Two weeks ago was insanely busy with regulatory developments from seemingly every federal agency. So it was nice to have a relatively quiet week for crypto legal developments last week. But it wasn’t completely dead, as there was a report from the OCC which confirmed systematic debanking under the prior administration, and the SEC is approving Key Performance Indictor Binary options (i.e., stock issuer prediction markets).
Here’s everything that happened in Crypto Law last week:
OTHER STORIES
MSCI Changes: Despite the pushback, the index provider MSCI has gone through with its proposal to remove crypto treasury companies (and one Uranium miner) from its indexes using some made up accounting standard to make it seem objective. Dumb.
Stock Prediction Markets: Love to see this move from the SEC approving binary options for stock issuer Key Performance Indicators (i.e., if a company his certain targets on production, revenue, or other milestones). Also love to see Chair Atkins being clear this isn’t going to turn into an SEC vs. CFTC turf war.
OCC Report Confirms Chokepoint 2.0: There have been a ton of confirmations that banks were systematically debanking crypto and other industries disfavored by the prior administration. But this OCC report is significant since the primary regulator for the banks performing the debanking is confirming political bias in debanking decisions. Nobody should be cut off from modern finance because of who they vote for or because of their legal business activities.
Treasury Sanctions Bank of America: It is crazy to me that every time there is a few million in suspected money laundering linked to crypto it is headline news, but Treasury hitting Bank of America with a $1.2 billion fine for admittedly willful violation of the Bank Secrecy Act is barely news. Also insane that it’s only in crypto where executives and developers get sent to jail while bank executives only get a strongly worded letter and a few percent off their quarterly income.
Richard Heart Arrested: HEX founder Richard Schueler (AKA, “Richard Heart”) was taken into custody in Istanbul. While the SEC case against him was correctly dismissed on jurisdiction grounds, he is still not a good guy and authorities were going to catch up with him eventually after an Interpol red notice was put on him.
Bo Hines Probe: Lots of news last week about Bo Hine’s connections with Tether while he was working to pass the GENIUS Act. More smoke than fire, in my opinion. USDT (Tether’s primary stablecoin) will not be permitted in the U.S. since it has no intention of being GENIUS Act compliant, and the President hiring a person with a crypto advisory firm to advise him on crypto (and that person continuing to own that firm/others continuing to manage it while he is serving his role as advisor to the President) isn’t major news.
Missouri Prediction Market Test Case: The first of the lawsuits challenging the Missouri cease and desist against prediction market operators was filed last week. With a Minnesota district court already ruling against prediction market operators, an 8th Circuit decision won’t be far behind to see where it lands in the current circuit split.
Patrick Witt Leaves White House Role: Without Patrick Witt in his role at the White House, Clarity never gets as close as it did to passing and a ton of the positive activities at the administrative level don’t get done either. While his time as the executive director of the President’s Council of Advisors for Digital Assets is over, the industry owes him a ton of gratitude for everything he accomplished the last few years.
Illinois Tax Challenge Update: The Digital Chamber and Illinois Blockchain Association filed a proposed schedule which would provide dates for briefings in the lawsuit challenging the Illinois digital asset tax which passed on the last day of the Illinois legislative session. First briefs are due November 4th.
Venue for Compute: This was an interesting article I saw about an individual who got called in to testify for running an Ethereum validator node in New York as the basis for jurisdiction for alleged crimes committed through Ethereum network. As much positive as the administration has done for crypto, continuing to push validator location as a basis for jurisdiction is a huge mistake and could have vast negative consequences if not pushed on back as the case law develops.
Onion Futures Protest: While not directly related to crypto, this protest against the Onion Futures Act is a level of financial markets nerdiness that deserves attention in this update. Get rid of the box office receipts ban too, while you’re at it.
Data Broker End-Around to Constitution: I really enjoyed this blog post from CoinCenter about how the government gets around 4th Amendment requirements by buying data it couldn’t legally obtain a warrant to obtain. Nobody cares about privacy because they have “nothing to hide” until they read things like Means of Control and Three Felonies a Day and realize how scary it is that pissing off the wrong government official can lead to people with “nothing to hide” still ending up in jail for their political beliefs.
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.
