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. The firm has started turning these into 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. But for more comprehensive and unfiltered thoughts, I have been 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 all are enjoying the long weekend and not checking Web3 news. However, if you are checking in while waiting for the burgers to finish or something, it was a surprisingly active week in Web3 law with Coinbase launching a sneak attack against the SEC and developments in the Digital Asset Market Structure Bill discussion draft which should have further updates this upcoming week. Also, be sure to check out and share the BitBlog Bi-Weekly which provides the top stories in an easily readable format every 2 weeks. I enjoy providing these updates to y’all, so keeping those subscription numbers growing helps me keep doing that.
Here’s everything that happened last week in Web3 law:
Coinbase Files Early Answer in Matter Vs. SEC
On June 7, Coinbase waived formal service in the SEC’s lawsuit against it, giving Coinbase until early August to Answer or otherwise plead. In a shock to many, Coinbase instead this past week filed its Answer and local rule required letter of intent to move for judgement on the pleadings under FRCP 12(c). While the SEC would usually be required to file a response to the letter of intent by yesterday (Monday, July 3), because of the holiday weekend the Court granted an extension until July 7 for the SEC to respond.
Tl;dr– You can read a full breakdown on the various strategic aspects of Coinbase’s decision here. Everything from the surprise timing, to the use of Answer pages to provide factual backgrounds, to the cites to the Mandamus action and the strategic use of judicial notice under Rule 12(c) have been highly strategic and intelligent decisions. Bill Hughes over at ConsenSys had a great few Twitter posts breaking down Justice Barret’s concurrence in the Biden v. Nebraska matter and its implication on how this SCOTUS may rule on a Major Question Doctrine issue raised by Coinbase. It will be interesting to follow what will now be different litigation tracts for the Coinbase and Binance lawsuits vs. the SEC.
Other Stories
Ranking House Financial Services Member Maxine Waters has given the US Treasury Department and the SEC one week to provide their opinions on the Digital Asset Market Structure Bill discussion draft. While some view this as indication she is looking for ammo against the legislation, others believe this is Waters’ way of pinning down Gensler, after he killed her stablecoin legislation last year by issuing critiques but no corrective solutions.
I don’t put the “must watch” title on many thing, but this interview/debate between Rodrigo Seira and Aaron Kaplan on the Unchained Podcast is a must watch. A great moment comes around the 29:45 mark where Arron, an unaccredited law school grad, essentially claims he is smarter than every attorney in the industry. Even the moderator walked away unimpressed.
The week after NFT based game NFL Rivals creator Mythical Games announced passing 1 million downloads for mobile, it secured an additional $37 million in funding in a series C extension round. Web3 gaming is hot right now.
Note to young (and all) attorneys: don’t bribe officials or falsify business records to assist your boss in his scams as allegedly a senior FTX Group attorney (“Attorney-1”) (AKA, Daniel Friedberg) did according to a recent filing in the FTX bankruptcy. No client or job is worth your law license or freedom. But the same attorney walked away OK from UltimateBet back in the day, so maybe he is a cat with 9 legal lives?
The Law Commission of England and Wales published its recommendations for reform and development of digital assets. The summary is here and the full 304 page list of recommendations is here. It has gotten positive reception so far from the UK attorneys I know, and seemingly will put UK in a good position to attract digital asset developers to set up shop in the UK.
SBF will very likely be going to trial after his motions to dismiss were predictably rejected. Miss 100% of the shots you don’t take, though.
Popular NFT project Azuki raised $38 million selling NFTs which are virtually indistinguishable from their original NFTs. On one hand, these are NFTs so provenance and collection identities are on the blockchain. So it potentially makes sense to release art that you know people love. On the other hand, these feel bootleggy because of the lower price point for seemingly identical profile picture clout?
Fidelity joined the spot Bitcoin ETF filing crowd with BlackRock and others. The masses are coming for your Bitcoin (or at least, to bet for or against your Bitcoin).
Only 24% of people are aware of Web3 according to a recent survey and only 8% said they were familiar with it. We’re still early.
Lacoste is the latest fashion brand dipping its toes in the NFT rewards ecosystem. Once people have been onboarded into Web3, things like promo codes and email discounts are going to be a way of the past.
Hope those alleged scam artists Kyle Davies and Su Zhu have their wallets ready because the 3AC creditors are coming after them for $1.3 billion. Allegedly.
This use of soulbound NFTs for tracking work history seems like a good idea. It will take quite a bit more mainstream adoption for these type of use cases to really pick up steam, though.
I missed this Committee on Capital Markets Regulation report titled “Cryptoasset Trading Platforms Cannot Register as Securities Exchanges” from June 6 but I am fixing that now. Gary Gensler gave this report a negative 3-star rating on rotten tomatoes.
Mastercard has big plans for blockchain, including a version of an app store for regulated financial apps. Understandable they didn’t want Visa to have all the fun.
TRM Labs released their annual illicit crypto ecosystem report. I haven’t dug in yet, but TRM and Chainalysis are the heaviest hitters when it comes to large scale crypto forensics work, so certainly something on my to-do list.
Lesser known Binance co-founder Yi He has started making statements regarding Binance’s regulatory compliance and her thoughts on the pending actions against the company by the CFTC and SEC. Binance is seemingly taking legitimate steps to become a compliant and upstanding business, but they are going to have to account for the cowboy wild west practices they used to get to be the number one digital asset exchange in the world.
Republic Crypto and Upside are debuting ERC-1404 Prime as a jumpstart to the tokenization standard designed for tokenized securities issuances. The revised standard now provides functionality for automated lock-ups and dividend distributions which is an upgrade to the old ERC-1404 standard.
The Chairmen of the House Financial Services, Judiciary, and Oversight and Accountability Committees sent a letter to SEC Chair Gary Gensler questioning the agency’s record keeping obligations being upheld and the staff’s use of Signal and other non-standard messaging apps (where records unlikely to be kept) for conducting official business. Combined with former SEC Chair Jay Clayton taking pot shots at the agency’s regulation by enforcement and he is being attacked on all sides.
Speaking of Gensler, the Blockchain Association unsurprisingly has taken the position that he should recuse himself from all digital asset enforcement decisions. He’s not going to, but it lays a good framework for others to argue that enforcement actions he was involved in are procedurally tainted.
Bittrex is launching a surprisingly stout defense to the SEC’s lawsuit after the firm previously announced its intent to shutter US operations. You might recall, back in March the firm announced it was winding down US operations, and the SEC sued them on their way out the door. Most expected Bittrex would settle with a fine they would never pay due to bankruptcy and for the SEC to point to the action as another win. However, similar to Wahi, the SEC may have picked a fight it doesn’t want a part of with a more motivated and able foe than expected.
The Wall Street Journal reported, apparently from an SEC source, that the TradFi Spot Bitcoin ETFs were going to be denied due to inadequacy of information provided. It ended up being much ado about nothing, but it will be hilarious if Coinbase ends up being the TradFi designated custodian in the middle of the SEC lawsuit against Coinbase.
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 