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.
With the election firmly in the rearview mirror, the industry is preparing to see if anything moves through the lame duck session of Congress and how currently pending and threatened litigation will pan out under the next administration. In the meantime, eighteen states have joined in a lawsuit against the current SEC over the agency’s handling of digital asset regulation, and news out of a major ETH developer conference has people setting their eyes on what’s next for the second largest blockchain.
Here’s everything that happened last week in Web3 legal:
18 States File Lawsuit Against SEC Over Handling of Crypto
18 states have filed a lawsuit against the SEC and its Commissioners, accusing them of unconstitutional overreach and unfair persecution of the digital asset industry. The lawsuit jointly filed in Kentucky federal court by Kentucky, Nebraska, Tennessee, West Virginia, Iowa, Texas, Mississippi, Montana, Arkansas, Ohio, Kansas, Missouri, Indiana, Utah, Louisiana, South Carolina, Oklahoma and Florida. The lawsuit alleges that the agency’s actions focusing on U.S. crypto companies “defies basic principles of federalism and separation of powers.”
Tl;dr: The DeFi Education Fund assisted with this effort, which is clear from the pleadings (and also explains why the file name on the Kentucky AG’s website is “FINAL DeFi States Complaint”). With Gensler expected to be out soon and replaced with a more friendly head of the SEC, this may largely be litigation theater. On the other hand, if any case is going to make it to the Supreme Court on an expedited basis regarding the appropriateness of applying 1940’s orange grove case law to digital assets, it would be a matter brought by a ton of states against agency overreach to a SCOTUS that is inclined to limit agency authority.
Other Stories
Report on Dollar Dominance Through Stablecoins: Loved this work from the Digital Chamber on how stablecoins are supporting the continuation of U.S. Dollar dominance. Also, be sure to check out this letter from the Digital Chamber calling for the end of the phenomenally stupid “crypto regulators can’t own even a de minimis amount of crypto” rule. Forbidding regulators from using the product/services they regulate is, in technical terms, a dumb dumb move.
Beamchain Upgrade Coming: The talk coming out of Ethereum Devcon is the planned Beam Chain which is an set of upgrades planned for 2030 which aim to create faster block times, smaller validator stakes, and making Ethereum post-quantum secure, according to Ethereum Foundation researcher Justin Drake. Cool stuff, but can you also please make price go up? Also, this speech by Joe Lubin at Devcon is worth a read.
Crypto Companies Going Public: With it expected for the SEC to replace current officials with more industry friendly officials, it will be interesting to see how many companies like Exodus and Circle use this opportunity to go public and increase M&A activity before political winds shift again.
Crypto Gaming Interview: Really enjoyed this interview with founder of my current favorite game, Off The Grid, which is poised to be the first digital asset integrated game to go truly mainstream.
Government Office Named After Memecoin: President elect Donald Trump announced Tuesday that Tesla CEO Elon Musk and Strive co-founder Vivek Ramaswamy will lead the Department of Government Efficiency, or “DOGE.” Making me wonder why I have been buying stupid things like BTC and ETH when I could have retired on a dog themed coin.
Canary Capital files for Hedera HBAR spot ETF with SEC: The increased number of ETF applications and Blackrock’s tokenized fund expansion plans (including multiple blockchains which have native assets named as securities in SEC lawsuits) show where industry players think the regulatory environment is going into 2025.
Chair Gensler Gives Parting Shot to Crypto Industry: SEC Chair Gary Gensler gave what reads as a farewell speech where he took credit for the BTC ETF (which he tried to block until he got bench slapped by the D.C. Cir. in Grayscale) and went from saying “virtually all” crypto assets are securities to “many of which” are securities. He will not be missed, but it is unclear who will replace him with one potential candidate saying he didn’t want the job because he “already cleaned up earlier Gary Gensler mess @CFTC and don’t want to have do it again.”
NFT Project Doodles Partners with McDonalds: It looks like Doodle artwork will be on McCafe Holiday Cups and online purchases will give users a code to redeem digital collectables. NFTs are so back.
FBI Raise House of Polymarket Founder: It is hard not to see political implications of the FBI raiding the house and taking the phones/computers of the Polymarket founder mere weeks after the platform he founded was front in center in predicting election outcomes. I guess time will tell the basis for this raid.
Senate Lead is Crypto Supporter: John Thune (R-SD) will be the Senate Majority Leader starting next year, and is rated as strongly supporting the digital asset industry by Stand with Crypto. So that’s neat.
OpenSea Class Action Dropped: The OpenSea class action was dropped with the users who brought the claim forced to arbitrate issues first. I don’t think this is the last we see of this Plaintiff’s firm (whose clients bought straight garbage as listed around paragraph 122 of the Complaint) but it is a welcome respite for the online marketplace for now.
Southern District of New York Toning Down Crypto Cases: The co-chief of the SDNY U.S. Attorney’s Office securities and commodities task force said not to expect more crypto cases from the office any time soon with Jay Clayton expected to take over the office. Honestly, other than the mixing services stuff and the prosecution of Nate for “insider trading” jpgs, I don’t have many issues with the straight up fraud which is usually the target of DOJ attention.
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 