Crypto goes to Washington, Uniswap tells the SEC to take a lap, and sadly, the movie her will not become a reality anytime soon. All that and more coming up on block and order. Welcome to block and order, the show that explores the legal issues facing the world of web three and beyond. I'm Kyle Lawrence, and with me, as always, he's the man your parents warned you about when you wouldn't eat your vegetables. Moish Peltz. Moish, you look very different tonight. I don't even know who you are. Yeah, I better. Your broccoli kids do not adjust your television screens. Something has changed. Drop a comment if you can. Tell whoever wins the grand prize. That's right. Well, Moishe, lot to, a lot of goings goings on these days in the world of crypto and in the world in general. Nothing of historical significance happened today, so we'll blow right past that. Why don't you kick us off on. The order, keep on trucking as we're recording the evening of May 30. Look, this is not what we're talking about, but it's kind of what we're talking about. Blockchain is getting a little political, Kyle. So let's start with fit 21, which is the biggest ever us policy win as the US Congress, the House representatives, not the full Congress, but half of it, voted to approve the financial innovation and technology for the 21st Century act, or, or fit 21 bill, which seeks to establish a regulatory regime with the CFTC as the leading regulator, marking what I think is the industry's most significant legislative accomplishment. And really the first time that there's been a major crypto market structure bill that has been really gotten the vote, but especially cleared the chamber of Commerce. So, Kyle, what do you think? Is this bill or some version of it going to get passed? Certainly tough to predict, but it certainly has headwinds that it didn't have before. I mean, if you asked me this question two, three weeks ago, I would have said absolutely not. The White House had made its position very clear that it was going to veto these things. It didn't really seem to have a lot of backing in Congress. And then all of a sudden, a few things kind of happened in tandem. One, the staff accounting bulletin 21 was overturned. That's the rule that required banks to carry a corresponding asset to any digital asset that acted as a custodian for meaning if you had $100 of bitcoin on your balance sheet, you had to have $100 of another asset corresponding that. So that dissuaded banks from being involved in the space. That was one that had been in effect for two years. And then the other thing was that the Ethereum ETF's got approved almost one day to the next. So a lot of stuff going on. And this, what's important about the blockchain integrity act that you were talking about a minute ago is that this had bipartisan support, which I don't think anybody would have expected. Now, again, without sticking our faces in the political hornets nest, when you have Republicans and Democrats holding hands and singing Kumbaya and passing these things in the House. And Chuck Schumer, the Senate majority leader, has also been on board with this. I mean, there's a lot of progress that we have not seen. You know, I'm not sure where we go from here, but. But if you could try to predict whether this would pass the House. I mean, mosh, what do you think about it? Look, as much as I want to say blockchain shouldn't be political, crypto shouldn't be political. I think it has become that. And I think it's a shame that it's become political because crypto, it shouldn't be political. Right. This is about bringing entrepreneurship and innovation and jobs to America. This is about exporting the US dollar via stable coins to the rest of the world. This is about making New York City and the US the leader in financial innovation and technology. These are all bipartisan, resoundingly bipartisan issues. It's about equity in getting people across the financial spectrum, across all classes, and getting him out of, you know, things like Elizabeth Warren, I read her course book, I learned from her course book about how, you know, come the great recession, all these big banks were, were needling down the little person, grinding them into dust. And we need to fight up and stand up for the little people. That's what crypto does. This should be a bipartisan issue. And it's a shame that, that somehow we lost that thread. It's a shame that, that there's so many people that were standing in the way of responsible innovation. And I think it's unfortunate that it took the political wind shifting for us to reclaim that ground a little bit. But look, I think that's the reality. I think for whatever reason, in my humble opinion, there are many reasons this became a political football over the past few weeks. But the reality is it did. And the industry let the wind hit its sails. It'll be really interesting to see what happens, given that it is. I don't know if you know, it is an election year newsflash everybody. It'll be curious to see which side, if they even try to sort of wrangle control over the narrative about what these bills entail and what goes on. Because certainly these bills, putting aside the bipartisan support that they have, these bills do have a lot of critics. Just for one, the act does seem to put a lot of wants to establish a regulatory regime with the CFTC as the leading regulator of these assets. And critics of this bill say the CFTC is not equipped to handle this. They have, what, 700 employees? I mean, it's not enough. Well, yeah, I think that's right. And I think there was really valid criticism about the merits of the bill and the merits of allowing the CFTC to take the lead here. Gabriel Shapiro, who's a pretty popular Twitter commentator in the legal world. Come on. Block and order came out pretty strongly against fit 21. I think what you just said about it being a political year, an election year, is a pretty good reason why this will not get passed in the Senate, because the signaling has already happened. People have registered their votes in the House. I think it's kind of done enough until nothing's going to happen until, you know, probably 2025. We take progress, however incremental it may be, and we can't let perfect be the enemy of the good. Right, so a win is a win. The ETF's are on the way. We have some, you know, headwind on the fit 21, and SAB 121 is going to, you know, be jettisoned. So all positive elements all tied to politicking, all tied to, you know, voters making themselves feel hurt on these. Nothing can possibly go wrong from here. Well, next up on the order, Moish, not as politically charged, but Dolce and Cabana has been in the news. Dolce and Cabana USA is being sued for delaying the delivery of its NFT project called DGF family nfts, which they told customers would grant them access to various digital rewards, physical products, exclusive events, you know, so on and so forth. A plaintiff by the name of Luke Brown, who lost $5,800 on his NFT, filed suit in the SDNY for the late delivery of the products that purportedly caused the loss of value of his assets and so on and so forth. He allegedly complained that the NFT came with digital outfits to wear in the metaverse that showed up 20 days behind. And he complained that it was too late and it gave him access to the metaverse, which had relatively few users. Moish, you're a Litigator, what do you think of the merits of this guy's claim. Putting aside the, you know, whether what he's saying is true or not, do you think this case holds any water whatsoever? Oh, that's a tough one because it's, it's really facts specific. And I don't know enough about what the contract looked like that he signed, if there was one, when he took delivery of his nfts. I don't know enough about what he expected and what was sold and what was advertised and those are all, you know, I'm, if it gets that far, those are going to be issues in this case. You know, whether there was contract, an online contract formed terms of service, you know, things like that and what was he sold. So it's, it's, it's really difficult to predict, but from the brand perspective, this is always one of those risks, right? You, you release an NFT set, the customer, you know, gets their NFT, right? You've done a lot of what you were saying you're going to do, but then you have to deliver things like metaverse assets and, you know, physical products and there's delays and things take longer than they should and they don't work. Right. This is all too technology, it's beta. You're working with contractors perhaps that may not be doing what they said they're going to do or may not be doing it as quickly or may not be as good as you thought they were when you hired them. So unless you're executing this all in house and you know exactly what you're doing and you're delivering, delivering everything like on time with value, like making every person happy, like this is what could happen, right? So you only hope that a large brand like Dolce and Gabbana had good legal counsel set this thing up, right, and mitigated the risks as much as they could. But the reality is no matter what you do, it's always possible for someone to file something like this. And so, you know, I think the facts that he alleged here were probably the case in like 70% of. Well, that's the thing I was going to ask you. I mean, has this ever happened to you? Surely every NFT you bought has wholly delivered on all of its promises, including value and so on and so forth. Certainly for mine, they are all just, you know, swimming in increased value. So I think this can curiously open the door for a lot of these suits. Yeah, well, I don't know if it's gonna open the door. I think, I think a lot of these suits have been filed already. I think this is one in a now series of quite a few of these. But it's. It's really, I think, a lot like, some of these should be actionable. Some of these are even criminal. Right? We've seen the DOJ get involved in rug pulls. I don't think this is a rug pull. I think they just, like, be got to the metaverse 20 days late, and it wasn't really as good as we hoped it would be. You know, it's kind of the allegation, which sucks. And, you know, the guy lost $6,000. That's kind of what I feel like Dolce and Gabbana. And I'm making an assumption here, but their. Their lawyers would have had the good sense to put in the terms of use that, hey, this is risky. You may lose value. You know, all these things are out of our control. All that kind of stuff. You know, it's not. It's not a rug pull. It's not one of these, like, invest in us, and you're gonna make a bazillion dollars. I don't know. Just. This seems a little. This seems right. just washed away. Right? I mean, we're gonna get to it later, though, that forming an online contract on the blockchain isn't always so easy, even. Yeah, spoiler alert. Sorry, that's for a later topic. All right, moving on to our next topic, everyone's favorite topic. My mom's favorite topic, Kyle's favorite topic. MEV, or maximum extractable value. So federal prosecutors arrested two brothers who studied at MIT on charges that they stole $25 million of cryptocurrency in about 12 seconds. It's pretty quick on a time value like this. 12 seconds. Yeah. So they alleged that they exploited a vulnerability in MEV boost, which is used to optimize Ethereum validator block building, and that they tampered with those transactions. So, Kyle, is this what the DOJ should be doing, investigating fraudulent MEV blocks and front running by alleged bad actors? Well, if what the DOJ is saying is true, then they absolutely should be saying that. And I realize that circular logic and self deal, you know, self fulfilling sort of argument, but, you know, it's clear, at least from what they're asserting, that these two brothers, Anton Pereira Bueno and his brother, James Pereira Bueno. The Bueno brothers, it seems that the way they targeted these validators, finding the specific ones they use, lore transactions, and they were trying to find the ones who would really optimize the MEV boost for the highest level transactions, because that's how they get paid. They found the weak links in the chain and they exploited it, according to the DOJ. To me, you compare this to the mango situation from a couple of weeks ago with Avi Eisenberg that we talked about, where I felt that he just exploited a loophole and didn't quite do anything as wrong as the DOJ was saying. But these two guys, again, if what they're saying is true, you know, it looked like they were purposefully doing it. And all of the things that they did around these transactions, moving, you know, moving the, the money right out of their account, googling, wire fraud and money laundering and extradition laws. I mean, look, we don't give legal advice here on block and order, but if you are going to commit a crime, do not Google where to how to dissolve a body. Does the state have the death penalty? Just don't do that. Okay? That's the end of my spiel for that. But I mean, you seem to be of the other opinion and that these guys just kind of exploited a loophole. I don't know, it just seems like these guys were. Knew what they were doing. Look, I agree that the alleged after the fact behavior, including like, setting up shell companies and moving the money through, you know, multiple routes and the online searches, like, those don't look good. Let's, let's like, let's agree to agree and set those aside. I think there's a very slippery slope about analyzing the way people are building blocks and the way they're structuring transactions and saying, this is a transaction that we think was a tamper transaction, was a lure transaction, and labeling these things and saying, well, there's really this criminal motive versus someone saying there's mispriced assets. I see an arbitrage. I'm executing a transaction within a block, 12 seconds, and, you know, and flipping that. Right. So you're right, though. I think if you go back to Avi Eisenberg's case and you say, well, that was a different kind of exploit, that's criminal. To me it feels very, very slippery slope, that it's hard to dive into these transactions. And now we're analyzing a year later what happened in like a twelve second block and deciding whether or not it just, it feels a little absurd. Was 12 seconds the Luke Perry movie about, like, bucking Bronco racing? I'm not making that up. That was like a real thing, right? You lost me. Well, I like, no idea. I don't. I know Luke Barry, but that we're. Going to pull that up in the edit, we're going to show a flash from the movie. That's a real thing. Okay, now I have some, as do all our viewers. Well, moving right along, Coinbase, as everybody knows, has been in the news and has been under fire from the SEC for quite some time. Supreme Court recently unanimously ruled against Coinbase, not in a case directly related to its business, but in a case that stemmed from a dogecoin sweepstakes competition in 2021 involving a dispute over conflicting clauses in two separate contracts. Now, leaving them with a mixed record with respect to these. That one contract said that any disputes had to go through arbitration and the arbitrator would decide whether the case was going to be arbitrary. And the other contract said that any dispute would have to go to courts in California. So, you know, just word to the wise out there, make sure you do your homework and actually read these things. So Coinbase users filed a class action suit in the United States district Court in the Northern District of California, alleging that the sweepstakes violated California laws, and Coinbase moved to compel arbitration based on this one provision. And the court held, and subsequently the 9th Circuit affirmed, that the official rules forum selection clause controlled the dispute and the case was not subject to arbitration. Moish, again, you're a litigator, you're smart. What do you think about all this? Like, I previewed it before, this sounds like a bit of a fuck up, right? There were two contracts. One contract said arbitration. That was the Coinbase user agreement, which everyone should be familiar with if they use Coinbase. And there was another contract that said district courts prevail. And one of the arbitration agreements going to say, no class actions, you can't really sue us, you have to go to arbitration, which is a, you know, for an individual person can be a bit punitive, perhaps. It depends on the circumstances. But then if you want to file class action, you have to in district court, and you can't do that in arbitration. And this sweepstakes agreement said that was what you could do, or it didn't prevent that. So they sued under that agreement. And I think I, you know, why am I discussing this case? This is about Coinbase, but it's really not about coin. It's not really a crypto issue, is it? I think it is because it shows how important these contract formation issues are to basically every blockchain business. If and if this could happen to Coinbase, which has an army of really amazing lawyers working on this stuff, and they spend a lot of time pushing cases into arbitration and making sure, they stay there, then it can happen to you. I think there's a lot of takeaways here about you get your first contract, right, but then how do you keep everything consistent down the road? How do you run your organization in an efficient way and make sure that all of your contracts, from top to bottom and all the different ways all of your users can interact with your service are structured in a way which are consistent and which is going to ultimately minimize risk for your organization. It's a really tough problem, and you have to go to the Supreme Court here to solve it and find out that you can have to get a. Litigated class action, which, but just as a PSA to everybody listening and watching us out there, there. When you go onto a website, whether it's coinbase or anything, and you click the, I agree to the terms and conditions. That's a binding agreement, and that's what these things are talking about, and it's not insignificant. And we've seen a lot of litigation, especially over the past couple years, with all of these different kind of platforms and projects emerging, that people just errantly click, I'm guilt moist. We're lawyers. I do the same thing. I don't read that all the time. And everybody should watch the South Park episode where Kyle agreed to the Apple terms of service and unknowingly agreed to be in the middle of a human centipede. We should pull that graphic up. I mean, that's. But, but that's. We joke, but, but that is very real. Absolutely. What happened? So, so everybody needs to be aware. PSA. Again, we don't give legal advice, but legal advice. Read those things even though you're not going to, and we're not going to either. But also, like, it's, it's, it's only boilerplate until, until it matters. And then all of a sudden you need it and you don't have contracts. Are your insurance policy. Nobody reads them until something goes wrong. And when they go wrong, the teeth come out. So be careful out there, everybody. All right, Kyle, moving on to our next topic. Uniswap has responded to the wells notice they received from the SEC. So if you remember, last month, Uniswap publicized that they had received a wells notice from the SEC and that they were going to challenge it. And they were going to challenge it publicly, which is, you know, what they were. Why they had gone so public about. Right. And this past week, we received their public response, that wells notice where they argued that the SEC should effectively drop their case, that they didn't have the resources to fight basically against Uniswap, which is kind of funny, and that their legal theories are weak and wrong. So, Kyle, what do you think? Is the SEC going to take Uniswap's response under advisement and drop their case? Maya Culpa. We're sorry, Uniswap. We're dropping the case. You're totally right. What a sound legal basis you have for your response. No, they're probably not going to do that. But I said in our last episode that I loved that Uniswap was doing this, that they were going to take it to the streets and get their hands dirty and roll up their sleeves. And I like that they're being so public in their response. People don't have the financial wherewithal or the stomach to go up against a regulatory body as powerful as the SEC, and certainly one is influential and especially one with the track record the SEC has in the past couple of years. But Uniswap's response, I think, is very sound, and they're using the SEC's own guidance against them, and I think that's the key. And obviously, the SEC is not just going to back down because that would basically kneecap any actions that they try to take going forward. But Uniswap makes some very salient points. And just to go over it a little bit, the securities act says what the categories of securities are, stocks, bonds, and of course, investment contracts, which are governed by the Howie test. I'm not going to recite right now. I'm going to assume that everybody knows what it is. But if you remember in the ripple case, it was held that the tokens themselves are not in and of themselves investment contracts. Therefore they failed the Howey test. Well, that's what the SEC is saying Uniswap did here, that the tokens by themselves are investment contracts, and we know that's false. And what Uniswap is saying, that if the transactions in digital tokens are automatically treated as investment contracts, regardless of how, when, or why they're sold, then basically anything that anybody buys is automatically a security. I remember three years ago when we first got together at the firm, which, can you believe that tomorrow is my three year anniversary at the firm? Putting that aside, congratulations. You asked me, based on this analysis, if I go buy a bottle of pappy van Winkle from the store, expecting that it's going to appreciate in value, that makes it a security. And Uniswap is saying that is ridiculous. Baseball cards are not securities. And we know that for a fact that they're not. The sale of luxury limited edition goods where people spend heavily on marketing control who purchases which items. These are Uniswap swerves. Those things are not securities. So I'm of the view that uniswap's response is very sound, it's very reasoned. And I'm really curious to see how the SEC, I mean, I know they're going to respond, but I'm really curious to see what reasoning they're going to have going forward in response to this very public flogging. I think that they're undergoing. Yeah, I mean, well, well said. And I agree that Wells notice response was incredibly well drafted and presents some really great arguments and I think also relies on a lot of these more recent decisions over, you know, from the XRP decision on, on forward in the past year. Now we have a bit of body of law to say, well, here's how the judge are actually analyzing these. And, you know, in the past twelve months, effectively, and here's why you're wrong. And I think unfortunately, we're going to see that the SEC is probably not going to take the under advisement, probably going to file the case. And we were right. Also right. We hadn't seen the wells notice in our last episode itself. I still think the Wells notice itself has not been published. But we were correct in presuming that the protocol itself as being framed as a broker and the uni token being framed as a security or the two bases that the SEC was coming after. And it seems like from the response, that's correct. And those are the two issues that Uniswap is now defending against and might have to continue defending against in a litigation setting. So we'll see how the suck at SEC. All right, so for our next segment, we are going to try something new. Let's do it. All right, this is our lightning round. So Kyle, the first one I think has your name written all over. Well, chat GPT was the voice sounded a little bit like Scarlett Johansson and she didn't sue them, but she questioned it. And apparently chat GPT is now no longer going to be using Scarlett Johansson's voice, although Sam Altman did tweet the word her following the company's event. And if everybody saw that movie, it's pretty great movie. But in any event, so Moish. Is a pretty great movie. I think it deserves look, name and likeness law does not require that you use someone's literal voice. If you use an imitation, make a reference to, and you get some commercial advantage from that. There there is state level privacy laws that protect against that. And I think there's a Bette Midler case going back probably 50 years in very like circumstances. So it should be interesting to see if this one actually sounded a little like her. Well, I think they said, well, who would be a good voice for for right off top of your head, who would be a great voice? Just oh for chat? GPT oh God, probably like Michelle Obama. I was going to say Bobcat Goldthwaite, but your answer was legitimate. Like Tom Waits, Bob Dylan. I know you got to go like. The well, next up, key opinion leaders. KOLl rounds are popular way for founders to market their projects without going out of pocket. As we talked about on block and order, key influencers who get paid exorbitant sums to market crypto assets and different protocols and platforms have been sued left and right. So now the new thing is, well, we're not going to pay you, but instead we're going to let you buy our assets at a favorable valuation so you can kind of cash out in the early kind of a little bit of a legal end around. I don't know. I think it's kind of an interesting way. Be curious to see if these people still get sued. All right, next lightning round. The SEC has rejected Coinbase's call for new regulations. So if you're a member, Coinbase has been basically asking nicely and maybe even begging a little bit to say, please just give us a little regulation that we can deal with. And the SEC has said no, it's unreasonable to call the existing regulation unworkable and so forth. So is there any regulatory pathway here to the SEC, like delivering new regulation while this fit 21 congressional kind of bill? Maybe when that legislation gets passed, you know, I mean, God willing, sometime in the next year or two. But the SEC is response is pretty telling. It just says the fact that the commission has brought crypto asset security related enforcement actions does not require the commission to grant rulemaking. Petition to the contrary, in authorizing these enforcement actions, the commission necessarily determined that the agency could assert claims under existing law. There you have it, folks. Nothing's nothing's going to change. Kyle without a this is a political football. Here we go again. Money laundering trial against Binance head Tigrin Gambarian was postponed until June 20. Apparently he has malaria, is seriously ill and needs medical attention. Moish, what do you think about what's going on with this guy? This whole case is a complete travesty. I can't believe Tigran, who was a federal government employee at the IR's for over ten years, he was one of the government's top blockchain investigators. This guy's effectively a hero for our nation and investigating some of the earliest blockchain crime. And now he's basically held in prison pending trial, getting malaria over the actions of finance that really all they're doing is providing a way for Nigerian citizens to get their money out of a failing currency. This whole thing is crazy. And the fact that nobody's talking about this guy being held hostage in Nigeria is insane. Speaker one, the, the us response has been pretty limp. I'm not going to lie. There should be a little bit more of an uproar. You're absolutely right. Yeah. So last topic is to get on the bill. Craig Stephen Wright is not Satoshi. Not to be confused with Stephen Wright, the deadpan comedian, but Craig Steven Wright. You know, Craig Wright, Stevens seems kind of thrown into it, you know, I don't know. You know, the lady doth protest too much. Me thinks. I mean, this guy is. Has sort of spent a small fortune trying to prove that he is Satoshi between lawsuits and filing, you know, injunctions against people who were claiming that he wasn't and turns out he's not. So guess you lose all your money, then. Turns out he's not. And if he was, he wouldn't need to spend a small fortune to prove. It would just be right. A fool and his money are soon parted, I suppose. There you have it. Thank you for tuning in to this edition of block and order. Don't forget to like and subscribe to our channel. There's a topic you would like us to cover. Please drop a comment down below. We do take those very seriously. Please note the show is meant for information and entertainment purposes only. This is not legal advice. Please hire your own representative if you're going to take the plunge. Also, remember, some of the assets that we discuss in the show may be owned by most myself or some of the other makers of the show. Our discussion of these assets is in no way, shape or form meant to promote these assets in any way. So please take anything we say with a grain of salt. Special thanks to producer Abby, our OG producer. Without her, the show would not be possible. So on behalf of Moish Peltz, I'm Kyle Lawrence. Thanks for tuning in, everybody. Take care, everyone. Thank you.