U.S. state and federal lawmakers, as well as federal regulators, are increasingly focusing on the role of blockchain and distributed ledger technology in ongoing efforts to combat climate change and to facilitate the transition from carbon-based fossil fuels.
There have been several key developments in the recent weeks at the state and federal level, covering
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NFT Insider Trading – Can There Be A Crime If It’s Not A Security?
We have previously addressed the recent indictment against Nathaniel Chastain, a former executive of a major NFT marketplace, for insider trading involving NFTs. The indictment charges Chastain with one count of wire fraud and one count of money laundering. It does not allege that the NFT is a security. It does not allege violation of…
NFT Insider Trading Compliance Policies – What They Cover and Why You Need One
It is well known that insider trading—the practice of buying and selling stocks, bonds, or other securities based on material, non-public information—is unlawful. For that reason, many companies have compliance programs and policies that restrict trading by officers, directors, employees or other “insiders” with access to such information.
What does this have to do…
DAO Liability and the bZx Class Action
A class action lawsuit filed by users of a decentralized finance (“DeFi”) protocol managed by a decentralized autonomous organization, or “DAO,” may shed light on the potential legal liabilities of a DAO and its participants. The complaint in Sarcuni v. bZx DAO, No. 22-cv-0618 (S.D. Cal. May 2, 2022), highlights several issues related to…
SEC Investigating Lack of Insider Trading Policies for NFT/Crypto Exchanges
For quite some time, we have been advising that marketplaces and NFT/crypto issuers consider developing an insider trading policy. The SEC is now investigating this issue. If you do not have a policy this is a good time to do so.
The issue of NFT-based insider trading became more well known when a high-profile executive…
The Legit Ledger Launches: New Podcast Provides Insights and Practical Tips on Blockchain-Related Legal Issues
Sheppard Mullin is pleased to announce the launch of The Legit Ledger, a new podcast hosted by Sheppard Mullin’s Blockchain and Fintech industry team members (including partners Jim Gatto, Yasamin Parsafar, and associate Gabe Khoury) that focuses on blockchain-related legal issues and practical tips for keeping things legit. Various episodes of The Legit Ledger will feature interviews…
May 2022 Crypto Enforcement Actions and Regulatory Guidance Roundup
In May, we saw a slower month for crypto enforcement actions by state and federal regulators. See our March 2022 Crypto Enforcement Actions Roundup blog here where we discuss the regulatory guidance and jurisdiction of federal and state agencies to enforce these matters.
Federal and State Updates
Securities and Enforcement Commission (SEC)
On May 3,…
Mythical Games Scores NFL License for Blockchain Video Game
The National Football League has announced a partnership with Mythical Games to create a blockchain video game called NFL Rivals. The game will use unique, generative 3D NFL franchise-themed NFTs and let players act as a general manager to assemble a team and compete against other teams.
Given the explosive growth of blockchain games, this…
The Crypto Enthusiast and The Regulator: What OFAC is, Could Be, and Should Be Doing to Regulate CryptoCurrencies
On May 6, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated a cryptocurrency mixer, Blender.io, as a Specially Designated National (SDN). That sanction follows a series of enforcements and sanctions which we have previously discussed here and here.
The action is the latest in a fascinating back-and-forth between the…
The Crypto Evangelist and The Regulator: What OFAC is, Could Be, and Should Be Doing to Regulate CryptoCurrencies
On May 6, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated a cryptocurrency mixer, Blender.io, as a Specially Designated National (SDN). That sanction follows a series of enforcements and sanctions which we have previously discussed here and here.
The action is the latest in a fascinating back-and-forth between the…
Former NFT Marketplace Employee Charged with Insider Trading
The United States Attorney for the Southern District of New York and the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging Nathaniel Chastain with wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible…
Securities and Exchange Commission V. LBRY; Is Your Crypto Project Illegal?
While the crypto community is rightfully focused on the Ripple case to see how the SEC will fare in court on enforcements alleging cryptocurrency offerings are a security, a lesser-known case may provide clarity first. The SEC’s suit against LBRY is scheduled for trial in September 2022.
LBRY is a protocol that allows anyone to…
Blockchain and Metaverse Legal Issues for the Government and Government Contractors
The rise of blockchain, metaverse and Web3 technologies has lead to rapid adoption across all sectors of the economy. The government sector is no exception. Perhaps one of the most compelling examples is the recent announcement that the US military is building its own metaverse.
There is no one precise definition of a metaverse. Rather,…
Governor Newsom Signs Blockchain Executive Order
In an apparent follow up to President Biden’s March Executive Order on Digital Assets (which we previously discussed here), this week, California Governor Gavin Newsom signed a similar executive order aiming to foster responsible innovation, bolster California’s innovation economy, and strengthen consumer protection through creating a transparent regulatory and business environment for Web3 companies.…
New York’s Superintendent of Financial Services Addresses BitLicense Delays
This January, Adrienne A. Harris was confirmed as superintendent of New York’s Department of Financial Services, which administers New York’s BitLicense program, among others. In a March 28 interview, Harris discussed the BitLicense program in detail and addressed some of its longstanding issues, including its slow response times to applicants and updating some of…
Uniswap and VC Backers Sued For Selling Unregistered Securities
A recent class- action lawsuit alleges that the “Uniswap Protocol” exchange is one of the largest crypto-asset exchanges in the world, which permits the unlawful promotion, offer, and sale of crypto tokens as unregistered securities. According to the complaint, Uniswap has no barriers to entry for users looking to trade or swap crypto tokens…