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.
Focus remained on the SBF trial as it entered week two, but the real Web3 legal news was surrounding the SEC’s busy week, with an update in the Coinbase mandamus action, a flurry of amicus in support of the SEC’s action against Coinbase, and a decision to not appeal the Grayscale decision which makes a spot Bitcoin ETF approval all the more likely (but it hasn’t happened yet, despite what some publications would have you believe).
Here’s everything that happened last week in Web3 law:
Coinbase and SEC File Updates in Mandamus Action
The SEC sent their Court mandated update on the status of digital asset rulemaking, and it technically meets the Court’s order… but just barely. It states that Commission staff have recommended action on Coinbase’s petition for rulemaking, but does not provide a date that the Commission intends to act on that recommendation or even what the recommendation was. Coinbase filed their own reply, claiming this is another stall tactic by the Commission and asking for the Court to Order a decision in the next 30 days.
Tl;dr: I can’t imagine the SEC’s letter was the expected level of transparency the Third Circuit was expecting when they kept this case on their docket to babysit the agency. Coinbase’s Chief Legal Officer’s update says it best: “We’ve filed our response with the Third Circuit. Tl;dr: the SEC’s unilluminating “update” is mere bureaucratic pantomime and confirms that nothing short of mandamus will prompt the agency to take its obligations seriously.”
Amicus Come Out in Support of SEC
There were three amicus filed in support of the SEC this week —the first from a group of administrative law scholars; the second from the New Finance Institute (which appears to be a blog); and the third from the North American Securities Administrators Association. The securities administrators focused on the regulation of digital assets at large, the administrative law scholars focused on major question doctrine issues, and the bloggers focused on…just disliking crypto generally?
Tl;dr: The blogger’s brief is…interesting. It claims that viewing gold as an investment vehicle is incorrect, and the reason there are no cases of an “investment contract” without some contractual arrangement for future work/profits is due to the “base rate fallacy” and not because the SEC is moving the goal post? It also cites to the academic literature of “Wikipedia” and a total of five cases in their briefing. The administrative law scholars focus on the major question doctrine but ignores that administrative procedures act challenges also apply to agency enforcement actions, not just rulemaking and guidance (I’ve gone back and forth personally on this issue, so they may have a point there depending on when you ask me). The securities regulators of course argue that securities regulations are clear and the SEC’s enforcements have been consistent. In sum, I would take the Coinbase amicus over the SEC amicus in a fight any day of the week.
Other Stories
Big week in tax, with Coinbase opposing the IRS proposed crypto reporting rules and geriatric Senators wanting the rules to go into effect sooner. The rules as written are simply unworkable, so I encourage everybody to leave a short comment letter opposing these regulations which can be done using this AI comment letter generator in 5 minutes.
Week 2 of the SBF trial happened. Like I have been saying, this isn’t something we should be focusing on as an industry, regardless of how spicy it may be to outsiders. But since you are reading this, the big stories of the trial from this week were: attempts by SBF to bolster advice of counsel defense, former Alameda CEO Caroline Ellison’s testimony, revelation that the CoinDesk leaked balance sheet was prepared by SBF in an internal memo, SBF’s request for amphetamines so he can decide if he wants to take the stand, and that there were seven different balance sheets prepared demonstrating the absurdity of the situation. I also found this timeline and this week 2 recap helpful.
The SEC has not filed an appeal in the Grayscale matter, which signals a likely approval for one of the various spot Bitcoin ETFs in the near future. Considering there is also an ETH futures ETF which is trading, one can expect a similar decision on that spot market as well.
California Governor Newsom has signed the state’s “Bitlicense” bill into law which will go into effect on July 1, 2025. California joins New York as states with fairly comprehensive regulatory regimes for digital assets, and considering most companies in the space avoid New York due to the regulatory burdens it imposes, I can see many of California’s current digital asset developers moving to more friendly jurisdictions.
A week late, but I need to read this recent publication from the Crypto Counsel for Innovation where they advocate for “Same Activity, Different Risks, Different Regulation BUT Same Regulatory Outcome” in creating a regulation model for DeFi.
Star Atlas, the NFT focused space video game, had more daily transactions Sunday than the entire polygon network. Web3 gaming is coming.
Trader Joe’s (the grocery store) is suing Trader Joe (the decentralized exchange), alleging federal trademark infringement. Was anybody super confused that their liquidity pair trading wasn’t on a protocol designed by the company the sells overpriced avocados? Probably not; but brands are justifiably protective over their names and goodwill.
The CFTC and FTC have sued the former CEO of Voyager lending, claiming he “misrepresenting the safety and financial health of the Voyager digital asset platform.” Not what you want to see as the former CEO of a now defunct platform.
The MoMA has acquired its first generative art piece from Refik Anadol. The 24-foot-tall video artwork constantly changes, and crowds seem to love it which makes the art world hate it. Which is fun.
BarnBridge DAO, which runs a DeFi protocol, opened a voting process over how it should respond to a Securities and Exchange Commission probe. An attorney for the DAO previously posted in their Discord to cease all development and payments during the probe, which is an interesting legal strategy? Honestly, most DAOs are going to have pain points on the legal side that everybody will need to figure out how to work through.
In AI corner, OpenAI has filed their reply in support of their Motion to Dismiss in the currently pending putative class action against the company for infringement. You can read the opposition here. Just like with digital assets, I expect most AI issues to work their way through disparate court rulings before they ever get dealt with by Congress.
Also, Dr. Stephen Thaler is officially appealing the copyright registration decision regarding his own AI registration. Big week in robot law!
Ferrari is going to start accepting crypto for buyers in America, just in case crypto bros didn’t have enough of a stereotype.
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 