On September 7th, 2023, the U.S. Commodity Futures Trading Commission (“CFTC”) announced settlement orders against three operators of decentralized finance (“DeFi”) protocols: Opyn, Inc. (“Opyn”), Deridex, Inc. (“Deridex”), and ZeroEx, Inc. (“ZeroEx”). The announcement is a clear message that the CFTC will be asserting jurisdiction in the DeFi space, and may be as much a signal to the SEC as it is a message to the DeFi industry that the CFTC is claiming crypto regulatory…
On June 8, 2023, Judge Orrick of the Northern District California entered an Order and Default Judgment in a case the U.S. Commodity Futures Trading Commission (“CFTC”) brought against the Ooki DAO. The case has garnered a lot of attention because of issues it raised concerning whether a DAO (a decentralized autonomous organization) could be held liable for violating the law. Indeed, the CFTC issued a Statement that said: [I]n a precedent-setting decision, the court…
In previous posts, we addressed the interesting service of process issues that were the subject of a number of decisions in the lawsuit that the United States Commodity Futures Trading Commission (CFTC) brought against Ooki DAO (a DAO is a decentralized autonomous organization). But the case has also received a lot of attention for the larger issues of a proceeding against a decentralized organization and who might be liable for its acts. The court’s recent…
In an earlier post, we reported that Judge William Orrick of the Northern District of California had authorized service of process on Ooki DAO (a DAO is a decentralized autonomous organization) through a Help Chat Box on Ooki DAO’s website, with contemporaneous notice through an Online Forum linked through its website. In another post, we reported that the Judge Orrick subsequently required the CFTC also to serve process on two Token Holders once it was…
In an earlier post, we reported that a judge had authorized service of process on a DAO (decentralized autonomous organization) through a Help Chat Box on the DAO’s website, with contemporaneous notice through an Online Forum linked through its website. Four amici — venture capital firms Paradigm and Andreessen Horowitz, crypto legal consortium LeXpunK, and the DeFi Education Fund — sought reconsideration of that decision. On December 12, 2023, Judge William Orrick issued an order…
This post concerns a lawsuit brought by the United States Commodity Futures Trading Commission (CFTC). The complaint alleges that, from approximately June 1, 2019 to approximately August 23, 2021, bZeroX, LLC (bZeroX) designed, deployed, marketed, and made solicitations concerning a blockchain-based software protocol that accepted orders for and facilitated margined and leveraged retail commodity transactions (functioning similarly to a trading platform). This protocol (the bZx Protocol) permitted users to contribute margin (collateral) to open leveraged positions…
On September 16, 2022 the White House released its Comprehensive Framework for Responsible Development of Digital Assets (Framework) for how the administration plans to address digital assets as a part of its “whole-of-government approach”, which was first outlined in a March 9 Executive Order (EO) issued by President Joe Biden. In the short-term, the Framework does little to alter the regulatory uncertainty that has allowed many bad actors in the digital asset space to thrive while stymieing responsible growth. There are…
The SEC has brought numerous cases in which it alleged that specific tokens were “securities” and that their offerings violated the securities laws. Those cases were typically brought against the issuers. However, the SEC upped the ante in a lawsuit it brought on July 21, 2022 in which the SEC declared that nine cryptocurrencies were “securities,” but in a case not brought against the issuers. The lawsuit is the SEC’s first insider trading case dealing…
On June 7, 2022, Senators Cynthia M. Lummis (R-WY) and Kristen Gillibrand (D-NY) introduced a bill to regulate digital assets and promote financial innovation. The proposed legislation is the first significant, bipartisan effort to apply comprehensive regulation to digital assets. The proposed legislation begins with the premise that digital assets are commodities and their regulation appropriately rests with the Commodity Futures Trading Commission (CFTC). Under the regime as contemplated, the Securities and Exchange Commission (SEC) would be…
We have written often about the efforts of the United States Securities and Exchange Commission (here and here) and Commodity Futures Trading Commission (here and here) to regulate in the cryptocurrency space. On May 19, 2022, the U.S. Department of Commerce entered the fray by publishing in the Federal Register a Request for Comments (RFC) under the title “Developing a Framework on Competitiveness of Digital Asset Technologies.” The impetus for the publication was President Biden’s…