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.
The below image from the Q2 2024 State of Crypto: The Fortune 500 Moving Onchain report put together by Coinbase and The Block is worth including as a small data point on why myself and so many others continue to work on integrating blockchain technologies into workable legal frameworks. The growth hasn’t stopped despite recent sideway market movements and isn’t expected to stop any time soon. Onwards and upwards!
Here’s everything that happened last week in Web3 law:
SEC Calls off Investigation into Ethereum 2.0
The SEC sent a letter to Consensys Software stating that the Commission staff does not intend to recommend enforcement action against Consensys relating to the SEC’s investigation into “Ethereum 2.0.” The “Ethereum 2.0” call out seems to be related to the switch from proof-of-work to proof-of-stake, which some claimed gave the SEC a hook to go back on the agency’s then director of enforcement stating in 2018 that proof-of-work Ether was not a security. The June 7 letter referred by the SEC in its letter to Consensys is available here.
Tl;dr: Is it a coincidence this comes a week after the head of the SEC’s Crypto Asset and Cyber Unit in the Division of Enforcement announced his departure? No way to know. Also unclear how much of this is legitimate with the SEC stating they do not currently intend to continue investigating the matter with no promises against future actions. It very well could be just an attempt to moot the Consensys lawsuit pending in Texas similar to the SEC attempting to moot the Coinbase rulemaking request by stating it was “under consideration” while very clearly being a done deal internally at the SEC. But people much smarter than me say it’s a big deal, so I will accept it is a big deal.
Other Stories
Ripple mostly won on the securities class action which has been tailing along basically since the SEC’s action was instituted. But the Order itself had some sub-optimal language on the Howey issue for surviving claims which I am hoping everybody just ignores. Move along. Nothing to see here.
While technically not specific to crypto, this recent ruling from a judge in the Northern District of Texas (where the Consensys and Lejilex are pending) could have some looming implications in various suits against the SEC. “[T]his case isn’t really about HIPAA…or the proper nomenclature for PHI in the Digital Age. Rather, this is a case about power. More precisely, it’s a case about our nation’s limits on executive power.”
Can we get rid if points and airdrop farming and just go back to ICOs? The whole “it’s not an ICO, users just need to spend money on our platform in a specific way to get an equal amount in token value” is dumb, tbh. Use the platforms you like. Buy into networks you think have value. This forced hoop jumping only comes at the expense of the ultimate consumer.
The hearing on Kraken’s Motion to Dismiss occurred and the judge was fairly outright in saying he is almost certainly going to deny the motion in its entirety. So that’s an expected but suboptimal update.
Tether is going to reverse MakerDAO route and started with treasury-basked dollars and moving towards gold-backed dollars. Good for them, continuing to move forward and not resting on laurels.
Pantera Capital believes that Biden has sincerely changed his stance on crypto and only vetoed the bill to overturn SAB 121 because he didn’t want to publicly oppose his appointed commissioner, Gary Gensler. Actions speak louder than words, Mr. President…
So the DJT coin is hyped up the same week as a report is released over increased activity of scammers targeting Trump supporters. I, for one, will be shocked if those two stories are related. SHOCKED I SAY!
As a follow-up development to the Trump coin, it appears that Martin Shkreli is behind the coin with a guy that claims to go to high school with Baron Trump. Combined with getting sued for disrespecting the Wu Tang in the same week, and the whole situation is a mad lib that can only happen in crypto. Also, Shkreli called a crypto lawyer I like a drain on society, so all my homies hate Shkreli.
U.S. law enforcement agencies queried FinCEN’s database 6.7 million times between 2019-2022. All without warrants. Make the Fourth Amendment great again.
This “white hat” hacker story involving Kraken is wild. The fact that it was apparently a reasonably respect security firm that did it, and the wild index goes WAY up! Both sides’ legal teams are going to have one hell of a day…Worth posting this story as a chaser about Immunefi passing $100 million in payouts to good white hats under bug bounty programs.
This was a really great read on the DAO Attack on its eighth anniversary and lays out how the attack shaped the digital asset community in immense ways going forward. Nice little nugget of lore.
Fairshake, the pro-crypto super PAC, now has a total funding number of $169 million, with over $100 million still in its war chest, after Jump Crypto adds another $10 million to the pot.
The Winklevoss twins donated a cool 2 million in Bitcoin to the Trump campaign. Think how much they would have donated if they invented Facebook!
Speaking of Consensys, what are the chances the IRS takes its letter to heart and agrees to push back their reporting rule requirements? Zero, or slightly more than zero?
The spot Ether ETF issuers made a bunch of disclosures regarding seed investors and fees and such. The ETFs are as inevitable as Thanos at this point, so just get on with it so I can stop writing about the constantly waiting game.
Not really Web3 legal, but the combo of Mt. Gox payments (and expected sell offs) and the Germany sell offs have really harshed the vibes with prices falling. Sell in May and go away really playing out as usual it appears.
I missed this last week, but giant shoutout to Tom Isaacson at my firm on his publication on blockchain patents! It’s kind of awesome when an attorney I deeply respects comes out of the clouds with a well written article dealing with complex crypto-law topics.
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 