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.
Hope everybody had a great Thanksgiving! The Web3 legal updates did not take a tryptophan-induced nap, with a fairly major development in the 5th Circuit regarding the sanctioning of software by OFAC, and airdrop season is back.
Here’s everything that happened last week in Web3 legal:
Fifth Circuit Overturns OFAC Sanctions of Tornado Cash Smart Contracts
The Treasury Department’s Office of Foreign Assets Control (“OFAC”) sanctions of the open-source digital asset software protocol known as “Tornado Cash” which forbid any dealings with the Tornado Cash smart-contracts was overturned by the 5th Circuit. This case was brought by various users of Tornado Cash, claiming the open-source, self-executing software is not sanctionable under the International Emergency Economic Powers Act (as opposed to the rogue persons and entities who abuse that software, which are sanctionable). The Court agreed, holding OFAC only had the power to sanction the “property” of a foreign national or entity, and since Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the “property” it is outside of OFACs statutory powers to sanction it.
Tl;dr: The Court’s use of diagrams and plain speak to explain how Tornado Cash works was (other than some minor technical misspeaks on pg. 5) surprisingly well done. Hats off to the lawyers that had to effectively teach 76, 65, and 59 year old judges the fairly complex technical aspects of the mixing platform enough for those judges to recite it back (mostly) accurately and reach the right result. This case may get attention outside of crypto law, as it turned primarily on Loper Bright grounds which re-defined the level of deference (previously known as Chevron deference) given to federal agencies in interpreting statutory text. Now we await a BSA challenge to really get privacy rights back to Americans and the outcome of the various Tornado Cash developer cases.
Other Stories
Hyperliquid Airdrops Billions to Early Adopters: The decentralized perpetual trading platform Hyperliquid airdropped $1.75 billion to early adopters of the platform. Too bad we don’t have a regulator to protect us from this free money with a lame duck SEC. This also follows the WalletConnect airdrop. Of course, the platforms I use the most don’t airdrop. But it’s fine. Not at all mad about that. Totally.
CFTC to Gain More Power Over Crypto: I don’t know if the musical chairs of replacing the SEC with the CFTC is the result the industry actually wants. But it might be what it gets. Is the regulator of orange futures really better fit to handle complex digital asset than the Howey folks at the SEC?
Pump Fun Disables Live Streaming: Apparently the Pump Fun folks got the memo that allowing people to live stream crimes to get their crypto to pump was a bad idea? Nobody could have seen this coming other than everybody with a brain.
Cantor Fitzgerald Gets Ownership Stake in Tether: Cantor serves as custodian for a vast majority of Tether’s U.S. Treasury reserves backing USDT, so it’s not shocking a part of the deal was getting an ownership stake in the stablecoin giant.
Trump Admin Further Develops: Trump has nominated Scott Bessent as Treasury Secretary, and current reporting is that Paul Atkins is frontrunner for SEC Chair, with former CFTC Chair Chris Giancarlo to become “crypto czar” to manage the admin’s crypto strategies. My DM’s are open to any government official that wants thoughts on how to fix U.S. crypto policy.
Former Meta Exec Claims Treasury Killed Libra: After the Marc Andreessen interview on Rogan went semi-viral, including clip about debanking, a former Meta executive came out to claim that the Treasury Department killed the company’s Diem/Libra stablecoin on political grounds. On the plus side, we are about 5-10 years away from people being able to opt-out of traditional banking entirely.
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 