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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…

BitMEX is one of the world’s largest cryptocurrency trading platforms. Last year, the U.S. District Court for the Southern District of New York entered a Consent Order that the U.S. Commodities Futures and Trading Commission agreed to with five companies charged with operating BitMEX. The order required the BitMEX entities to pay a $100 million civil monetary penalty. (read more here). Earlier this year, the three co-founders of the company plead guilty to violating the Bank Secrecy Act…

In its first enforcement action in the cryptocurrency arena in 2022, on January 3, 2022, the United States Commodity Futures Trading Commission (CFTC) entered an Order filing and simultaneously settling charges against Delaware-registered Blockratize, Inc., which operated its business under the name  Polymarket.  The Order finds that, beginning in approximately June 2020, Polymarket had been operating an illegal unregistered or non-designated facility for event-based binary options online trading contracts, known as “event markets.” According to the…

BitMEX is one of the world’s largest cryptocurrency trading platforms. On August 10, 2021, the U.S. District Court for the Southern District of New York entered a Consent Order that the U.S Commodities Futures and Trading Commission agreed to with five companies charged with operating BitMEX. The order requires the BitMEX entities to pay a $100 million civil monetary penalty and provides that up to $50 million of the penalty may be offset by payments…

Depending on the particular branch of the U.S. government one is talking to, cryptocurrency can be property (IRS), a security (SEC) or a commodity (CFTC). On April 20, 2021, the U.S. House of Representatives passed a bill aimed at remedying this situation. The bipartisan Eliminate Barriers to Innovation Act will establish a digital asset working group to ensure collaboration between regulators and the private sector to foster innovation. The new law will require the SEC and CFTC to…

On January 26, 2021, federal prosecutors in New York unsealed a criminal complaint against 24-year old Jeremy Spence (aka “Coin Signals”). As alleged, Spence took cryptocurrency worth over $5 million from more than 170 individual investors after making false representations in connection with these cryptocurrency funds. The allegations in the complaint allege the following scheme: From November 2017 through April 2019, Spence solicited investors in various cryptocurrency investment pools that Spence had created and managed. …

On October 21, 2020, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the United States Commodity Futures Trading Commission issued an Advisory to futures commission merchants (FCMs) regarding the holding of virtual currency in segregated accounts. The advisory provides guidance to FCMs on how to hold and report certain deposited virtual currency from customers in connection with physically-delivered futures contracts or swaps. The Advisory also provides guidance that FCMs should follow when designing…