Rapture #245: US Government Related Updates
Lots of movement in terms of regulatory and legislative action recently. Specifically, the CFTC made moves on a derivatives exchange and a DAO. Furthermore, a leading US Senator proposed an incredibly friend crypto bill. Finally, the SEC charged Kim Kardashian for unlawfully touting a crypto security.
Let's dive in to each item.
CFTC's moves
While the crypto industry overall has historically viewed the CFTC as its regulator of choice, the agency's recent moves might cause some participants to reconsider.
On September 22nd, the CFTC served Ooki DAO, alleging the DAO offers illegal leveraged and margined trades without a Futures Commission Merchant designation or KYC program. Interestingly, the CFTC found the individual members of the DAO responsible for this alleged infringement. Specifically, the CFTC stated that it intended to hold any voting member of the DAO individually viable.
If the CFTC wins this suit, a precedent could be set that any DAO voter is liable for the actions of the DAO itself, which would dramatically decreases the willingness of individuals to want to participate in DAO governance.
In addition to going after Ooki DAO governance voters, the CFTC also charged Digitex, a digital asset derivatives platform, with facilitating unlawful futures transactions and failure to register. Furthermore, the CFTC accused Adam Todd, an operator of the exchange, of market manipulation of the price of DGTX through pumping the coin via "bots" on third-party exchanges.
Clearly, the CFTC is getting more active in patrolling the crypto markets.
SEC's moves
Earlier today, the SEC charged Kim Kardashian for unlawfully touting a crypto security. Kardashian opted to settle the dispute for $1.26 million.
This case will be an eyeball catching one for the SEC. Furthermore, Chairman Gary Gensler tweeted an incredibly well-made video describing his positioning on the issue. Gensler is definitely upping his PR skills in his pursuit of crypto.
While this move does not really set many precedents, what the action tells us is that Gensler without a doubt is looking to pursue cases that will attract attention.
Bill Hagerty proposes crypto exchange safe harbor
In addition to regulatory agencies continuing to pursue cases in crypto, legislators are also increasingly becoming more interested in the space. In fact, Bill Hagerty, a member of the Senate Banking Committee, introduced the Digital Trading Clarity Act of 2022, which provides digital asset exchanges with a safe harbor form certain SEC enforcement actions. This safe harbor would last 3 years and would require the development team of the token to disclose every 6 months details of the network. These disclosures would include source code, transaction history, the economics of tokens, the plan to achieve network maturity, prior token sales, information regarding the team, trading platforms used, and certain material transactions.
On or before the period end, the development team would need to report to the SEC regarding the maturity of the network. The bill specifically states that network maturity is reached either through decentralization or through network functionality.
If network maturity is not reached, the development team must register the token as a security.
Personally, I think this bill offers the best compromise for this issue to date and, if passed, would enable the US to be both a leader in supporting this new asset class while also creating a path forward to achieve regulatory acceptance.
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