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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 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…

On April 17, 2024, Republican Senator Cynthia Lummis and Democratic Senator Kirsten Gillibrand introduced the bipartisan Lummis-Gillibrand Payment Stablecoin Act, which creates a clear regulatory framework for payment stablecoins that the Senators said will protect consumers, enable innovation and promote U.S. dollar dominance while preserving the dual banking system. Heads of both the Federal Reserve and the Treasury Department have recently called for Congress to regulate stablecoins. The Bill provides, among other things: (1) For depository institutions (banks)…

BitMEX is a cryptocurrency exchange and derivative trading platform. It is owned and operated by HDR Global Trading Limited, which is registered in the Seychelles. HDR is an acronym of the last names of its founders, Arthur Hayes, Ben Delo, and Sam Reed. In 2020, Plaintiffs brought a putative class action against the founders and HDR alleging multiple violations of the Commodity Exchange Act (“CEA”), including price manipulation.  The Defendants moved to dismiss the case…

In 2021, Illusory Systems, Inc. developed a cross-chain bridge known as the Nomad Bridge. A “bridge” is a protocol that allows multiple blockchain networks to interact with each other and for users to swap one token for another without having to trade in and out of tokens on an exchange and incur multiple trading fees. While operational, the Nomad Bridge moved more than $912 million worth of crypto assets on behalf of more than 21,000…

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…