Blockchain and the Law

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States have long been “laboratories of democracy” where policymakers can try out certain innovative policies on a local or regional level that could eventually, if successful, become national programs. On the tech side, some states have sought to establish themselves as laboratories of blockchain. For example, this past week Vermont announced that it will work with vendors to launch a pilot program permitting new captive insurance companies to register with the Vermont Secretary of…
New York State has taken measures this year to modernize its approach to regulation for blockchain-based companies. Even before Assembly Bill A8783B established a government task force to study the effects of blockchain and digital assets on financial markets in the state, in October, the New York State Department of Financial Services (“NYSDFS”) announced that it would allow companies engaged in “virtual currency business activity” (as defined in the New York State “BitLicense” requirements
On December 10th, 2018, a U.S. District Judge for the District of New Jersey denied Latium Network, Inc. (“Latium”) and its co-founders’ motion to dismiss a class action alleging violations of Section 5 of the Securities Act of 1933 (the “Act”) for offering and selling unregistered securities in the form of Latium X (“LATX”) tokens.…
Proskauer authored a Practice Note published by Practical Law, which provides an overview of the use of blockchain and smart contracts in the supply chain context, including the legal issues, concerns, benefits and risks associated with its use. It includes, among other topics, information on key distinctions between public and private blockchains and important considerations regarding the use of blockchain consortia. The full text of our Practice Note is available here: Practice Note: Blockchain and Supply Chain Management
On November 16, the SEC announced that it settled charges against CarrierEQ, Inc. (“Airfox”) and Paragon Coin, Inc. (“Paragon”) for securities offering registration violations in connection with their respective initial coin offerings (“ICOs”). The settlement orders represent the first time the SEC has imposed civil penalties against ICO issuers solely for securities offering registration violations (i.e., without any allegations of fraud or misrepresentation) and notably, require Airfox and Paragon to make…
The SEC recently announced its settlement of charges against boxer Floyd Mayweather and producer DJ Khaled for their failure to disclose payments they received for promoting Initial Coin Offerings (ICOs) on their social media accounts. The federal securities laws contain an “anti-touting provision,” which regulates paid promotions of securities offerings. Specifically, Section 17(b) of the Securities Act of 1933 makes it unlawful for a person to “publish, give publicity to, or circulate any notice…or communication which, though…
Uncertainty regarding the compatibility of blockchain technology and the European Union’s General Data Protection Regulation (GDPR) has often been highlighted as a potential obstacle to the development and widespread implementation of blockchain systems involving personal data. To address tensions between blockchain technology and the GDPR, Commission Nationale de l’Informatique et des Libertés (CNIL), the French data protection regulator, published an initial report analyzing certain fundamental questions regarding the interaction between blockchain technology and the GDPR’s…
Today, Ohio reportedly becomes the first US state to allow taxes to be paid in the form of bitcoin. Although the program, which is spearheaded by Ohio Treasurer Josh Mandel, will not be available to individual taxpayers until a later time, businesses operating in Ohio are now able to register on OhioCrypto.com to pay 23 types of Ohio state taxes using bitcoin. In the Office of the Ohio Treasurer’s own words, this initiative represents…
On November 8, the SEC announced that it settled charges against Zachary Coburn, founder of EtherDelta, a type of non-custodial digital asset trading platform commonly referred to as a “decentralized exchange” or “DEX.” Coburn was charged with causing EtherDelta to operate as an unregistered securities exchange in violation of Section 5 of the Securities Exchange Act of 1934 (the “Exchange Act”) during the period between July 12, 2016 (the date Coburn launched EtherDelta’s website) and…
Recently at a conference in Dubai, Brian Quintenz, who is a Commodity Futures Trading Commission (CFTC) Commissioner, expressed his personal opinion (rather than the views of the CFTC) on the conceptual challenges in applying the CFTC’s regulatory oversight to, and fostering accountability for, smart contracts that reside on decentralized blockchains. In particular, Quintenz conveyed his belief that smart contract developers could potentially be held liable for aiding and abetting activity that violates CFTC regulations through…