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.
It’s officially 2024! I will be releasing a top 10 Web3 legal stories of 2023 on the Polsinelli BitBlog on the early next week, with Bi-Weekly updates to resume on January 11th. I am also working on putting all these posts into a single document so people can easily search through them for stories/links like I do. In the meantime, we had a relatively quiet week with a break in the calm for Judge Rakoff in the Southern District of New York to release his Terraform Labs summary judgment decision.
Here’s everything that happened last week in Web3 law:
SEC Wins (Mostly) in Terraform Labs Case
The SEC was granted summary judgment against Terraform Labs regarding the SEC’s allegation that the UST, LUNA, wLUNA, and MIR tokens are investment contracts under the Howey test. Terraform Labs was granted summary judgment dismissing the SEC’s allegations that it engaged in illegal security-based swaps. The issue of whether Terraform Labs’ actions constitute fraud was left for trial.
Tl;dr: Leave it to Judge Rakoff to release a major decision like this over a holiday week. The Court held that LUNA and MIR were securities, in large part due to statements from founder Do Kwon indicating that LUNA purchasers were effectively putting their money in a common enterprise with expectations of profits from the efforts of Terraform Labs and Kwon. However, the Court also ruled that Terraform’s Mirror Protocol, which allowed users to mint “mAssets,” mirroring real-world assets on the blockchain, were not security-based swaps under the law. Interestingly, the Court did not even cite to Judge Torres’ Ripple ruling, despite previously being critical of it on Motion to Dismiss.
Other Stories
Right before the New Year, Vitalik decides to drop this must-read blog titled Make Ethereum Cypherpunk Again. Working in the legal side of Web3, it is easy to get distracted on the core value proposition that crypto represents and get caught up in the compliance aspect rather than censorship resistance. This was a great blog, and I highly encourage anybody working in the space give it a deep read.
It looks like there will not be a second SBF trial. The fact that this would have been the campaign finance charges that very high up politicians are trying to sweep under the rug is not great from a visuals perspective. But end of the day, SBF is going to jail for most of the rest of his natural life so bringing another circus of a trial is a waste of time and resources.
This was a nice little rundown of the biggest crypto M&A deals in a relatively slow M&A cycle of 2023. It will be interesting to see if 2024 brings further consolidation or if new players carve out their own share of the space.
People did their yearly tax harvesting on NFTs which went to zero in the last year along with other accounting based sells in the space. Looking forward to somebody making millions off these random NFT treasure troves.
Barry Silbert and Mark Murphy are out at Grayscale, in a move likely to clear the way against any objections to the Grayscale spot Bitcoin ETF.
Everybody is focused on the spot Bitcoin ETF filings. It’s a matter of if and not when at this point, so any related crypto prices have been long priced in for these approvals.
Still undeveloped layer 2 solution Blast has gotten users to lock in over $1 billion in liquidity. What do users who lock up funds get? Points! What do points mean? Nobody knows!
Over $4.5 billion was airdropped to various crypto users this past year as rewards for using various platforms or as incentives to start using various platforms. Many of these were geofenced against the U.S., so thanks for the consumer protection from getting free money, Gary.
Yes, despite no real news I am still including a blockchain gaming update because blockchain gaming is the future and I will not be told otherwise.
Blockchain focused venture is excited for 2024, and is this a group of VCs pumping their own bags? Sure. Am I still sharing it due to it supporting my own beliefs? Absolutely.
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 