Intro/Disclaimer: Since late 2022, I’ve prepared weekly updates for attorneys at my firm to stay abreast of the latest Web3 legal developments. The biggest stories are included in Bi-Weekly posts on the renowned BitBlog, where we provide concise tl;dr overviews and insights into how these developments might ripple through the industry. In pursuit of a more thorough and personal discourse, I also share expanded versions of these updates on my personal blog every Tuesday. Here, you’ll find my unvarnished perspectives, offering a deeper dive into the nuances of these legal narratives. Please note, the views and opinions I express, both on BitBlog and my personal blog, are solely my own. They do not reflect the official stance or endorsement of my firm.
Last week my firm’s blockchain focused attorneys got the chance to get together in person in Salt Lake City, Utah. There are a lot of big things on the horizon that I am very excited to be a part of.
It also coincided with the firm filing an amicus brief in the Hermès v. Rothschild matter on behalf of The Chamber of Digital Commerce. It is an immense honor to be trusted with such an important legal filing, and I wouldn’t have been able to do it without the help and support of the entire Polsinelli Blockchain+ team as well as the Chamber members and staff. I do not take for granted the significant trust these people have placed in me to represent the industry with this filing, and I could not be prouder of the work we produced advocating for the protection of intellectual property and consumers in Web3.
Now that my shoulder is sore from patting myself on the back so much, here’s everything that happened last week in Web3 law:
The SEC Describes What a “Dealer” Is Under New Rule Leaving Everybody More Confused than Before
The SEC voted to adopt two rules “that require market participants who engage in certain dealer roles, in particular those who take on significant liquidity-providing roles in the markets, to register with the SEC, become members of a self-regulatory organization (SRO), and comply with federal securities laws and regulatory obligations.”
Tl;dr: Commissioners Peirce and Uyeda dissented to the rules, with Uyeda stating “The public should be concerned about the immense scope of this claimed jurisdiction. The rule of law means that the government should define ex ante which activities are lawful and which are not. Without such definition, governmental authority can be arbitrary and even tyrannical.” The current Commission has not strayed from ruffling feathers, but needlessly poking the most powerful financial institutions in the world seems bold, even for these Commissioners. We’ll see how that works out for them.
Prometheum Says Ether is a Security
Prometheum, the only SEC-registered crypto platform, has stated that the first product they plan to let customers buy and sell is the native token of the Ethereum network, Ether. The CFTC has previously declared Ether to be a commodity, and Prometheum is only authorized to act a securities custodian/dealer. When Prometheum’s CEO, Ben Kaplan, was asked about this issue, he responded: “The CFTC is not our regulator…When the SEC says to us, ‘It’s not a security,’ then we’ll be troubled.”
Tl;dr: Promethium has previously stated they plan on offering the trading of “digital asset securities” through use of Rule 144 exemptions usually reserved for trading restricted stocks. However, to be a tradable asset under Rule 144 the issuing entity needs to abide by certain reporting requirements and…not sure who they plan on being the reporting entity for the Ethereum network. Considering Gary Gensler himself has stated Ether is not a security in the past, a view shared by former SEC Director of Corporate Finance William Hinman, somebody is certainly going to have some ‘splainin to do.
Other Stories
Apparently Congresswoman Maxine Waters thinks the stablecoin bill in the House is “very, very close — very close.” This came during a hearing in which Secretary of Treasury Janet Yellen testified before the House Financial Services Committee. If you remember, Waters previously tried to walk out and kill the stablecoin bill in committee, so this is certainly an interesting development. Even if it passes the House, it will face a steep climb in the Senate which doesn’t seem intent to pass any digital asset bill without first beefing up federal financial surveillance.
Loved this State of Crypto Report put out by The Block and Coinbase.
Ripple was ordered to turn over certain financial statements as a part of its ongoing battle with the SEC.
I cannot comment on this case, but presented without any commentary is the letter from various Senators to the SEC regarding the pending Debt Box litigation.
This was an interesting op-ed in Blockworks about the interplay between crypto patents and the industry’s otherwise opensource mentality.
The Solana network went down briefly on Tuesday but its price is also up on the week. Interesting to see where users place their priorities regarding low network fees vs. network stability.
TradeStation Crypto settled cases with various state agencies and the SEC over a crypto lending product which it hasn’t offered since June of 2022. It also has subsequently ceased all sales in the U.S., so another business driven overseas rather than offered a way comply with existing laws. I feel protected.
Farcaster decentralized social media platform has been the talk of social media this past week. I saw it described as the social media of choice after SOL influencers drove ETH influencers off Twitter. Which is all the selling I needed. Follow me @Birdnals.
The SEC continues to delay various Spot Ether ETF product registration decisions. In other news, the sky is blue and Earth is round.
Speaking of the SEC, Charles Gasparino from Fox is reporting that there may be a “major exodus among senior enforcement lawyers in its crypto assets and cyber unit, according to officials at major law firms who have seen several of the resumes.” Bad form for leaking resumes, but will be interesting to see how the office handles if true.
ENS Foundation is teaming up with GoDaddy to link web domains from GoDaddy with blockchain-based ENS names.
ERC-404 token standard was a big talk this past week, which is a new token standard on the Ethereum network which mixes the standard ERC-20 token standard for coins with NFT fractionalization.
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 