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David Zaslowsky

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We previously reported about action by the U.S. House of Representatives concerning U.S. Security and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 121 (“SAB 121”), which was issued on March 31, 2022. It requires reporting entities which perform custodial duties in relation to crypto assets to hold those assets on their balance sheet. Doing so means these entities would also be required to take on significant capital, liquidity, and other costs under the existing prudential regulatory…

In the United States, the Form 1099 has been used for years by investment firms to report investment income of their customers. As a result of final regulations (the “Final Regulations”) that the United States Internal Revenue Service issued on June 28, 2024, there will now be a Form 1099-DA (not yet released) on which custodial brokers will be required to report sales and exchanges of digital assets, including cryptocurrency. The reporting requirement will go…

In two earlier posts, we reported about Consensys filing a pre-emptive lawsuit against the United States Securities and Exchange Commission seeking, among other things, a declaration that (i) Ether is not a security and that, accordingly, the SEC’s investigation into Ether and Ethereum and any resulting enforcement actions exceed its regulatory authority; (ii) any enforcement action against Consensys premised on Ether being a security or Ether transactions being securities transactions would violate due process and…

Dapper Labs is the company that was known originally for CryproKitties. That ran on the Ethereum blockchain. But Dapper Labs then developed its own blockchain, called Flow, to house NBA Top Shot, its co-venture with the NBA. Top Shot is best known for selling “Moments,” which are often compared to sports trading cards. Dapper Labs clips NBA highlights and turns them into NFTs (non-fungible tokens), which can be bought and sold. In May 2021, a…

The New York State Department of Financial Services (DFS), the state’s top financial regulator, views itself as the leading cryptocurrency state regulator in the country. Its regulatory scheme began with its introduction of the BitLicense, a set of regulations that prohibited companies from engaging in “virtual currency business activity” in New York, or with New York residents, without a license. Very few were actually applied for, and fewer still issued. Much has been written about how…

The United States Securities and Exchange Commission surprised the crypto community on May 23, 2024 when it effectively approved the sale of spot Ether Exchange-Traded Funds (ETFs). First, some historical context. In 2013, Gemini founders Tyler and Cameron Winklevoss first sought to launch a Bitcoin ETF. The SEC rejected that application and, for about 10 years, rejected all other applications to list spot Bitcoin ETPs (an Exchange Traded Fund is the most common type of…

There has been much publicity around the cases that the U.S. Commodity and Futures Trading Commission (“CFTC”) has brought against exchanges, such as Binance. Those cases, according to the CFTC, were meant to demonstrate that the CFTC would not tolerate digital asset exchanges that fail to register with the CFTC or comply with the agency’s rules concerning the derivatives markets. On May 13, 2024, the CFTC went one step further down the chain in, for…

U.S. Security and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 121 (“SAB 121”) was issued on March 31, 2022. It requires reporting entities which perform custodial duties in relation to crypto assets to hold those assets on their balance sheet. Doing so means these entities would also be required to take on significant capital, liquidity, and other costs under the existing prudential regulatory framework. SAB 121 thus represented a significant departure from decades of generally accepted…

Last week, we reported that two crypto industry groups sued the United States Securities and Exchange Commission seeking to strike down revisions to the dealer rule. On April 26, 2024, Consensys Software Inc., a software developer whose business centers on the Ethereum blockchain network, brought a much more significant case when it sued the SEC in federal court in Texas over the regulation of Ethereum. The Complaint may be found here. In a June 2018…

The tension between the crypto industry and the United States Securities and Exchange Commission over the issue of which tokens qualify as securities has been well documented. SEC Chair Gary Gensler is on record as saying almost all crypto products are securities. On April 23, 2024, two crypto industry groups, the Blockchain Association and the Crypto Freedom Alliance of Texas sued the SEC in federal court in Texas, challenging the SEC’s rule expanding the definition…