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 tl;dr overviews and insights into the biggest stories from the past two weeks. I post the weekly updates on my personal blog every Tuesday, where I also provide links to more obscure legal developments and otherwise discuss industry trends and stories. 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.
It was another quiet week in Web3 law, until Friday when there was a fairly major amicus filed regarding the territorial limits on securities laws, and FINRA decided to drop a substantial report on the use of the metaverse by regulated financial entities. Nothing like a Friday news dump. Already in writing this on a Tuesday it is going to be a big week of recaps next week, so enjoy the calm before the storm now.
Here’s everything that happened last week in Web3 legal:
Crypto Council Asks Supreme Court to Consider Issue of Internet Infrastructure Based Jurisdiction
The Crypto Council for Innovation has filed an amicus brief asking the Supreme Court to determine if the location of internet infrastructure (third-party AWS servers) can be correctly used as a factor in determining whether certain transactions were within the scope of U.S. securities laws. Full brief here. This comes as a result of the Binance v. Anderson case, where the Second Circuit ruled that the extraterritoriality doctrine voiced in Morrison was inapplicable when the entity being sued uses servers in the United States to process certain challenged transactions.
Tl;dr: We have seen some stretches on jurisdiction and venue, whether it is the claims against Richard Heart (where the SEC claimed his use of Uniswap code, which was developed in New York, created an E.D.N.Y. forum hook) or claiming jurisdiction over Justin Sun and the Tron Network because Justin Sun…travels in the U.S. a lot. So this is actually something the Supreme Court may want to take up, based on the increasing use of cross-border transactions and the realities of modern internet networking.
Financial Industry Regulatory Authority (“FINRA”) Publishes Metaverse Update
FINRA, the largest independent regulator for U.S. securities firms, released a publication on The Metaverse and the Implications for the Securities Industry. In FINRA’s press release about the publication, it stated in part: “staff from FINRA’s Office of Financial Innovation (OFI), which is part of the Office of Regulatory, Economics and Market Analysis (REMA), launched a research initiative focusing on the opportunities and risks that the metaverse may present for the industry. This initiative led to the publication of this report. As part of our research, OFI staff engaged with more than two dozen stakeholders, including securities firms and other financial institutions, hardware and software providers, academics, industry observers, and government entities.”
Tl;dr– The publication is mostly a recitation of what is otherwise known: regulations which apply in the real world also apply online and in the “metaverse” which FINRA defines as “the next evolution of today’s internet.” While there are heavy warnings about risks of firms trying to function in this new iteration of the internet, the Report also states how much opportunity there is, stating it is “expected, by some, to contribute over $3 trillion to global Gross Domestic Product (GDP) by 2031.” It also highlighted the use case in gaming assets as well as in the financial sector with data visualization, digital twins, and virtual trading.
Other Stories
$20 Million Stolen from U.S. Government: It appears that the federal government had $20 million in seized cryptocurrency stolen (and mostly subsequently recovered). Straight out of national treasure. Good to see the government is just like us re: compromised wallets.
Stripe Acquires Stablecoin Platform: Stripe finalized a deal to buy stablecoin platform Bridge for $1.1 billion. The biggest part isn’t the deal size necessarily, but it shows that M&A activity in the space is alive and well, so VC’s can maybe be less aggressive in token terms when traditional equity cash outs are available.
Great Article on Omnibus Crypto Bill Issues: FIT21 was a great start and certainly good to get people talking about crypto, but if we are being honest, it is an inherently flawed piece of legislation that may do more harm than the status quo of regulatory wack-a-mole. This article does a great job breaking down what any omnibus crypto regulation needs to address.
U.S. Citizen/Binance Executive Freed: LONG overdue but great news that American citizen and former IRS agent Tigran Gambaryan has been freed from Nigerian jail after being lured there under false pretenses and arrested/detained for the alleged misdeeds of his employer (Binance). Wishing him a safe and healthy return home and recovery from this ordeal.
“Marc Andreessen-funded AI bot becomes a millionaire after ‘Fartcoin’ holdings rally”: That’s the headline. No further explanation from me needed. But honestly, we are living in an odd time when people are making millions of dollars in investing decisions based on the memecoins bought/held by a twitter bot.
ETH Founder Talks Decentralization: Lots of talk in the policy circles about if/how “decentralization” should be codified into law surrounding digital assets. So Vitalik’s latest think piece about the risk of centralization in ETH is worth reading with that in mind.
SEC Announces Examination Priorities for 2025: The SEC’s Division of Examinations released its 2025 examination priorities. The only change of note for crypto was taking out “digital asset security” language to “crypto assets that are offered and sold as securities or related products”
Kraken Getting in L2 Game: It looks like Kraken has seen the success of Base and releasing their own L2 called Ink. Makes sense for institutions that has the volume of transactions as an exchange to have their own L2.
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 