, especially for Defendants who have already lost on attorneys’ fees issues once and may end up paying more in damages from the trial, but it’s not my money.
Other Stories
I’ve already spent two major stories tl;dr’ing the Coinbase mandamus action so I won’t bore you with those details again, but Coinbase filed its reply to the SEC’s claims this past week. As expected, Coinbase pushes back at the SEC’s “we haven’t made our mind up yet” claims and cites to Gensler’s recent comment that “the rules have already been published.” I still think Coinbase loses (and I doubt the Court retains jurisdiction to babysit the SEC’s progress as requested by Coinbase), but I think they have a decent chance at getting the dicta bench slap they are really hoping to use against the SEC elsewhere.
Nike raise a little over $1 million from their first digital sneaker sale, selling over 60,000 such digital sneakers at $20/pop with sales still open as of writing this on Friday morning. I got a couple pairs myself. If they can find a way to offer token-gated rewards to buyers, I expect any future sales to sell out instantly and other brands to follow suit.
ConsenSys, the developers of popular self-custodial wallet MetaMask, got in hot water when they updated their terms to say “We retain the right to withhold taxes as necessary.” Similar to ledger (discussed below) know your audience when writing Web3 terms and conditions, and if there is something you know is going to confuse people have something to address it ahead of time instead of being forced to do damage control.
Last week, I wrote about Ledger getting in trouble when their good faith attempt to provide seed recovery services blew up due to bad communications and fears over being vulnerable to subpoena powers of state actors. This past week, the CEO released a statement addressing those concerns and delaying the feature. It demonstrates the importance of having communications team trained for crypto-specific legal and customer concerns.
More companies are getting through App Store approvals with Axie last week and STPN this week integrating Apple Pay into a project designed to reward people for walking. As Reddit taught us, the best way to onboard people into Web3 is for people to not even know it’s Web3.
The International Organization of Securities Commissions (IOSCO) proposed 18 crypto policy recommendations in a recent consultation report. The SEC is a voting member of IOSCO so we know there will be at least one vote in opposition to this proposal. IOSCO is actively seeking public input on its recommendations until July 31, and they’re expected to be finalized by the end of the year.
The Financial Industry Regulatory Authority (FINRA) announced that it approved its first broker-dealer with custody rights for digital assets securities: Prometheum Ember Capital LLC. All Prometheum had to do was eliminate everything that makes crypto better than non-crypto by not allowing true self-custody, requiring use of intermediaries (and associated fees) for disposition of assets, and a host of other concessions.
In something that literally nobody was asking for, FTX continues to explore an option to re-launch the exchange. If they changed literally everything about it (including name) except for its user-friendly interface, it could work.
Hong Kong has moved at lightning speed from an effective ban on crypto to beginning accepting applications for crypto trading platform licenses on June 1, leading the way for China to potentially back off their own ban. Gives hope that there is still time for the US to catch up.
Back in March, the SEC brought charges against Green United for allegedly violating federal securities laws by selling $18 million worth of phony crypto mining equipment. Green United has now moved to dismiss that Complaint, arguing the sale of computer hardware/software cannot create a “common enterprise” as required under securities laws, there was no fraud in the sales, and the Major Questions Doctrine prevents the SEC’s novel interpretation of the Securities Act in this case. Even reading the Green United advocacy slant, they still sound crazy shady; but maybe just regular fraud and not securities fraud?
Shaq got hit with a class action complaint over his promotion of NFTs to be used in an online role-playing game Shaq co-founded. Now begins the hunt to serve legal process on the surprisingly elusive 7+ footer again.
Binance won on a Motion to Dismiss on jurisdictional grounds regarding a “pig butchering” scam in which a Texas woman was tricked into sending over $8 million in cryptocurrencies to an individual she met on dating app Tinder. These scams are more and more common (while more traditional hacks have dropped due to increased security knowledge) and recovering the assets after they have been sent is nearly impossible due to jurisdictional and other complexities. Think Nigerian Prince scam for Web3.
Really cool to see Visa putting out thought leadership on use of account abstraction as a way to get blockchain transactions to the same levels of adoption that credit card transactions are at. With account abstraction, we can potentially eliminate the need for acquiring tokens simply for gas fees in the same way Visa’s core network allows for payment in local currencies without the person having to purchase that currency first.
Gov. Ron DeSantis went on Twitter Spaces to formally announce his bid for presidency, and spent a decent amount of time discussing his platform on digital assets, coming out in opposition to the Biden administration’s seeming hostility to the industry. His views appear to match Democratic presidential hopeful Robert F. Kennedy Jr.’s views as well.
Basically every financial power in the world is working on issues surrounding whether or not they will issue central bank digital currencies (“CBDCs” aka, digital dollars). It seems like a vast majority of countries are in favor of them, while there are many privacy concerns with the US’s own proposed plans. This comes at the same time as Beijing released its Web3 white paper outlining plans and challenges for development of the city’s Web 3.0 industry.
Bitcoin Ordinals NFTs continue to surge while Bitcoin supporters debate whether recording digital art is the best use of block space and transaction costs/speeds on the network.
NFT ticketing is coming to F1 and debuted at the Monaco Grand Prix this week. These create lasting memorabilia, allow event sponsors to reward prior attendees in a verifiable way, and prevent use of fake tickets at events. It’s a win/win/win and I expect most major sporting and concert events will be ticketed through NFTs in the very near future.
New York crypto miner Coinmint alleged two semiconductor companies set up an “elaborate deception” to lure the miner into a $150 million purchase agreement, in a lawsuit seeking over $23 million in damages. One of the co-Defendants has moved to dismiss the allegations against them. The debt ceiling deal did not include the Biden proposed 30% tax on electricity use for cryptocurrency mining. So that’s a minor (pun intended) win.
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 