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.
Always hard to stay on top of developing stories during conference szn, so I am sure there are stories I missed this week being away in D.C. and Chicago. The big news is the Senate moving forward to overrule a controversial SEC accounting bulletin with bipartisan support despite a threat of a Presidential veto. With the FIT 21 bill coming up for a House vote this week, it would be nice to see bipartisan action on technology issues which should not be partisan. And all of this already seems stale with yesterday’s SEC (potential) about-face on the spot Ether ETF applications and action coming up this week (which I will of course be covering in next week’s update).
Also, as a reminder, I will be in Austin for Consensus next week, so if you are going to be in town please shoot me a message. I would love to meet up with as many of y’all as possible.
Here’s everything that happened last week in Web3 law:
Senate Passes Bill to Repeal SAB 121
After previously passing in the House with fairly significant bipartisan support, Joint Resolution 109 to repeal SEC Accounting Bulletin 121 passed the Senate as well, with a significant number of Senators from both parties voting in favor. As a reminder, SAB 121 was the controversial guidance from the SEC that custody of crypto assets should be treated as liabilities on banking balance sheets unlike cash and other assets held on behalf of customers. While the bill only needed a simple majority to pass, it ended up with the 60 it would have needed to override any Senate filibuster for most legislation.
Tl;dr: The news all week was that this bill would pass the Senate, but you never know until the vote actually happens. As stated in the House update, this should be seemingly uncontroversial bill to pass; consumers should be able to use banks to store things of value without becoming creditors to the bank or the bank taking on those valuable things as liabilities. Now we wait to see if the President makes good on his promise to veto or if the SEC withdraws the rule as requested by Congressman Nickel.
Other Stories
Incredibly disappointing ruling out of the Netherlands where Tornado.cash developer Alexey Pertsev was sentenced to 64 months in prison for his contributions to the privacy protocol. The ruling had straight up inaccurate facts, but either way it is not great to see that development of neutral privacy preserving technologies can be criminalized because some criminals use them. Outlaw knives or cars too, while you are at it. He faces a long appeal route ahead which he will need to litigate while imprisoned for writing software.
The Binance executive, former IRS agent, and American citizen Tigran Gambaryan being held without bail in Nigeria should be getting more coverage (including in these updates). My understanding is he went to the country in his official capacity under the promise of safe passage and was detained once there. Hopefully the Justice Department steps in. Whatever the country’s issues with the company Tigran works for, that isn’t an excuse to jail an American citizen.
The House of Representatives is expected to vote on FIT 21, the comprehensive crypto bill passed out of the House Financial and Agricultural committees, next week. According to multiple speakers at the D.C. Blockchain Summit, there are going to be surprise Democrats to support the bill, so while it has zero chance of going anywhere in the Senate in an election year, it could set things up for a 2025 version.
Speaking of digital asset legal reform, Cobie essentially solved the disclosure regime for crypto if the SEC ever cared enough to make workable rules. Make development teams disclose important stuff. Don’t make them disclose unimportant or non-existent stuff. Give them a realistic path to not needing to file disclosures forever once they stop controlling network. This isn’t hard.
Coinbase chief legal officer is (justifiably) upset about the SEC’s description of the Wells notice process and the agency’s failure to follow that process as described prior to suing Coinbase.
One of the Falcon entities settled with the CFTC over past misdeeds. I think we see more of this (especially if there is a change in administration) as companies come in and take their lashings for past misdeeds during wild wild west era of crypto in exchange for a clean bill of health going forward.
Popular crypto predictive market company Polymarket closed on a $45 million series B with Founders Fund and Vitalik getting in on the action. Wonder if the controversial statement by the CFTC that it plans to regulate these types of predictive markets had any effect on the deal.
This is a phenomenal resource put out by a friend of mine in the Web3 space on some intro crypto contract issues for younger attorneys or people not especially familiar with crypto. I have bookmarked it and I encourage others to as well.
Two individuals have been indicted in connection with a hack on an MEV bot. As a reminder, MEV bots essentially front run transactions to increase price others buy token at and then sell at increased price. It is the definition of artificial inflation/market manipulation. The fact that the bot operators seemingly ran to the feds when their co-runners made off with their money is funny. Like calling the cops because somebody stole the drugs you were planning on selling.
Circle is looking to leave the tax haven of Ireland and redomicile in the U.S. ahead of its IPO. Also probably related to what is looking to be a likely regulatory capture move if Congress votes to pass stablecoin regulations for U.S. based issuers.
The state of Wisconsin has purchased $100 million in Bitcoin ETFs through its state investment board. Doesn’t count until the Wisconsin Twitter page puts laser eyes on its avatar.
Scott proving once again why he is the best in the business with spot ETF coverage. Honestly, this newsletter is basically just me reformatting and passing off the awesome analysis of others in the space, and I am very OK with that.
Canada’s self-proclaimed “Crypto King” is having a rough year, after previously being kidnapped and tortured by people he stole from in his (alleged) ponzi, and now getting criminally charged for his involvement with that same (alleged) ponzi. But the jets and cars for a year was pretty cool, I guess.
Lewis Cohen pairing up with Sam Enzer is quite the move. Already each a crypto-law powerhouse in their own rights, teaming up at the same firm is going to be something that makes a ton of their clients very happy I expect. Congrats to both.
There was a flash loan attack against meme-coin generator pump.fun, which apparently was done with somebody with developer keys to the platform? Never a dull day.
More pig butchering scheme participants are getting caught and arrested. Committing crime on an immutable and public blockchain is generally not smart unless you are OK with the government knowing you are a criminal (Russians and North Koreans).
Craig Wright is a liar and a fraud. This is not news to anybody who has been following his claim to be the inventor if Bitcoin despite all evidence to the contrary, but a judge saying it just hits different.
Conclusion
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Warpcast. 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 