Kyle Lawrence [00:00:00]:
Season two is here, and is this the best episode of Block and Order we've ever recorded? Spoiler alert. Yes. Welcome to Block and Order, the show that explores the legal issues facing the world of Web3 and beyond. I'm Kyle Lawrence, and with me, as always, I'd appoint him Commissioner of the SEC if given my. If given the opportunity, Mr. Moish Peltz.

Moish Peltz [00:00:25]:
And I would gracefully turn you down. Hey, Kyle, how you doing?

Kyle Lawrence [00:00:27]:
Nice to see you. Nice to see you, my friend. Well, season two of Block and Order is here, and what a surprise. What a treat we have for all our viewers and listeners. SEC Commissioner Hester Peirce stopped by.

Moish Peltz [00:00:39]:
It's unbelievable. One that we've made it a full year. I'm really proud of you and Abby and Chris and everyone else that has helped us put the episode together for the last year. And wow. To have Commissioner Peirce on our own humble show is a real, real honor. And I'm really, you know, really excited.

Kyle Lawrence [00:01:01]:
It is a pretty amazing thing. And she was, one, very gracious with her time and two, very candid in her responses, you know, refreshingly so. I don't know why I can't speak anymore. You know, you don't get that a lot of times with government employees, and I mean, she's not a politician directly, but you don't get that kind of frankness in responses. Very great stuff.

Moish Peltz [00:01:24]:
Yeah, she was extremely candid and I think made a pretty compelling argument that someone should really try and go in and register. You know, I think, I think we rightfully push back a little bit that, well, who's that going to be and what's the incentive for them to do that versus probably moving offshore. But I think given the changing tides politically, which I think no matter what happens, as we discussed in the episode, no matter what happens in the upcoming election, we think things might start a thaw a little bit. But, like, is someone going to go into the SEC, get a no action letter that's going to provide some guidance in this industry? And I think we'll have to wait and see.

Kyle Lawrence [00:02:05]:
Yeah. But even her responses to what happens if the SEC doesn't grant that no action letter is something that, I mean, I've always flippantly just said, don't do that, you're crazy. But she really cast a different, different light on it. And I have to be honest, you know, it definitely made a compelling case. So I hope that as the year turns and the new administration takes over, that we have a little bit more of a friendly environment and she is at the forefront of that. So.

Moish Peltz [00:02:28]:
Yep, absolutely. We also talked about some of the other regulatory regimes and whether we can pick and choose. And I think she also said, well, this is kind of, we've talked about this. Right. Like, it's kind of good that the U.S. is like, yeah, let's hang back a bit and see what's working and not to work. I think that's right.

Kyle Lawrence [00:02:46]:
I think that's right. I think, you know, the chickens will come home to roost at some point. We have to act. But I think that is a very prudent approach as opposed to just copying what somebody else does. Because an entire industry is saying, wen regulation, wen regulation, that's not a, does not a good statute make, as we know.

Moish Peltz [00:03:03]:
Yeah, unfortunately. You know, look, I think we're in the situation we're in. If we, if we were able to pass legislation politically in our country, maybe we would have. But we are where we are.

Kyle Lawrence [00:03:13]:
Made it this far.

Moish Peltz [00:03:15]:
Yeah, we made it this far. And, you know, let's, let's see what, at this point, we might as well see what works and what doesn't. Right?

Kyle Lawrence [00:03:20]:
Exactly. Without further ado, let's kick it over to our discussion with Commissioner Hester Peirce. Well, season two of Block and Order is officially kicking off. And what a guest we have today, folks. SEC Commissioner Hester Peirce is giving us some time to appear on our show, and we are thrilled to have her on board.

Hester Peirce [00:03:37]:
Well, I'm so delighted to be on Block and Order. I appreciate the chance to be here. I do want to start with my disclaimer, which is that my views are my own views as a commissioner, not necessarily those of the SEC or my fellow commissioners.

Kyle Lawrence [00:03:49]:
Absolutely. And again, thank you so much. It's really nice to see you. We have not met in person, but I'm really looking forward to this conversation. Moish and I are kind of giddy. I'm not going to lie.

Hester Peirce [00:03:58]:
Well, I'm excited about it as well.

Kyle Lawrence [00:04:00]:
As somebody who we follow what's going on with the SEC and crypto and digital assets generally, but just as a sort of day to day matter. As a securities lawyer, what is it like working at the sec? What is your day to day like? I'm really curious to see what it's like when you walk through the door in the morning.

Hester Peirce [00:04:18]:
No, one day is like the next. There's a lot of, as you all know as lawyers, there's a lot of reading and a lot of, we're doing a lot of rulemaking these days, so there are thousands of pages that go along with each of each of those rulemakings, whether it's the rule or the comment letters. And so you spend a lot of time on things like that. And also, enforcement actions are the same. There's a lot of paper that you're reading, but you're also interacting with a lot of people both inside and outside the commission. I talk to the staff all the time about rulemaking issues, about enforcement issues, and then also talk to a lot of people on the outside who have an interest in what we're doing. So I find it to be a pretty nice mix. And I get to talk to a lot of really interesting people.

Kyle Lawrence [00:05:05]:
That's good. Well, speaking of really interesting people, I mean, we'll jump right in. What is your relationship like with Commissioner Gensler? I know you aren't necessarily aligned on policy, but we've seen historically, Justice Scalia and Justice Ginsburg, who could not have been more opposed, but they were best friends and theater friends and those kinds of things. Just what is your relationship like with your fellow commissioners?

Hester Peirce [00:05:25]:
We all get along very well, the five of us do. I mean, we're all very different in our in our approaches to securities law issues, but we get along well. I don't know that any of us go to the opera together the way Scalia and Ginsburg did, but we all get along. I mean, again, I think it really is important to look at these issues from a policy perspective. You can have disagreements on policy, and we all care about the capital markets, we all care about investor protection. And so we can come together around those issues, those big issues, even if we disagree on how to put that into operational practice. And as you note, I mean, there are very, very large divides between how we approach these things. I think we've done a lot of things very wrong in the past several years, and I hope that we'll be able to turn it around.

Kyle Lawrence [00:06:21]:
Yeah, no, that's a great point. And it leads into one of the things that Moish and I were wondering while we one just were preparing for this interview, but also just in in our following of what goes on at the SEC. We've seen in various decisions and dissents that you have published. You've joined with Commissioner Uyeda several times. How do you work together to specifically craft a dissent or an opinion? And what is the process for doing that, the two of you, especially in light of the fact that there is not a lot of precedent for some of the issues and decisions that you're setting up?

Hester Peirce [00:06:54]:
Well, Commissioner Uyeda and I have the advantage of having known each other for a very long time, we worked together at the Commission many, many years ago. And so I know his strengths, which are many. And so I'm able to draw on his deep knowledge of SEC precedent in a whole range of areas. And so then we can bring that to bear. Obviously, I worked here a long time ago as a staffer, so I have a lot of experience as well. And we can bring those things to bear on the issues that we're looking at. As you say, a lot of these are new issues, but when you go back and look, sometimes there are analogs in the past. So on the Flyfish case, for example, we went back and looked, and there's some examples of where people have come in with country club memberships and said to the SEC, do we need to.

Hester Peirce [00:07:48]:
Are we allowed to do this without registering these things? And I mean, I think that's outrageous, too. Does every community pool that offers memberships need to come into the SEC and get permission to have memberships? It just strikes me as ridiculous. So while I do think that we're taking particularly aggressive positions in the crypto space, there are some pretty bad examples from the past as well where we've taken not. I mean, we're. I think we've been overly aggressive with our jurisdiction.

Kyle Lawrence [00:08:23]:
Is there one in particular? One instance, if you could go back in time and change one specific case. I know that's a pointed question because. And there's been a bunch of them that you've dissented on. Is there one? You said, gosh, we really got that one wrong. If I could just go back in time like Superman, what. What could I do? Is there one that sticks in your craw?

Hester Peirce [00:08:41]:
Well, you mean in the crypto world specifically, or before that? Yeah, I mean, either. I. I think the LBRY case is one example of a case that it really was a heartbreaking thing to see because people had really put a lot of effort into building something. And then we came in and we said, you didn't comply with the registration rules, and it wasn't anti fraud, it was all about registration violations. And so we put that company through quite a grueling litigation, and ultimately we did win in court. But I think that that kind of thing can have a really chilling effect on young entrepreneurs who are trying to build things in the U.S.. The other thing that I would go back and change, if I could change in time, was I would have approached this issue earlier with greater legal precision, and I think I would have encouraged my colleagues to do the same, because I think we've lost a lot of time by not really taking a very, you know, sober legal approach to these issues. And maybe we would have avoided some of these questions around is it the token that's the security or is the token the object of the investment contract? Right. A lot of people have wasted a lot of time trying to figure out where we are on particular tokens.

Hester Peirce [00:10:03]:
We could have provided guidance earlier. That would have been very helpful.

Kyle Lawrence [00:10:06]:
Yeah, that's a great point. I know LBRY is one that Moish and I have covered on the show. We've written articles about it and it's something that we follow very closely, obviously. And if I remember correctly, the commission originally wanted a penalty of $44 million, and they ultimately settled on something like 111,000, which was all they had left in their account. And your quote from the case, I have it up here. It's "are investors in the market really better off now after the commission's litigation contributed to the minds of a company that had built a functioning blockchain with real world application running on top of it." And for me, when I sit here and I understand the SEC is a very difficult job, they're operating without the proper guardrails of congressional action. So I understand that it can be difficult.

Kyle Lawrence [00:10:52]:
But where does that line get drawn between investor protection and hurting businesses? I think that's one of the key things we want to talk about today. I'd love to get your thoughts on where that line can possibly be drawn.

Hester Peirce [00:11:05]:
Well, it's hurting businesses and it's also hurting, you know, sometimes we come in and we say, well, the solution for a registration violation is that you, like take the Mango DAO example. I mean, there are a lot of strands to that, a lot of bad actors in that situation. But you look at that and the solution is to say, okay, destroy all of the DAO's tokens. Is that a good result or is that not a good result? And then in some of these cases, there's a. There's sort of the idea that you're going to try to get things to stop trading on secondary markets. Does that help token holders or does that hurt token holders? So I think this is a really difficult area for us as a commission to think about because there are new, you know, there, there are new features here and, and thinking about how do we, how do we actually further the goal of protecting investors? It, it can be difficult to do that. So I think we're grappling with that now.

Moish Peltz [00:12:14]:
Yeah, I mean, I've. About the LBRY case. I mean, one of the comments you had there was also the proportionality to investor harm. And, and I think that the facts there of them appearing to come in and try and find a way to get this through, and then the result was the enforcement action. And then I think pairing that with Impact Theory and Stoner Cats. You know me as the intellectual property attorney. There's a lot of companies that have really creative ideas of how they want to, you know, revolutionize. I'm thinking, you know, like the Web3 industry, right? Like, we want to have an IP offering, we want to have community, we want to have other things like this.

Moish Peltz [00:12:53]:
Where even getting to your descent in both Stoner Cats and Impact Theory about the IP in Star Wars and things like that is something that has not traditionally been a subject of enforcement. And so it kind of leaves, I think, a lot of entrepreneurs with really no good path forward. And they're like, well, we have a cool idea of how a blockchain could allow people to have some consumer IP relation to our company, but we see no pathway to an offering that's consistent with any substantive guidance in the United States. And so I guess my question is one, do you think that's changing at all, given the star map of both enforcement actions and descents that has started to emerge? And then also now some judicial decisions and like, what. What is it? What is an entrepreneur to do today, October 2024? Like, okay, this is, this is the field of play. Like, should I even consider an offering in the United States or not even an offer? I'm just. I'm just selling an NFT that. That is an IP asset.

Moish Peltz [00:14:02]:
So I'm not asking you to give them guidance, but, like, how. How did, how does an entrepreneur even start to think about the framework here?

Hester Peirce [00:14:09]:
It's a very important question, I think, because I think this is one of the reasons that we're not seeing the types of experimentation with NFTs that we would otherwise see in the U.S. and there are a lot of people who have ideas, whether it's a team that's trying to build a fan base or an artist that's trying to figure out a way that she can continue to receive royalties on future sales of her work. These are really, I think, potentially revolutionary things for the way that people connect with their fans, the way people get compensated for the creative work they do. And it is really hard right now to know where to go. Yeah, you're right. There have been some settlements, there have been some dissents, but I think it's still a very difficult landscape. You know, you Saw what happened. You mentioned Stoner Cats. The Flyfish Club, I think is another example where they had this interesting idea of sort of creating a relationship with the members of their dining club.

Hester Peirce [00:15:16]:
And the result of the case was that really the NFT isn't going to be that point of connection anymore. And so I think if people are looking at this kind of thing for guidance, the guidance they're probably taking away is it's going to be really hard to experiment in the U.S. with this. But here a couple, I mean, one practical thing I would say is if you have an idea about how to use an NFT for something that you really think has nothing, you know, it's not a securities offering in the view, then come in with again, a very concrete plan of what you're going to do, conditions around what you're planning to do. You can ask for no action relief. And so I know that that door, a lot of people have gone through that door and have been very discouraged. But if you have a use that you think you can really distinguish from any securities nature, then I do think it's worth trying to push the envelope a little bit. And I mean, that's not even really pushing the envelope, but I think it's worth coming in and saying to the SEC, hey, here's why we don't think that this is within your jurisdiction. I mentioned those country club statement staff positions in the past.

Hester Peirce [00:16:31]:
I mean, you could do the same kind of thing and say, look, I'm just trying to, I'm just an artist trying to sell her art and can you give me a no action letter on this?

Moish Peltz [00:16:43]:
Well, it's interesting and it's a fascinating answer because I know, you know, we've done some of this research and it's, there's the country club no action letters. And then I think there's also the ones related to, I think the Green Bay Packers and the way that, you know, like there's like fan kind of governance of the, you know, the sports team, for example, which, and I think a lot of those are very analogous to DAOs and the way people are thinking about both selling, you know, NFTs and also like community governance of an organization. And I think really more governance versus like ownership and an income stream. Although I think a lot of people are trying to push that boundary and say, well, that they're all kind of related together and we have the technology to do this. And so for me it gets into this idea of, you know, there's this criticism of crypto that there's no use case. Like, why are people spending all this time and energy? And I think all this shows that there probably is some use case, and it's very analogous to things that people have been doing historically. It's just putting a new technology layer over it. But I think there's something of chicken and an egg.

Moish Peltz [00:17:52]:
There's no use case, but we can't actually do the use case we want to do in the U.S. because we feel like there's regulatory uncertainty. But then we can't do that. So there's no proof of the use case. So do you see there being a business there?

Hester Peirce [00:18:06]:
Yeah, you're exactly right on that. This has been one of my great frustrations when regulatory colleagues say, well, I don't see any use to stable to crypto. First, I say, well, they're stablecoins. A lot of people are using that as use case. That's pretty prevalent now. You know, maybe not as prevalent in the U.S. but in other places. But second point is, yeah, how are you going to have use cases if when you. I mean, we talked about LBRY, someone has come up with a use case and we shut it down.

Hester Peirce [00:18:35]:
So, you know, then the question is, what can we do to build an environment in which people could actually try things? And I think one of the things it will be crypto technology will be used for is the point you were talking about building communities, enabling people to interact with other people in a way that allows them to trust other people. Right. This is one of the revolutionary parts of the technology. And I'm not advocating or I'm not predicting what the future will hold, but I think there is a possibility that it's going to be used for building these communities. And that stuff may all be outside of the realm of the SEC, but if you want to have some sort of a profit component in it or something like that, it might well be within our space. So then I think the question for us becomes, can we work with people? I mean, we've had this mantra of come in and register, but now that we've had some time to think about it, can we work with people to think about a way that we can achieve the objective of making sure that the people buying these tokens or coins are aware of what they're buying, they understand who's behind it, they understand the plans for moving forward. Can we build that kind of disclosure framework that is really well suited for this type of. You know, again, if it is a fundraising right that's suited for this type of fundraising, can we somehow marry it with crowdfunding or can we come up with some other exemption that makes sense? That is a much better way for us to spend our time than trying to do this enforcement action by enforcement action.

Hester Peirce [00:20:16]:
Because the problem with the enforcement action approach is that you end up with no clear path for people to experiment.

Kyle Lawrence [00:20:23]:
Right.

Hester Peirce [00:20:24]:
And you end up with this really discouraging environment. So I really am encouraged that as people are thinking about this on the outside, when the attitude changes here in the SEC, we'll be able to put our heads together and say, okay, we can actually come up with a framework that makes sense.

Kyle Lawrence [00:20:43]:
That's a great answer. Thank you. In terms of crafting what that looks like based on what other jurisdictions have done already. You have, you know, the Mika in the EU markets and crypto assets regulation. We've seen the VASP act in the Virgin Islands. We've had clients setting up entities there. Is there a sort of a la carte approach that at least, you know, you've seen? You know, this really, this is something that could really make sense here in the U.S. maybe not that, but certain bits and pieces.

Kyle Lawrence [00:21:09]:
Is there anything specific in any of the other legislation that you've seen that could maybe work here?

Hester Peirce [00:21:15]:
Yeah, I mean, we do have to kind of pick and choose, I think, from, from what others are doing. We have an unusual financial regulatory framework in the U.S. our securities laws are a little bit different than some other places. But the first thing that we can do is we can take the open mind that some other regulators have and we could take that on for ourselves. So, you know, I'm thinking something like the United Kingdom, while they haven't said, yeah, come into every crypto project, you know, there is a barrier to entry there. But they have certainly said we want to work with projects. So I think. And then you see, Switzerland has been very open minded.

Hester Peirce [00:21:57]:
Bermuda has tried to build a framework. And then you mentioned MiCA, of course, and that I commend Europe for being able to pull together a comprehensive regulatory structure. So I think there are elements of all those things that we can take. You know, I'm sad that we've waited as long as we have to try to create something here in the U.S. the benefit that we have is that we can see whether some of these things work or don't work. I think it's too early to tell with respect to MiCA how that's going to play out and it'll play out differently in different jurisdictions within Europe. But I think we can watch and learn from what others are doing and so I think that sort of my question, my answer to your question is let's wait and see which one is working best and where we end. I mean, you know, there are a lot of, there's a lot of activity in the UAE as well. And so just watching how these different places approach it, I think we'll be able to draw from them when we're ready to do our own thing.

Kyle Lawrence [00:22:58]:
Yeah, always beneficial to see the sort of downstream effects for how these things play. I mean, you see this all the time, you know, without getting political. You watch the news and it's like, well, this legislation passed yesterday and the world didn't end today, therefore the legislation is good. It's like, I don't, I don't think that's how that works. So that's definitely a prudent approach that I welcome. But to harken back into something you were talking about before about welcoming people to come in and maybe discuss a no action letter or present their case as to why the thing that they're selling is not going to be an investment contract falling under the purview of the securities laws. Is there any risk to these people? Because, I mean, I deal with people who raise capital all the time, and their sort of orders to me are, I want to be protected. I don't want to have a problem down the road, whether it's with an investor, whether it's with a regulatory body.

Kyle Lawrence [00:23:44]:
And that's, you know, we're certainly sensitive to that. But is there ever a risk? And this may be a pedantic question, but if I'm an issuer and I come in and say, hey, can I have a no action letter? And the SEC says no. Am I now going to be under the eye of the regulatory body just by doing that?

Hester Peirce [00:24:00]:
Well, I mean, I think that's certainly true. You've raised your hand and you're getting attention. But I think when you get a no from the SEC, usually it's a no because your conditions aren't what we want, so you can come back in with revised conditions. Typically, it is important to remember you've got to think about all the prongs of the securities definition, not just the Howey test and the investment contracts. But yeah, I mean, I think it's not a, you know, one. You come in one time, they say no, and then you have to leave. You can come back. That said, one of the things that the SEC has not been great about is really understanding the value of time and the fact that a lot of these projects are you know, they want to launch because they need to have a revenue stream coming in.

Hester Peirce [00:24:50]:
Their money is drying. The money that they got funded with is drying up. And they need to be able to commercialize something. And that's, you know, that's something I really think we need to address, not only in crypto, but more broadly of just really speeding up the process so that people can come in, get an answer, whether that answer is yes or no. And if it's no, then tell me where the problems are so I can go back, figure out a solution to those, come back in. And so we have work to do on our side. But yeah, you can come in. I mean, I think you really have to have everything buttoned down before you come in.

Hester Peirce [00:25:29]:
You're not going to come in and get legal advice. And I do. In this environment, I have trouble telling people, you know, the come in and register mantra is so tired now. And so I don't want to deny that there are real problems at the SEC. We have not been using our brilliant securities lawyer, regulatory minds to tackle this problem. We've been shunting everything to enforcement. And that's just, that's just a sad reality. But I think that has to change because I think there has to be a recognition that one, even if you think all of this stuff is garbage and should not be in existence, an enforcement strategy is not going to get you there because you cannot put enough lawyers on this to go after everything.

Hester Peirce [00:26:16]:
So you have to develop a regulatory strategy at some point and it's just not a good use of our resources to go about it the way we've done so far.

Moish Peltz [00:26:26]:
Yeah, that's really interesting. And I think, you know, from the standpoint of a company that's entrepreneurial, trying to move fast, do something innovative where there may not be clear guidance, you're right, they're running low on capital and they're stretching thin already. And I think that from their standpoint, the decision is, well, I can go in and try and register and have a serious conversation, but I don't know what the outcome of that's going to look like versus I can go offshore. And that's, that's risky and there's lots of downsides that go along with that. But I kind of know, at least in the first, you know, few months, like what that, what that's going to look like. Right. I have a pathway to starting up.

Hester Peirce [00:27:13]:
I mean, that's one of the reasons that I suggested that we have some like a micro innovation, sandbox type thing that could marry up with. So say you decide we're going to go do our project in France and here's how we're going to do it in France, but we want to also try it in the U.S. if we had this kind of thing where you could come in and say, okay, this is what we're doing in France. We're going to do the same thing here. We're letting you know about it, we'll provide you data to tell you how it's working. Then we could have a cross border experiment going on. It would be limited in size and I think that might be a way to sort of force our hand to move a little faster, but also allow people who are trying things overseas to at least dip their toes in here.

Moish Peltz [00:28:00]:
In the U.S. I think that that would be great. And I think the idea, I mean, we were, we were talking, Kyle, on a previous episode about, you know, basically the people are being screened off of a lot of these offerings, you know, and people, you know, whatever happens, people are using VPNs to get around them. I think instead of saying, you know, people using a VPN to get around, there would be some sandbox, okay, this offering is happening in an offshore jurisdiction, but pursuant to some exemption, they're going to allow us people to register with these conditions. I think would be a fan. I don't know anyone's even thought of doing that, but that would be great. I mean, my bigger concern is less on the actual issuers, which I think is its own problem. And I think there's things wrapping through Congress and who knows what will happen. But I think eventually you're right.

Moish Peltz [00:28:50]:
Well, we'll learn from the other jurisdictions and make our own version of it and we'll get there. It might just take another year or two, hopefully less, but I don't think so. But my more immediate concern is the downstream effects of all the other startups in this ecosystem that are seeing their peers go and do an offering offshore and then they say, hey, I want to, I want to be, I want to have commercial relationship with your company, I want to provide you a service and you're going to pay me at least partially in your token. And that company, their vendor, which has moved offshore, says, no, I can't pay you in my token because you're a U.S. company and I'm not and I don't want to have a nexus with you. And that's where I think there's not very much discussion about the downstream effects of saying, all right, you can go in and register or you can go offshore. That's kind of your decision. Great. Like you, you take that the way you want.

Moish Peltz [00:29:50]:
But then I think it, what it does is it forces the rest of the community that maybe isn't even offering a token, but just wants to interact with this ecosystem. And this could be small startups, this could be big, you know, mega companies, but that want to do something responsibly. But now we're being told, oh no, you also have to go offshore or you just can't even work with us because you're a U.S. company. And so I'm curious if there's a.

Hester Peirce [00:30:14]:
Such an interesting point. Yeah, I mean, I think it has ripple effects, right? You can't just say, okay, fine, we'll push these companies out. But it will mean that you lose, you lose other companies, you lose the talent that goes with those companies. I mean, the big companies aren't going to leave the U.S. but the fact that they're not going to experiment, you know, if they're willing to get paid in tokens, for example, that, and, and we say no, or the, the company says no, you can't, because we can't have those flowing into the U.S. then it means that, that we're losing, the big companies are losing the ability to experiment with this stuff as well. So, yeah, I think it's a really interesting point and, and one that we should be thinking about.

Kyle Lawrence [00:31:00]:
It's certainly something that we hear a lot about. I mean, a lot of our clients are in that boat and it's just, it can be a harrowing experience for some.

Hester Peirce [00:31:07]:
I mean, that breaks my heart to hear. Right. Harrowing experience of navigating the regulatory waters of the U.S. it should not be this way. Of course we're going to have rules. We need to have rules. But you never want to put people in the position where they are scared to start a business or do business here because they don't know how the rules are going to play out.

Kyle Lawrence [00:31:30]:
That. That's exactly right. You know, one of the conversations I have, and it's, it's something that kind of dovetails into what you were talking about before about, you know, we will find the way in which you can do this in a compliant manner. And, you know, the reality is when I try to explain to people, okay, this could be an avenue for you to, to go in and register, you know, for example, I don't know, Regulation G, for example, requires if you have non GAAP financials, you have to be something as close as possible to GAAP. But the accounting standards haven't been updated to account for crypto assets. So it's, it's this kind of Moish used chicken and the egg that, that's kind of where we are with a lot of these things. And it can be really frustrating for a lot of people so you can see the.

Hester Peirce [00:32:08]:
Well I mean and the reality is that, that a lot of these crypto startups, when we tell them, come in and register as if you're a public company. I mean, it's just, it's, it's, you would never tell a small startup in a garage in San Francisco that they have to come register and do an IPO. That's ridiculous.

Kyle Lawrence [00:32:27]:
Not once we're, we're running. As we kind of whittle down our time, there's one question I would like to ask without kicking political hornets nests, as I'm sure you know, is a big election coming up next week and everything that we're seeing is that regardless of who wins, the new administration is going to be a little more sympathetic to crypto, embracing of crypto. I mean, depending on who you ask. What are your thoughts heading into 2025? As you know, we've had a great conversation about what the SEC needs to do, what we as a country, as practitioners need to do. But what do you think is going to happen in 2025 once a new administration comes in that is purportedly more friendly to this space?

Hester Peirce [00:33:06]:
What I worry is going to happen is you get a more open mind toward, you know, developing good rules. And then they say, okay, so what should those rules be? And everyone just as no one knows what to do. So my advice to people is come be ready with good ideas and come to us with those good ideas. And so whether it is we talked about what other jurisdictions are doing now that people have had started to have experience, tell us which pieces of other jurisdictions approaches are working and not tell us what are the big pain points here in the U.S. for you? Tell us if you do feel that you're on a harrowing journey. Right. Tell us what is it that you're scared of here in the U.S. Tell us what project you were going to build but you shelved because you feared that it would run into trouble. Have that stuff ready to go so that whether it is, you know, one administration or the other, you can give them ideas about how to move forward. And you know, there also is a lot of interest on Capitol Hill, and so there'll be people looking for good ideas there as well.

Hester Peirce [00:34:22]:
Having those ideas ready is so important because otherwise we're just going to lose more time.

Kyle Lawrence [00:34:27]:
Yeah, that's great stuff. Do you have any final words of wisdom for the nascent industry, for the issuers out there, for the people who are just getting their feet wet?

Hester Peirce [00:34:38]:
I think I always urge people to keep coming to talk to me. That's a little bit self serving on my part, but just to tell me what I should be thinking about. It's helpful. commissionerpeirce@sec.gov and then I just want to thank people who are trying to do legitimate work. I'm not thanking anyone who's trying to use crypto to rip people off because there's too much of that. So, you know, call out. Call out the bad actors you see. Tell us about those bad actors as well.

Hester Peirce [00:35:07]:
But for the people who are trying to legitimately build things, I just appreciate the fact that you're willing to hang on and wait as we fumble around here in Washington. I do think we can get to a better place and I'm grateful that there are people who are still willing to. To keep working.

Moish Peltz [00:35:27]:
Well, we want to thank you for being so open and transparent and having your email and your Twitter account and appearing at digital assets conferences regularly and other events in the industry. So we want to thank you for your openness and everything you've done to.

Hester Peirce [00:35:45]:
No, the honor has been mine in that regard. I mean, I can't tell you how grateful I am that people are willing to have a regulator in their midst and, you know, be open with me. It has been a real. One of the big honors of being a commissioner has been being able to meet people in this community.

Kyle Lawrence [00:36:04]:
That sounds great. Commissioner Hester Peirce, thank you so much for joining us on Block and Order. We'd love to have you back whenever you'll. You'll have us. So we thank you.

Hester Peirce [00:36:11]:
Well, thank you for having me. This has been such a wonderful conversation.

Kyle Lawrence [00:36:14]:
Thank you. Appreciate it.

Moish Peltz [00:36:15]:
Thank you.

Kyle Lawrence [00:36:18]:
Well, that was a fantastic discussion that we had with Commissioner Peirce. And just once again, I don't mean to harp on it, but just so appreciative of her time and her wisdom and just her insight into the space. It was fascinating stuff. I hope we get her back again someday soon.

Moish Peltz [00:36:31]:
Yep, you said it. Well, we're gonna have to run through the whole commission once we. Once we get there, you know, by season five of Block and Order. One commissioner per season, Right?

Kyle Lawrence [00:36:41]:
Well, I like that. That's a good idea. And now you're an SEC commissioner, so now that'll include you. Well, that wraps it up for this edition of Block and Order. Season 2 first episode went off brilliantly, I think. Don't forget to like and subscribe and follow us on all our socials. Links are down below in the show notes. We are available on all podcast platforms, including YouTube.

Kyle Lawrence [00:37:03]:
Don't forget that Block and Order does not dispense legal advice or financial advice. Please consult your own advisor if you're going to take the plunge down the rabbit hole. Special thanks to producer Abby for all her work on the show. Without her, the show would not be possible. We didn't talk about any, you know, specific assets necessarily on the show, but to the extent that we discuss them, that does not represent an endorsement of said assets by Moish and or I. We own a perhaps irresponsible amount, these assets, but, you know, such. Such is life. That wraps it up for this episode.

Kyle Lawrence [00:37:31]:
So on behalf of Moish Peltz, I'm Kyle Lawrence. Take care, everybody.

Moish Peltz [00:37:34]:
Take care.