Off the Blockchain+, March 11-18, 2024

While everyone was focused on the hype around “meme coins” Coinbase went on offense in its multi-front battle against the SEC, appealing the SEC’s denial of rulemaking, and a UK court finally ruled what everybody knew: that Craig Wright is not the inventor of Bitcoin (Satoshi). There was also a must-read document from SBF as a part of his sentencing briefing which came to light and shows just how delusional he really was in those final days of freedom.

Here’s everything that happened last week in Web3 law:

Coinbase Appeals SEC’s Denial of Rulemaking for Digital Assets

In July of 2022, Coinbase petitioned the SEC for rulemaking regarding digital assets, requesting sufficient rules to create market certainty on whether the Commission would view a particular digital asset to be an “investment contract” subject to registration and oversight by the SEC. After challenging the SEC’s lack of action on the exchange’s petition, the SEC was forced to formally deny the request, clearing the way for judicial review of that denial. Coinbase has now filed a 78-page brief seeking such a judicial review.

Tl;dr: You can look at the chart on page 12 of the brief (document page 16) to get the gist of the argument.  An over 3-page introductory statement and a summary of argument that starts on page 19 is…interesting. But when the primary author is Eugene Scalia, who am I to provide stylistic critique? Maybe it is from reading all the various SEC vs. exchange briefings, but this one didn’t jump off the page for me? Pg 40-46 explaining the unworkable nature of existing securities laws with blockchain functionalities was probably the best part (and reads like a summary of the Paradigm 3 part series on the subject). But good on Coinbase availing itself to all avenues of judicial review of the SEC’s actions (an inactions). The wheels of justice turn slowly, but grind exceedingly fine.

Other Stories

A Court determined Craig Wright is not Satoshi, despite his sister’s testimony that he pretended to be a ninja well into his adulthood. The fact that he thought he could just forge documents into existence is a level of audacity you almost have to respect.

This SBF document he prepared in the days following FTX’s collapse on how to win back the court of public opinion is great. Strategies of blaming the lawyers and going on “Tucker Carlsen” to blame his situation on the “woke agenda” were really things he thought he needed to write down?

I am very much looking forward to digging into the MetaLex whitepaper from the folks over at Delphi Labs. Combined with the project in semi-stealth mode from Cobie for funding, and I am looking forward to all the building in the bear market coming to fruition.

Bitcoin ETFs had a $1 billion inflow day last week. Random Tuesday. $1 billion being put into Bitcoin ETFs. However medium-term bullish you are on crypto, it isn’t bullish enough. When is the gold flippening going to happen?

 The U.S. Copyright and U.S. Patent and Trademark Offices released their collaborative study on the impact of NFTs on IP law and policy. Big takeaways were (1) the recognition the value NFTs can bring to artists and brands, and (2) insistence that existing law is sufficient to address infringement concerns related to NFT applications.  

I have seen lots of confusion over the upcoming Ethereum Dencun Upgrade. While it will make L2 transactions cheaper, it likely will have some (but minimal) transaction cost savings on L1 which is still the decentralized settlement layer. So better learn how to bridge to L2’s for daily transactions unless you love paying L1 validators.

The CFTC is also elbowing for room at the crypto-regulation table with its Chair stating the agency will consider rulemaking regarding prediction markets and separation of roles, putting protections against exchanges from concurrently serving as market makers, clearinghouses, lenders, and custodians. More middlemen! Huzzah!  

JPMorgan’s CEO Jamie Dimon said “I defend your right to smoke a cigarette, and I’ll defend your right to buy a bitcoin,” which is interesting from the guy who testified its only use is for criminals. But, in his defense, those statements are ~3 months apart. People change.

Roman Sterlingov was convicted on all four counts of money laundering for his involvement with crypto-mixer BitcoinFog. This conviction is likely to be appealed, and I admit to not knowing many facts of the case (other than some claimed logical leaps taken by the DOJ’s cryo-tracing experts), but generally I am not a fan of punishing people for creating neutral privacy preserving technologies.

MakerDAO announced two new tokens it will be launching as a part of its Endgame move, tentatively titled NewStable and NewGovToken. Users will be table to upgrade DAI/MKR to these new tokens, with the old tokens geared towards crypto natives with the new tokens geared towards mass adoption. Maker has led the way with DAO’s, and this transparent blending of CeFi and DeFi is another example of them doing so.

Gemini/Genesis had their Motion to Dismiss denied. To be fair, the EARN product had many securities qualities…so probably the correct result.

Democrat Senators are bigly mad over the spot Bitcoin ETFs and writing their friend Gary not to approve any other cryptocurrency products. Which makes sense with all the investor harm over the spot Bitcoin ETFs which are…checks notes…up ~50% since approval in January.

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.