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.
Bitcoin hit its all-time high, Ether is over $4,000 for the first time since 2021, and I have been consciously avoiding mentioning either for months now out of fear of jinxing it (this doesn’t count; we are all friends here…just be cool about it). Meanwhile, SEC Commissioner Uyeda is becoming increasingly outspoken in his dissent to current agency policy around digital assets, while 3/4 of the other SEC Commissioners continue to do SEC Commissioner things. Oh, and some people chose rich which got other people bigly mad.
Here’s everything that happened last week in Web3 law:
SEC Commissioner Uyeda Warns About Unbound Administrative Authority
SEC Commissioner Mark Uyeda gave a speech to the Council of Institutional Investors titled Dangers of the Unbounded Administrative State which included a section regarding the current regulation of digital assets by the SEC. In it, he warned the Commission’s “broad reading of Howey would appear to scope in many common transactions in the non-digital world, including pre-purchase commitments, collectibles, art, and land.”
Tl;dr: It is nice to see a Commissioner without the last name Peirce come out strongly in opposition to regulation by enforcement by the current SEC. “When a regulator can, without practical limitation, promulgate, interpret, and enforce rules and guidance, including retroactively, the temptation to be arbitrary in the exercise of administrative power and enforcement can be great.” Well said. Combined with his dissent to the ShapeShift settlement, and it appears politicians are getting more emboldened to publicly object to arbitrary regulatory enforcements against digital asset industry participants.
Other Stories
One of the 9 alien CryptoPunks in existence sold for $16 million last week. Lots of focus has been on Ordinals, but I think there are still plenty of ETH based NFTs which are going to pump simply due to ease of access for new crypto entrants.
The SEC settled with Erik Voorhees’ long-defunct exchange ShapeShift for a $275,000 fine and an agreement that the company would no longer violate the Securities Exchange Act. Shapeshift handed off operations to a DAO in 2021, which continues to operate unaffected. As stated by SEC Commissioners Peirce and Uyeda “[t]he Commission’s enforcement action against ShapeShift is the latest installment in the serial drama of the Commission’s poorly conceived crypto policy.”
Predictably, the SEC is trying to use a default judgment in the Wahi case against Coinbase and predictably Coinbase pushed back. “The Wahi order was procured against an empty chair and its reasoning reflects as much. Coinbase respectfully submits that the default judgment against Mr. Ramani should be afforded no weight.”
The SEC is asking the kids who raised their hands in class to ask for more homework (i.e., public comments) to explain if they agree with Fidelity, BlackRock, Cboe, and Nasdaq that the arguments made in favor of the recently approved spot Bitcoin ETFs similarly apply to the spot Ether ETFs. Can’t wait for the reports of the TradFi mad-online crowd to object like they did with the Bitcoin spot ETFs.
It’s hard not to laugh at the audacity of Prometheum declaring Ether as the first “security” they plan on custody apparently without getting the go-ahead from anybody from the SEC or CFTC prior to that announcement. Truly a fake-it-until-you-make-it masterclass (until it fails, which it inevitably will; probably).
CFTC Chairman Rostin Behnam testified to the House Agriculture Committee and his testimony predictably covered many digital asset topics. In addition to the above Prometheum development, Chair Behnam also testified about the need for legislation as digital asset cases apparently make up 49% of the CFTC’s current enforcement docket.
BlockFi settled its FTX Bankruptcy claims for almost $900 million. It is only guaranteed $250 million of those funds, but with the rising price of cryptocurrencies it seems likely they will be able to collect on a large percentage of these amounts from the suddenly solvent FTX entities.
The Binance class action dismissal got overturned, which is less about crypto but more about the role of extraterritorial jurisdiction when there is no other jurisdiction which can claim clear ownership of a lawsuit. Very good thread by Jason Gottlieb on this issue.
Wyoming passed a law creating a new corporate structure: the “Decentralized Unincorporated Nonprofit Association” or “DUNA” (terrible name; unless it involves sandworms). This was a structure advocated by various industry participants as a DAO corporate wrapper. I’ll read it and consider it, but I am probably more of the mindset of DAOs being BORGs with any off-chain activity done by standard corporate entities. Just like any lawyer though, I have a “it depends” mindset, so the DUNA probably makes sense for some.
I don’t know what this Sony/PlayStation “super-fungible” gaming token is, but I know I want it.
Conclusion
If you have any questions or would like me to write about anything else, let me know on either of my Twitter (X?) 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 