The Polsinelli Blockchain+ team recently released their Blockchain Bi-Weekly, which highlights the latest developments in the Web3, blockchain, and crypto industries. This update covers significant litigation and legislative actions, including the ongoing criminal case against FTX founder Sam Bankman-Fried and Binance’s motion to dismiss the SEC’s lawsuit. It also discusses the Compound DAO securities lawsuit and SEC Chair Gary Gensler’s testimony before the House Financial Services Committee.
In the Compound DAO securities lawsuit, a judge denied the defendants’ motion to dismiss, allowing the case to continue. The plaintiffs, who own minimal amounts of the tokens in question, argued that certain statements made by Compound partners created a plausible claim that they were statutory sellers. This ruling highlights the potential liability of DAO participants even if they are not the issuers or sellers of the tokens.
Binance has filed a motion to dismiss the SEC’s lawsuit against its foreign and U.S. entities. The motion argues that the secondary trading of digital assets does not meet the “investment contract” standard and that the SEC’s intervention in the digital asset industry violates the Major Questions Doctrine. The motion also challenges the SEC’s fraud allegations and claims jurisdictional immunity for being an international entity.
SEC Chair Gary Gensler testified before the House Financial Services Committee, where he discussed his accomplishments during his tenure, including passing private fund rules, proposing climate-related disclosures, and bringing crypto-related enforcement actions. However, Gensler faced criticism for not providing clear answers regarding what constitutes a security, including when Pokémon cards are tokenized.
Additionally, a bipartisan effort led by Mike Flood (R-NE) introduced the Uniform Treatment of Custodial Assets Act to prohibit federal agencies from considering assets held in custody as liabilities. This legislation aims to counter the SEC’s Staff Accounting Bulletin 121, which requires banks to list digital assets held in custodial services as liabilities.
The article also briefly mentions other developments, such as the SEC’s delays in reaching a determination on Bitcoin ETFs and the SEC’s objection to Coinbase’s involvement in the distribution of Celsius bankruptcy assets.
Overall, this bi-weekly update showcases the ongoing legal and legislative developments in the digital asset industry and emphasizes the complexities and regulatory nuances within the space. It highlights the legal challenges faced by companies like Binance and Compound DAO and the efforts to clarify regulatory frameworks through legislative initiatives.