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.
The week before inauguration was BUSY with outgoing agency heads bringing final administrative actions under the current administration, and private litigants looking the fill the hole which seemingly will be left by the SEC in digital asset litigation. And to cap it all off, incoming President Trump and his wife each launched memecoins with a collective market cap which exceeds many S&P 500 companies.
Here’s everything that happened last week in Web3 legal:
SEC Ordered to Explain Crypto Rulemaking Denial
The Third Circuit has ruled that the SEC’s one paragraph denial of Coinbase’s petition for rulemaking was arbitrary and capricious. While Coinbase had requested the appellate court order the SEC to engage in rulemaking for the industry, they instead merely required the SEC provide a cogent explanation for the agency’s denial which is currently lacking. The issue was remanded back to the agency for further explanation of the denial, but there is no deadline currently set for that explanation in the Order.
Tl;dr– The decision itself rejects most of Coinbase’s arguments as procedurally improper for a rulemaking denial appeal, but the concurrence gave attention to the potential lack of due process by the agency bringing non-fraud cases in a seemingly arbitrary manner. This case doesn’t matter much, because it is expected the SEC will work on some common sense rulemaking and reassess some of its current crypto cases. But this may give some ammo for due process and fair notice defenses for some of the pending matters.
SEC Files Appeals Brief in Ripple
The SEC has filed its opening brief in the appeal of the SEC v. Ripple matter. It challenges the lower court’s ruling regarding the differentiation of sales from institutional investors vs. blind bid/ask sales done on exchanges. It also challenges the lower court’s ruling regarding non-cash contributions being ruled as outside the “investment of money” prong of Howey, such as Ripple’s donation of tokens to charitable organizations and distributions as bounties/grants.
Tl;dr– There aren’t any new arguments in this brief which haven’t been presented before. It seems to be expected that this ruling will come before Coinbase’s interlocutory appeal would be ruled on (assuming the 2nd Circuit agrees to hear that), so this is going to create the first appellate level case law on the issue unless the incoming administration withdraws the appeal entirely. I will likely give this more attention once Ripple files its response and there is a complete view of the arguments.
Class Action Filed against Memecoin Platform Pump.fun
A securities class action has been filed against memecoin platform Pump.fun for its role in the creation and sale of the PNUT token, which Plaintiff alleges to be an unregistered security. The lawsuit was brought by Burwick Law, a Plaintiff’s firm that has been advertising seeking securities class action representatives against many different projects. It cites to many different issues with the platform, but the basis of the actual legal claims seems to be centered on a single memecoin (PNUT).
Tl;dr– The named Plaintiff bought 24,789,088,943 $PNUT tokens on 11/4 for ~$1,275 according to the Complaint. Those tokens are now worth almost $16 million, and at the peak were worth over $50 million. And he was still buying similar memecoins on the day the lawsuit was filed! Quite possibly the worst class rep/token to choose as the highlight of the lawsuit. The fact that President Trump released his own memecoin the same week has a certain level of irony. The Plaintiffs firms are coming and will certainly replace the SEC in some respects, but I almost miss the Kyle Roche types who were scumbags, but at least understood the law/technology and was a worthy adversary.
OTHER STORIES
How to Make the United States the Crypto Capital of the World: Great op-ed from Stephen Rutenberg on how the incoming administration can encourage digital asset development in the United States.
$TRUMP and $MELANIA Tokens Released: As stated above, President Trump released his own memecoin on Friday night followed shortly thereafter by a Melania token on Sunday. While I don’t think memecoins are the highest/best use of the technology, the fact that Trump’s team seems to be using the profits to buy ETH and put money into the World Liberty Financial DeFi platform is good. Once people understand they can use digital wallets instead of banks for stablecoins and lend their own liquid assets/keep the profits instead of letting banks get all that profit, the better, in my opinion. Also hilarious that two memecoins can DDOS attack the SOL network.
USA/Japan/South Korea Issue Joint Statement: The United States, Japan, and the Republic of Korea (South Korea) issued a joint statement that they remain committed to combatting against North Korean crypto thefts. The Lazarus Group is a problem, so all for efforts to stop them. Just not at the expense of individual liberties.
Sony Launched Layer-2 Blockchain: Sony launched and ETH Layer-2 blockchain called “Soneium” but is already facing backlash for centralized validators and censorship of people trying to build on the chain. You either got to embrace the degen, or take your censorship lashes and hope you can get enough support to break through to mainstream(good on the team responding quicky, though). But also, this thread on how chains built on the OP stack can have their censorship bypassed unless the builder forks it.
SAB 121 Repeal Could Be a Day 1 Order: People are reporting that the controversial SEC Staff Accounting Bulletin 121 (“SAB 121”) which Congress voted to overturn but was vetoed by President Biden, could be a part of the Day 1 Executive Orders. Would be one less blocker for publicly traded banks that want to safely store digital assets for their customers.
Token Supported ROTH IRAs: This AnchorZero Roth IRA option is brilliant. Being able to take the tax hit while the tokens are low value to retain more of your money on the backend in retirement is something I would think many people would want to avail themselves of.
Moonpay Acquires Helio: Moonpay has purchased Solana payment infrastructure firm Helio in a $175 million deal. Crypto venture funding hit $4 billion in Q4 last year, and venture funding/M&A activity are seemingly poised for a big year.
Franklin Templeton Explores AI Agents/Crypto: Franklin Templeton released a think piece on the intersection of AI Agents and the crypto ecosystem. Worth a read. I do think self-custody of digital money is helpful for AI agents, but not sure why that cannot be done with traditional financial rails and programming limits on the back end rather than giving a limited bank of self-custody funds.
Tether in the News: Tether is apparently going to set up a headquarters, and it chose El Salvador to do so. This comes the same week it sues Swam over a Bitcoin mining joint venture dispute. Guess if you are going to choose a country to set up shop, going to one which set up BTC as official legal tender early is a decent one to pick.
SEC Departing Lawsuits: It looks like Nova Labs (creator of the Helium Network) and Digital Currency Group Inc. (DCG) drew the short straws in getting SEC actions filed against them on the final day of the current administration.
ETH Foundation Shakeup: With competitor chains like SOL, XRP, SUI, and others largely gaining ahead of the change in U.S. administration while ETH is stable or down, Vitalik’s call for changes in the Ethereum Foundation is probably overdue. The internet’s computer narrative only goes so far, without getting active development on the L1 network.
Phantom Wallet Raises on $3 Billion Valuation: It looks like Phantom has raised $150 million in a series C on a $3 billion valuation. Honestly, as the main wallet for SOL users, and with SOL’s increasing popularity, this number while astronomical, still seems almost low.
Coinbase Still Pushing FDIC: Coinbase is still pushing for the FDIC to come into compliance with FOIA law, even with the new administration coming in. Will be interesting the Congressional hearings over debanking and crypto pause letters, which seem likely to happen.
Coin Center Backed Mixing Software Lawsuit Filed: Coin Center is backing a lawsuit filed by a developer against the DOJ regarding his intent to creating neutral digital asset mixing technology. Definitely worth watching, as privacy protections is something digital asset industry participants are likely going to need to fight both sides of the aisle over.
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 