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 firm’s 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.
This past week, I had a lot of personal FOMO seeing everybody in the industry at ETH Denver. I definitely need to try to make it out there next year, as it has become the main U.S. crypto conference, with focus on many different blockchain ecosystems despite the ETH headline name. The big news this past week amongst the general crypto rally was the amicus coming out in support of Kraken and the Department of Energy stepping back from its “emergency” survey of Bitcoin miners.
Here’s everything that happened last week in Web3 law:
Amici Come Out In Support of Kraken/Opposition to SEC
Various amicus briefs were filed in the SEC vs. Kraken lawsuit, including briefs filed by the Chamber of Digital Commerce, the Blockchain Association/DeFi Education Fund, Paradigm, and a group of State Attorney Generals. All of the amicus briefs call into question the seemingly shifting stance of the SEC on what is a “digital asset security” or an associated “ecosystem” as to turn involvement with a particular blockchain’s token enough to satisfy the commonality element under Howey.
Tl;dr: With this being an election year, any real change in law or administrative policies this year is likely going to need to come from the courts. The amount of amicus support at the district court level for all the exchange cases has been an impressive showing from industry advocacy organizations, businesses, and political actors. The State AG briefing is especially interesting, claiming the SEC is overstepping into the realm of general consumer protection reserved for the states. Preparing each brief is no small effort, and can cost in excess of $100,000 each in attorney billable time, so kudos to the industry groups and firms (usually working for a reduced fee or pro bono) who were behind these efforts.
Other Stories
The ENS DAO approving a settlement for pending litigation is wild. Crazy to think how many legal and strategic decision will be made at the DAO level in upcoming years.
The legislative effort to overrule SAB 121 has passed the House committee, which is great to see. Because this only needs a simple majority in both houses to pass, I remain hopeful that this bill reaches the President’s desk this year, but I also understand that may be an irrational hope in the current legislative environment.
I covered this last week, but great job by the various advocacy groups that successfully pushed back against the “emergency” efforts of the Department of Energy to seek confidential data and impose burdensome reporting obligations on Bitcoin miners.
The Uniswap foundation has put up a proposal to turn on the fee switch which would allow users to stake $UNI tokens for an allocation of platform fees. Every other time this has been proposed, the venture firms who invested in the Foundation/got token allocations have voted against it. I wonder what changed which made the Foundation propose this now.
This SBF sentencing brief was quite the document to scan through. While it takes a certain level of gall to suggest that 6 years and no fines is appropriate for his crimes, I also don’t know if Pre-sentence Investigation Report’s 100 year sentence recommendation is appropriate? If SBF’s bunkmate in prison says he is a good guy, who am I to judge?
50% of the people I polled in January said it will take over a year for Bitcoin to pass gold as the largest ETF commodity by AUM in the United States. Interesting to see what people are saying now at the end of February.
I think the use of “soul-bound” tokens is nearly limitless, and has the possibility to replace cookies as the premiere way to track users’ preferences as data privacy laws and digital wallet usage grow alongside each other.
This rundown of the Mt. Gox hack and subsequent collapse ten years after it happened was a great read. It was before my time, as I didn’t start really paying attention to crypto until 2015-2016. But certainly a piece of history everybody should remember. Not your keys, not your crypto.
Liquid re-staking protocol EtherFi raised over $23 million in a series A. I don’t really understand it, but wake me when I can restake my restaked ETH to earn yield in a lending protocol which requires staking the double restaked tokens in a separate protocol. It was a big week in funding though, with Backpack and BounceBit also getting $17 million and $6 million cash injections, respectively.
Razzlekhan’s husband turned State’s evidence and testified in the Bitcoin Fog mixing service/money laundering matter. Gotta think this is going to hurt her rap credibility.
While I don’t think a complete throwing of the baby out with the bathwater is appropriate, I did enjoy this article advocating for a complete dismantling of the AML/KYC system underpinning modern finance.
This is an opinion piece which is pro crypto-gaming, so I am basically obligated to link it.
Points farming is officially a dumber meta than ICOs. There. I said it. Consumers have no idea what they are getting, and projects know for a fact people are expecting a token even if they don’t expressly say it. While there are exceptions to every rule and certainly some are doing it responsibly and in good faith, those are outliers as “points” are largely being used to get people to FOMO into services they don’t want or need.
Ordinals is one of those things I know I am missing out on but simply cannot get myself the effort to actually immerse myself in that ecosystem. But I don’t hate money, so adding it to my to-do list this week.
In the SEC v. Wahi case, the one individual who managed to flee before the charges got a default judgment against him. So now we get to look forward to the SEC touting this meaningless but bad case law in cases going forward.
Conclusion
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The NFTtorney 