Hope everybody is enjoyed their President’s Day! Last week, lots of focus was on the two hearings in the House and Senate with SEC Chair Paul Atkins, especially as the Senate continues to work towards market structure legislation which would give the SEC new powers and responsibilities overseeing digital assets in America. In the meantime, the stablecoin yield issue continues to hold up market structure, while Uniswap had a big week winning its patent infringement case and getting the co-sign from asset manager Blackrock.
Here’s everything that happened last week in crypto law:
House Financial Services and Senate Banking SEC Hearings
The House Financial Services Committee held a hearing entitled Oversight of the Securities and Exchange Commission with testimony from SEC Chair Atkins and the Senate Banking Committee held a similar hearing the following day. In both hearings, Chair Atkins reinterred his advocacy for bipartisan CLARITY Act legislation being the best step for giving lasting regulation for crypto but also that both the SEC and CFTC are moving forward with giving the space rules of the road through formal rulemaking and not arbitrary enforcement. While there was a variety of topics discussed unrelated to digital assets, there was quite a bit of focus on digital assets including the SEC’s enforcement decisions related to dropping/not bringing cases against certain digital asset companies and the SEC’s rulemaking plans for digital assets.
Tl;dr– Quite a few Democrats on the House Financial Services Committee focused on issues related to Binance and Justin Sun, and specifically the SEC’s decision to drop the case brought by Gary Gensler against Binance and the lack of enforcement actions brought against Justin Sun by the current SEC. On the other side, Republicans in the House focused digital asset questions on the SEC’s rulemaking intentions both if the CLAIRTY Act passes the Senate or not. One interesting exchange in the House was between Chair Atkins and Representative Gottheimer, who is a major digital asset industry advocate on most issues, involving pump.fun and ensuring the innovation exemption doesn’t encourage “scam artists and hucksters pushing stuff online” while Chair Atkins reiterated that “fraud is fraud, whether it happens in the crypto world or in paper certificates.” There was also an interesting exchange between Representative Davidson and the Chair re: the SEC’s plans for self-custody of assets and protecting privacy rights of asset owners.
In the Senate, there was far less focus on individual actors in the digital asset space similar to the split in recent hearings in the House and Senate with Treasury Secretary Bessent, seemingly indicating the Senators are not trying to focus on divisive issues around crypto as they work towards bipartisan market structure legislation. With some notable exceptions such as questions from Elizabeth Warren, which could be expected. Indeed, key Democrats such as Senators Warner and Alsobrooks used their time to advocate for digital asset legislation passage. There was also an interesting exchange with Senator Warnock indicating there would be bipartisan support for many crypto measures but needing Democrat commissioners to be a part of the process at the SEC for that support.
OTHER STORIES
Coinbase Paid in FOIA Lawsuit: Coinbase got almost $200K in legal fees after they had to fight to get banking records in FOIA requests related to Operation Chokepoint 2.0. Honestly, the whole FOIA system is messed up in that you can virtually never get anything of value without six figure legal fights, so not exactly the pinnacle of transparency.
Whitehouse Host 2nd Stablecoin Yield Meeting: The Whitehouse held a second meeting between crypto industry and banking industry positions regarding the ongoing stablecoin yield debate. The banks did not provide a redline to existing language but instead had a list of (at points contradictory) “principles” which was….something. But until banks are actually negotiating language it is hard to actually progress. The Digital Chamber released its own Yield Principles to keep the conversation moving forward.
SEC Commissioner Uyeda Speech: SEC Commissioner Uyeda is the latest SEC official to talk tokenization, nothing that the no-action relief granted to the DTCC model is the first step in the process and not the end goal. Chair Atkins and Commissioner Peirce have said similar things so this isn’t groundbreaking but it is nice that they are all rowing in the same direction re: enabling peer-to-peer securities transactions in more disintermediated models in the future.
Polymarket Maryland Lawsuit: Polymarket has joined in the Maryland gaming regulator legal fight, as the latest prediction market operator to sue the state regulator for trying to block prediction markets are certain events in the state. And while talking prediction markets, I need to plug this excellent article from Daniel at Variant on how insider trade laws apply to CFTC-regulated markets (focusing on prediction markets). Prediction markets will obviously be a focus for the CFTC based on its recent advisory committee announcement which has some major names in prediction markets as members.
tZero Digital Asset Briefing: First time this crossed my wire, but really enjoy this rundown of digital asset developments relevant to TradFi put out by tZero. Concise and easy catch-up on most the major recent topics.
Uniswap Beats Patent Troll: Uniswap has won its case against Bprotocol Foundation over the foundation’s allegation of patent infringement. The lawsuit involved Bancor’s automated market maker patents, and wasn’t brought until last year which is generally a red flag considering Uniswap wasn’t in stealth mode the past 7 years so if it was legit patent infringement that’s a long time to sleep on rights. Either way, big week of dubs for Uniswap.
Blackrock Extending DeFi Activities: Blackrock is preparing to enable trading through Uniswap and purchased a large amount of the Uniswap governance token, UNI, as a part of that plan. It’s a heavily permissioned pool built on Uniswap, but a great start to financial institutions plugging into “true DeFi.” Despite current market conditions, I have never been more confident that value accrual for (some) blockchain technologies will be a rocket ship.
Safemoon CEO Sentenced: Braden Karony, the former CEO of SafeMoon US LLC, was sentenced to 8 years in prison for his role in the Safemoon token fraudulent statements. This company was the definition of a ponzi, claiming there was a “tax” for transfers or sales but then excluding that “tax” for executive transfers/sales and pocketing funds. Good to see bad actors in the space held accountable.
CZ/All In Podcast: Former CEO of Binance, CZ, sat down with one of the hosts of the All In Podcast to discuss a whole range of topics over a 2 hour interview. This is probably the most CZ has publicly talked about a ton of topics including his conviction, prison sentence, and subsequent pardon by President Trump, so certainly something worth listening to if you have the time.
Farcaster Founder Joins Tempo: Mert probably put it best when he said Dan Romero joining Paradigm-backed Tempo was like Kevin Durant joining the Warriors. Just a huge addition to an already stacked team trying to be the blockchain of choice for stablecoin use. Speaking of, the former CLO of Magic Eden joining crypto law boutique firm Day One Law is also one of those things you love to see re: great teams getting greater.
AI Attorney/Client Privilege Ruling: My good friend Moish recently went viral breaking the news on a recent decision from everybody’s favorite love/hate S.D.N.Y. Judge Rakoff which compelled discovery from a litigant that used AI to research something and send the results to his/her attorney. Interesting development for sure. Also, Moish is a real crypto attorney with serious chops, and has a great crypto/ai legal newsletter and podcast I highly encourage people subscribe to.
FED Crypto Margin Report: The FED released a study on the appropriate risk scale to give digital asset used to support margin positions. This isn’t formal rulemaking, but many asset managers use this in designing their internal risk controls as the quantitative basis for their decisions. The big takeaway is stablecoins getting a risk score of 2, which is exceedingly safe (a USD/EUR fx pair gets a risk score of more than twice that) so this gives strong support for asset managers using stablecoins in their trading margin positions.
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 