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.
Friday I was thinking how it was a nice quiet week in crypto law and was looking forward to a weekend where I didn’t feel like I had a ton to catch up. Then the House decided to drop their 162 page Digital Asset Market Structure Bill and schedule a Ag. Committee meeting on it for Tuesday. So that’s fun…
With the SEC lawsuits against Binance and Coinbase dropping yesterday and today, I imagine next week’s update is going to be a doosy. But in the meantime, here’s everything that happened last week in Web3 law:
US House of Representatives Digital Asset Market Structure Bill Discussion Draft Released
On Friday, the 162 page Digital Asset Market Structure Discussion Draft was released as was a 2 page summary of the bill and a 9 page section by section breakdown. There is a hearing scheduled for Tuesday, June 6th with the House Committee on Agriculture (the committee responsible for overseeing the CFTC) titled “The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets” for this discussion draft to be…discussed. This is by far the most comprehensive bill regarding digital assets we have seen be proposed by Congress.
Tl;dr– This is the bill we have all been waiting for since House Financial Services Committee Chair Patrick McHenry promised in late April he would have a digital asset regulatory framework bill through the House in the next few months. The 2-page summary above is better than anything I could put here for a paragraph tl;dr, and hopefully we will have something up on the BitBlog breaking this down more in depth soon. In the meantime, Justin Slaughter and Gabriel Shapiro had solid Twitter threads breaking down the bill text itself. I expect a significantly changed version of this bill will pass the House, then have a 50/50 chance of passing the Senate before dying on the President’s desk, but fingers crossed I am wrong and the Senate/Executive have a change of heart in their current approach to crypto (i.e., kill it with fire).
SEC Gives Up in Fight Against Former Coinbase Employee
The SEC has requested a consent judgement (i.e., settlement) be entered in its case against a former Coinbase employee and his brother (Ishan and Nikhill Wahi) over the alleged insider trading of certain digital assets listed on the Coinbase platform. The Wahis had previously filed a Motion to Dismiss and had strong amicus support filed by various industry players prior to the SEC’s announcement that a settlement had been reached.
Tl;dr– While the SEC is claiming this as a win, the settlement doesn’t admit any conclusions about the tokens themselves constituting securities and doesn’t require the Wahi brothers to pay any fines on top of what they are already paying under their DOJ criminal pleas. The optimist in me thinks maybe the SEC realized their case involving secondary sales of digital assets is weak and ran from an unexpectedly strong opposition. A more realistic view is that the SEC realized they need to gather resources for a final boss fight against Coinbase, and this unimportant fight against a couple nobodies wasn’t a smart use of those resources.
Other Stories
In funding, Tribe Capital is apparently targeting $100m for its latest crypto fund, StepStone raised $97m across two blockchain focused funds, Anoma Foundation raised $25m for its layer 1 blockchain Namada, Magic non-custodial digital wallet raised $52m primarily backed by PayPal, and crypto gaming company Illuvium raised an additional $10 million in funding from Framework Ventures. Venture may be on the lookout for AI home runs, but they are also still looking for singles and doubles with established Web3 companies. Bear market schmear market.
Nike has teamed up with EA sports for its Web3 collection, announcing Nike digital assets will be wearable in EA games such as FIFA. Biggest sneaker company in the world pairing up with biggest video game developer in the world to integrate their brands through blockchain technology? Probably nothing.
Prosecutors have responded to disgraced FTX founder SBF’s Motions to Dismiss various charges against him. At the same time, they responded to SBF’s claims that certain charges violate the terms of his extradition from the Bahamas stating they will drop the charges if Bahamas asks them to (unlikely). SBF also apparently is planning to use an “advice of counsel” defense on at least some claims, which isn’t entirely unexpected to defeat certain mens rea elements of some of the non-fraud charges. Like I previously said, I think both (1) some of the charges against SBF won’t stick; and (2) SBF ends up in jail for most of the rest of his life after it is all said and done.
Gemini has moved to dismiss the SEC lawsuit against it over its Earn program, which allowed customers to lend crypto assets in exchange to interest on that loan. In what is becoming increasingly common, Gemini’s legal team took to Twitter to further advocate for their dismissal request.
Not Web3, but some big AI stories over the past two weeks with an attorney being bench slapped for using AI to write a brief and not noticing the case cites were made up and a N.D. Tex. Judge requiring all filings be certified as either not using AI or checked by human before filing. In the same way you shouldn’t blindly copy Westlaw forms, don’t blindly follow AI provided materials. It’s not a difficult concept.
OpenAI is also launching a grant to democratic governance proposals. Have they heard of DAOs?
With the current popularity of fly-by-the-night ERC-20 tokens with no utility or use other than gambling (which, to be fair, is the same thing that drove memestock speculation a few years ago) , it is a good time to remind people that even if not a security, price manipulation and pump/dump schemes are still illegal under a variety of laws.
The IRS’s use of “John Doe” summons to gather information on all individuals with over a certain amount of crypto trading on a platform has again been upheld, this time by a District Court in New Hampshire. Reminder: pay your taxes, even if I do personally object to this digital stop-and-frisk collection of evidence method.
If you really want an informational snoozefest, check out this market study on digital-assets regulatory data. I am really only including this to reference later as a “damn, I wish I had read that earlier” document when something important comes of it.
GameStop has moved further into its Web3 gaming strategy by partnering with the Telos Foundation to pilot a new Web3 game launcher called GameStop Playr. Gamestop launched its NFT/crypto division last year, so it’s nice to see it seemingly moving in the right direction. Between this, EA teaming up with Nike, and games like Ev.io integrating in-game rewards combined with player skins, it is exciting to see where blockchain integration into gaming is going.
Tokenization of real-world assets (RWA) has been a hot topic for a while, so this opinion piece is worth knowing to have speaking points on it if you haven’t familiarized yourself with it yet. This was a pretty good article explaining how five pending SEC rules which aren’t specifically directed to crypto could secondarily affect crypto markets.
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 
One thought on “Off the Blockchain+, May 29-June 5, 2023”