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…
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…
We recently reported on the first NFT enforcement action brought by the U.S. Securities and Exchange Commission. On September 13, 2023, the Commission brought its second, against Stoner Cats 2 LLC (SC2), the entity responsible for the cartoon series Stoner Cats. The animated Web3 series featured the voices of Ashton Kutcher, Mila Kunis, Chris Rock, Jane Fonda, Seth MacFarlane and others. The series is about the adventures of cats who learned to talk after inhaling…
On August 29, 2023, the D.C. Circuit Court of Appeals delivered the most recent blow to the SEC’s crypto crackdown with its ruling in Grayscale Investments, LLC v. SEC. The decision was a big win for Grayscale and a clear repudiation of the SEC’s handling of Grayscale’s (and, implicitly, others’) spot Bitcoin ETF application under the Administrative Procedure Act (“APA”). By way of background, in 2013, Gemini founders Tyler and Cameron Winklevoss first sought to…
On August 25, 2023, the United States Treasury Department issued a notice of proposed rulemaking regarding tax reporting by brokers of transactions involving the sale or exchange of digital assets (“Proposed Regulations”). These long-awaited Proposed Regulations are in response to section 80603 of the Infrastructure Investment and Jobs Act of 2021, which expanded the scope of information reporting obligations for brokers under Code section 6045 to cover transfers of digital assets. Baker McKenzie has prepared an…
We previously reported on the Friel v Dapper Labs decision, which was a first-of-its-kind decision in the U.S. courts, holding that an NFT (non-fungible token) can be a security under U.S. securities law. On August 28, 2023, the U.S. Securities and Exchange Commission brought its first NFT enforcement action, against Impact Theory, LLC, a media and entertainment company headquartered in Los Angeles. It read very much like the SEC’s actions concerning cryptocurrency. As in those…
We have previously reported on U.S. Securities and Exchange Commission cases against influencers for violating the anti-touting statute. On August 22, 2023, the SEC announced settled charges against Washington, D.C.-based investment adviser Fundrise Advisors, LLC arising from the firm’s solicitation arrangements with online content creators. The following information is taken from the Order. Fundrise has been registered with the SEC as an investment adviser since September 25, 2014 and, as of March 31, 2023, reported…
We have previously reported (here and here) on the refund lawsuit that a couple, the Jarretts, brought against the U.S. Internal Revenue Service. Mr. Jarrett produced Tezos tokens, a form of cryptocurrency, through a process known as “staking” — a system being used by more and more blockchains. As Jarrett saw things, staking uses existing Tezos tokens and computing power to produce new tokens. Thus, he argued, he would owe taxes on the tokens only…
In Revenue Ruling 2023-14, issued July 31, 2023, the IRS ruled that a cash-method taxpayer that receives additional units of cryptocurrency as rewards for validating transactions on a proof-of-stake blockchain must recognize the fair market value of the validation rewards as income in the taxable year in which the taxpayer gains dominion and control over the validation rewards. This is broadly consistent with the IRS views previously expressed on the treatment of mining income. In…
Almost five years ago, we reported on the SEC’s first-ever case against celebrities for touting ICOs. In 2022, Kim Kardashian paid $1.26 million in connection with her touting on social media a crypto asset security (she received about $250,000 for a post on Instagram). On August 4, 2023, in the SEC’s most recent touting case, singer Austin Mahone consented to a judgment under which he paid about $46,000 for illegal touting. The simple concept behind…