It was a relatively quiet week, especially in comparison to the week before where SAB 121 was repealed, the SEC formed a crypto rulemaking task force, and President Trump released an Executive Order on crypto. But despite having no developments worth “Major Story” attention (except maybe my ETH bags tanking due to tariff talk), there were still interesting developments like Kraken restarting staking-as-a-service operations the same week its major questions defense got kicked in the case against the SEC, and another memecoin lawsuit was filed.
Here’s everything that happened last week in Web3 legal:
OTHER STORIES
SEC Actions Not Major Enough for Court: The SEC successfully struck Kraken’s Major Question defense (but since there doesn’t need to be discovery on the issue, left open the ability for Kraken to assert again later) but failed to get due process and fair notice defenses tossed. Note: I predicted the Third Circuit ruling would be helpful in future cases. Not to brag. But Kind of to brag. After Judge Orrick cut off Kraken from even arguing MQD at oral arguments a while back, this isn’t a shocker. I think it’s wrong, but also don’t think getting a district court to rule something is “of vast economic and political significance” is an easy task.
Kraken Restarts Staking Offerings: After previously settling with the SEC (under Gary Gesnler) Kraken is starting back up its staking as a service offering. Love to see it; users on exchanges should be able to put their assets to use.
AirDrop Tax Explained: I really enjoyed this explainer on the likely tax implications of doing a token airdrop from a U.S. entity. Long story short, either issue from a foreign entity or be prepared to get wrecked come tax season.
Paper on DAO Bankruptcies: Added to the constantly expanded “to-read” list, this paper on insolvent DAOs and what happens when a DAO is bankrupt under American bankruptcy law seems like a good resource to keep handy.
Senate Confirms Treasury Secretary: Scott Bessent has been confirmed as the new Treasury secretary, replacing Janet Yellen. He is viewed as “pro-crypto” so one can hope for some common sense rulemaking around digital asset tax reporting and compliance during his tenure.
KuCoin Enters Plea Deal: Kucoin agreed to pay $300 million in unlicensed money transmission penalties and its founders entered deferred prosecution agreements related to operating a digital asset exchange without proper money transmission licenses. The fact that the founders were offered DPAs seem to indicate the DOJ does not want to kill the platform completely, which is a nice change of pace.
How the SEC Stifled Innovation: This article from Andre Cronje on the regulatory burden placed on a single non-U.S. developer for creation and improvement of free software which he bootstrapped the development of himself is a great example of how even just an SEC investigation can smother and kill a project before it even begins.
A Second Pump Fun Lawsuit Has Hit the Buildings: The same law firm that sued Pump.fun memecoin platform two weeks ago has filed a second lawsuit, this time alleging the law firm itself issued a security on the platform? Absolute clown show.
Combined ETH/BTC ETF Approved: The SEC has approved the Bitwise BTC/ETH ETF product. Even as a heavy ETH bag holder, I do not know why anybody would want to have this over just holding BTC after looking at the BTC/ETH chart.
Reason for Token Manipulation Policy: This should be exhibit 1 for why every company that releases a token should have their employees and service providers agree to anti-manipulation terms. Don’t give regulators more of a reason to go after the industry.
Secretary of Commerce Pick Questioned on Tether: Cantor Fitzgerald CEO Howard Lutnick was questioned about Cantor’s relationship and ownership position in Tether during his Senate confirmation hearing. While concerns over Tether were likely valid a few years ago, at this point they would be crazy to not be buttoned up on the regulatory side and risk their money printing endeavor.
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.
Outro/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.
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