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…
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…
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…
On February 29, 2024, the U.S. House of Representatives Financial Services Committee passed a resolution (H.J. Res. 109) which, if enacted, would undo the recent US Security and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 121 (“SAB 121”). It acted under the Congressional Review Act (“CRA”), which allows Congress to use their oversight authority to overturn rules issued by federal agencies. SAB 121 requires reporting entities which perform custodial duties in relation to crypto assets…
One of the issues that we, and much of the rest of the crypto community, have been following for many years is the battle between the crypto industry and the SEC on the issue of whether crypto assets are securities. In November 2022, a federal district judge in New Hampshire held that the LBRY token was a security. On July 13, 2023, a federal district judge in the Southern District of New York ruled that Ripple Labs’…
SEC v. Crowd Machine, Inc. was a lawsuit that the United States Securities and Exchange Commission brought against Crowd Machine Inc. (“CMI”), and others, for CMI’s making materially false and misleading statements in connection with an initial coin offering of Crowd Machine Compute Tokens (CMCTs). Rather than using the ICO proceeds for the stated purpose, Defendants diverted more than $5.8 million in ICO proceeds to gold mining entities in South Africa. The SEC also alleged…
We have previously written about the SEC’s case against LBRY, which offered a video sharing application. Its native token, LBC, was meant to be used by content creators and audience members on LBRY’s “content marketplace,” which billed itself as an alternative to YouTube. LBRY had a real business and real customers. But the SEC sued LBRY, claiming that it had conducted an unregistered offering of digital asset securities. LBRY tried to fight back aggressively, noting that…
We have been writing for years about what had become an almost quixotic quest for U.S. SEC approval of a spot Bitcoin ETF (see one such post here). The D.C. Circuit’s decision in the Grayscale case (see post here) was a clear repudiation of the SEC’s position and infused the industry with hope that such approval might finally be forthcoming. Though it has not happened yet, this post provides an update on this topic. There…