Hope everybody in the U.S. had way too much turkey and football on the couch this past week for Thanksgiving! In a short week, there were still quite a few legal developments including another SEC no action letter for a DePIN token launch, and some venture capital token sale shenanigans for a fairly large L2 that had lawyers in the space talking. There was also a lawsuit against Binance’s foreign entity with biglaw players on the Plaintiff’s side (rare!) and other legal developments worth watching.
Here’s everything that happened last week in crypto law:
SEC Issues New No-Action Letter for Energy DePIN Token Release
The SEC has issued another no-action letter, this time to energy DePIN Project Fuse related to the distribution of their Fuse Token which is a rewards token for users who participate in their energy supply network. This follows the SEC’s prior no-action letter for the DoubleZero DePIN project, after the SEC failed to issue any no-action relief related to digital assets for the prior 5+ years. While no-action relief is limited and as staff-level guidance they are neither binding nor something which other companies can completely rely on, but they are still super helpful as companies try to navigate this changing regulatory environment.
Tl;dr– Love to see this. As the Digital Chamber pointed out in one of the letters to the SEC that I helped prepare, no-action relief is a powerful tool to let the market know what is permissible and not, but it is insanely expensive to obtain and the process for seeking and obtaining these types of pre-distribution determinations is huge for businesses. The fact that so many projects are seemingly working with the SEC to try to obtain no-action relief shows how far we have come from the “come in and register” days of showing up to talk to the SEC and getting a Wells notice the next week.
OTHER STORIES
Berachain VC Refund: This story, as reported by Unchained, about Berachain giving one of their investors essentially a risk-free token sale/buyback option without disclosing is wild. A post-token generation event refund on tokens is pretty crazy, but even more crazy is it only being included for one investor and the other investors not having a most favored nations clause in their deals? It seems like there must be more to this story.
Klarna to Use Stablecoin Chain: Klarna is signed on to integrate the Stripe/Paradigm-backed stablecoin-focused L1 “Tempo” in a move to cut payment costs. Fairly impressive adoption considering Tempo is still in testnet and seemingly will not be live on mainnet for about a year.
Kraken Bankless Solution: Kraken has launched “Krak” in the EU, which essentially acts like a checking account except users are able to deploy their cash in DeFi while they aren’t using it for enhanced yield? Great idea and hope they can get these types of offerings to American consumers.
Binance Lawsuit: This lawsuit filed against Binance is a doozy at almost 300 pages, but the crux of it is accusing Binance of facilitating movement of funds by Hamas which was then used to finance the October 7th attacks against Isreal? I know nothing about the merits of the causes of action brought under the Anti-Terrorism Act/Justice Against Sponsors of Terrorism Act, but the weight and expansiveness of the allegations and the fact that a Biglaw firm is a part of Plaintiffs’ counsel (very uncommon for this type of mass/class action lawsuit) makes this a lawsuit worth covering/paying attention to.
House Judiciary Democrats Release Scathing Report: Well, if the title “Trump, Crypto, and a New Age of Corruption” wasn’t a give away about the findings of a recent House Judiciary Committee Democrats report, it doesn’t take long to get the gist of it. I guess if it is glass half full, at least this was released the day before Thanksgiving when nobody was paying attention except nerds like me?
Kalshi Class Action: In addition to the ongoing lawsuits against state regulators, Kalshi has now also been hit with a private class action alleging their prediction markets on sports outcomes constitute unlicensed sports wagering. These types of actions will continue until there is some consensus reached by the courts or regulators as to the proper regulatory framework for sports-related prediction markets.
Right to Self-Custody: Our favorite SEC Commissioner went on a podcast last week to reaffirm her belief that people should be given the right to self-custody their assets. Forced intermediation is not needed due to technological advances, so people should be given the option to hold their own assets if they so choose (including stocks, once they move onchain).
Curated DeFi Article: Really enjoyed this article about the rise and dangers of “curated” DeFi pools. I love Morpho and similar and use regularly, but there needs to be some oversight into how deployment of funds is controlled/disclosed because for some there are certainly issues. There are ways it can be done responsibly and irresponsibly and the market needs to understand the difference.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. 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: In late 2022, while I was at Polsinelli, I started preparing weekly updates for attorneys at the firm to stay abreast of the latest Web3 legal developments. I now 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 are solely my own. They do not reflect the official stance or endorsement of the Digital Chamber or any of its members.
The NFTtorney 