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.
I had a call last week with somebody in the industry who was talking about U.S. sales strategy and how a competitor blocked “China, Russia, Iran, South Korea, and the United States. You know, the usual suspects,” which just highlighted how backwards things have gotten in U.S. policy for the industry to be looped in with those other countries. As discussed below, there are signs things are changing and going towards a more bipartisan support that it should have, but litigation continues as this week has updates in multiple private actions against blockchain developers.
Also, I have had some people reach out with concerns that my updates have been too politically slanted recently. I don’t think my tone or content has changed, but I understand it’s election season and people are on edge anytime somebody says something negative about whatever side they support. Trust me, NOTHING would make me happier than crypto being bipartisan and it SHOULD be! There are Democrats like Representatives Torres and Nickel who have been champions of the industry in the Democratic party and a pro-technology approach should align with the party’s values.
But the fact remains that many in Democratic leadership including current President Biden and Senators Warren and Wyden have staunchly opposed the expansion of the industry in the United States. So when I report about distrust in the industry for certain Democratic candidates, it is not out of partisan slant. I am simply reporting what people in the industry are saying, with the continued hope that any partisan divide be overcome and we in the legal industry can focus on supporting our clients’ products and services rather than trying to play a game of regulatory gamesmanship.
With that said, here’s everything that happened last week in Web3 legal:
Other Stories
While not directly crypto related, this recent ruling in the 5th Circuit struck down the use of “geofence” warrants which are warrants to access location information for users who have opted into having Internet providers retain location history. This could have massive implications for the use of the John Doe subpoenas against centralized exchanges and other cryptocurrency platforms like SFOX and Circle and fairly universally upheld prior to this recent case law.
Paradigm released the findings of its recently funded poll of registered Democrats regarding various crypto election issues. As reported in The Block: “Thirteen percent of those surveyed were undecided about voting for Harris. Of those voters, 18% said they have bought crypto, and 21% say the Biden administration was “too hostile” or “much too hostile” toward the industry, according to the poll.” Uhhh, you think?
Onchain crime is down! Huzzah! Where there is money, there will always be criminals. But good to see industry efforts are working in preventing crimes in the first place and tracing the assets to criminals when they do succeed.
It looks like CoinCenter is going to have their day in court, after an appellate court overturned an early dismissal of the think-tank’s lawsuit challenging certain crypto tax reporting rules.
DeFi Education Fund has purchased the patent used by a patent troll to go after various DeFi platforms. Apparently, the sole member of the entity that owned the patent died during the litigation against the DeFi giants, so hopefully this is the last we see of that area of attack.
There was a Crypto4Harris town hall hosted by Senator Schumer, Senator Gillibrand, Representative Nickel, Mark Cuban, and others in an attempt to woo industry votes and money to support Vice President Harris’s Presidential bid. Big Take away was Senator Schumer saying he was going to pass a comprehensive crypto bill in the Senate before year end (zero chance). It is great to see the partisan devide on crypto seemingly weakening, but until Haris herself stakes a position (and backs it with real action), many find it hard to trust an administration that spent the last 4 years trying to kill the industry in the U.S. and while the other side is openly embracing crypto.
Coinbase may be offering their own form of wrapped Bitcoin in the near future? So, are we just completely giving up on lighting network, or nah?
PYUSD is now bigger on Solana than Ethereum, largely due to the yield on Kamino and elsewhere, offering upwards of 17% APY on lending deposits in the stablecoin. With USDT in the regulatory bullseye for U.S. stablecoin legislation, PayPal’s play here could pay out big for them.
The SEC has charged NovaTech and its founders with securities fraud regarding the company’s 2019 pyramid scheme. I skimmed the first few pages and struggled to see the crypto connection, but there apparently was one so I am including it in this update.
Oral arguments occurred in Yuga Labs v. Rider Ripps appeal (starts around 39-minute mark). I am team Yuga all the way, and think they win on the papers, but even I think Ripps’ team argued their positions better (not that oral arguments really matter in these things, but still). One thing I hate is when appellate specialists are brought in to argue niche areas they are unfamiliar with (NFTs in this case). Stick with the attorney that won the underlying case, instead of replacing with an attorney who was very much giving “I have never had to explain NFTs/blockchain tech to boomers and it shows.”
Very much enjoyed this thread on the inner workings of market making. Combined with the Eigen Labs insider token allocation scandal, and we as an industry need to do better about keeping things more transparent/on-chain and less back-room dealings. Let TradFi have that side of finance.
The Court hearing the lawsuit against Shaq related to his Astrals NFTs has allows most the claim to advance, ruling against The Big Aristotle’s motion to dismiss and holding that his NFTs could be plausibly alleged as securities.
I expect we will see more of these lawsuits where Apple/Google allowed scam apps into their app stores despite supposedly taking a 30% cut of money from those apps as a fee for the security services they perform.
Another SEC crypto attorney has left to join biglaw in defending crypto companies from the SEC; this time it was David Hirsch who is joining McGuireWoods. Raised eyebrow at all these individuals who supported the regulatory environment we are in now in leaving public office and taking money so companies can navigate the regulatory environment they created.
Adding this case against Lido DAO from the N.D. Cal. to cases to watch. Looks like the Motion to Dismiss is fully briefed, so we wait to see if plaintiffs’ general partnership arguments work in creating legal personhood for software.
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 