The SEC went forward with its Regulation Crypto rulemaking proposal despite cancelling the open meeting it was supposed to be unveiled at. The Digital Chamber’s letters were some of the most cited in the proposal, with 17 footnotes specifically referencing TDC letters to the SEC on the applicable topics, which was great to see! There was also the inaugural CFTC Innovation Advisory Committee meeting which some interesting tidbits, and the White House is continuing to try to pass Clarity with a crypto summit last week to discuss how to get that legislation over the finish line.
Here’s everything that happened in Crypto Law last week:
SEC Releases Regulation Crypto for Digital Asset Fundraising
The long-awaited token fund raising exemption to securities laws, known as “Regulation Crypto Assets” was revealed last week! This was first discussed by Chair Atkins in March at the D.C. Blockchain Summit in March of this year, and people have been waiting for it ever since. The proposal was expected the prior week before a last minute cancelation. This largely follows the token fundraising provisions from the Clarity Act with minor variations so easy enough to change this to fit Clarity Act mandates should that bill pass in September, but the SEC is clearly intending to move forward with or without Market Structure to update financial markets to address unique issues surrounding blockchain-enabled technologies.
Tl;dr– There are a ton of people who have put out big picture explanations of the rulemaking and, at over 400 pages, it is going to take times for people to really dig in to see how this will work in practice and prepare comments in response to the proposal. I will say, for every question this answers there are probably two more that pop up especially regarding how tokens which are sold in an investment contract through the safe harbor can be used for their utility prior to the promises and obligations of the investment contract ending. But this is great to see from the SEC and solidifies that they (along with the CFTC) were being honest when they said they want market structure legislation but plan on using their existing powers with or without further actions from Congress.
OTHER STORIES
Crypto Privateers: I forgot to add this last week, but the White House’s proposal for combatting online crime through white hat hackers is great to see. This is something that has been proposed for a while, most recently in a bill sponsored by Congressman Schweikert, and while there are certainly valid concerns regarding government sponsored theft, sometimes you need good guys with a computer to go after bad guys with a computer.
Hyperliquid Pre-IPO Perps Submission: Giving individuals access to pre-public companies through pre-IPO perps is something which was mentioned at the CFTC Innovation Meeting and an idea seemingly picking up steam with a Hyperliquid Policy Center submission to the SEC on that topic last week. There is certainly consumer demand, as we have seen for a huge offshore market developing trying to price IPO price of pre-public companies.
Chainalysis Government Contract Suit: Chainalysis is bringing a lawsuit over a government contract bid loss to their competitor TRM Labs. These types of government contract disputes are fairly common so while some are treating this as a big deal, this is just a part of doing business with the government.
White House Crypto Meeting: There was a meeting at the White House this past week with many of the leaders in crypto to discuss getting Clarity Act over the finish line when the Senate returns in September. But the talk coming out of the meeting was the President’s statement about trying to give Americans access to Hyperliquid, which I think everybody knows the CFTC was actively working on but which was made public in the President’s remarks.
CFTC Innovation Meeting: The Inaugural CFTC Innovation Advisory Committee meeting was last week, and it focused on the expected topics: (1) Crypto; (2) AI; and (3) Prediction Markets. The biggest takeaways were probably Chair Selig announcing his expectation that there will be prediction-market specific consumer protection and core principle changes, and a spat between old guard CME representative Terry Duffy and fast growing competitor Kalshi, represented by Luana Lopes Lara at the meeting.
Treasury Releases GENIUS Act Rule Proposal: The Department of Treasury has issued its rule proposals which would dictate which foreign issued stablecoins are permitted to be purchased and used through U.S. financial services firms. Still need to dig in more, but from a first pass this seems well intentioned but will need many changes to be a workable framework.
SALT Has Bullish Sentiment: What has become one of the major digital asset conferences, SALT in Wyoming, was last week and the sentiment across the board was bullish for crypto. Which combined with the White House meeting last week seems to have driven the market price up across the board.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. Any typos or errors are intentional to prove I am not AI. 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.
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