Key Receivers

• Whether or not a crypto product is safe is a matter of serious concern. In recent years, the Securities and Exchange Commission (SEC) has taken a broad position that various crypto assets are secured by federal security laws. Crypto currency creators, market participants and fans often argue that their crypto assets are not secured.

• In 2020, a federal judge in New York found that certain digital assets were collateral and sided with the SEC.

Recently, however, some judges have been asked to consider cryptocurrencies as collateral — the first in a federal court. Judges overturn SEC interpretation of federal insurance law no I do not Warranties.

• Significantly, the discrepancy between the court and the evaluations of various crypto asset judges gives cryptocurrency stakeholders new opportunities to push back on the SEC’s broader interpretation of federal security laws as applied to digital currencies.

Introduction

Crypto currency products have increased in use and popularity in recent years. Going to the forefront of American financial life, legal questions about everything from taxable income (as we reported in one Latest OnPoint It remains to be seen how cryptocurrencies will be defined by the expected improved tax enforcement. Recently, the question of whether federal security laws apply to certain crypto assets has reached a central stage.

By 2020, a federal judge in New York has ruled that certain encryption products, which are of great benefit to the cryptocurrency community, are protected by federal insurance laws.1 Earlier this month, a federal judge in Connecticut sent that question to judges.2 Implementing the well-established Supreme Court Hawaii On trial, the judges came to the opposite conclusion; The four cryptocurrency products in question are Hashlets, Hashpoints, Hashstakers and Paycoin no I do not Warranties.3 This finding by the judges has already added another dimension to the complex and controversial issue. He also encouraged debate on the legal status of digital currencies under federal law.

Although the verdict of the judges is widely accepted as a victory for many cryptocurrency stakeholders, from a legal point of view, perhaps the most interesting thing is that the case goes to the judges. That decision would pave the way for further legal challenges to the case — including the controversial dispute over encrypted cryptocurrencies.

Background

Of “Hawaii” Experiment The Supreme Court established the test in 1946 to determine whether a weapon was safe SEC v. WJ Howey Co. (“Hawaii”).4 The court stated that a guarantee or “investment contract” is a contract, transaction or plan in which a person invests his money in a joint venture and only expects profit from the efforts of the advertiser or a third party.5 Apply that definition to determine whether a device is safe, now well-dressed. Hawaii Test asks: “The program involves investing in a joint venture that only benefits from the efforts of others.6

Federal courts hold that crypto currencies are subject to security Hawaii

Recently, federal courts have been asked to determine whether certain cryptocurrency offerings are safe. Hawaii. The difference between cryptocurrencies makes this a very realistic question, but so far the courts have been willing to accept the SEC’s broad view that certain crypto assets are protected by federal security laws.

For example, in 2020, a federal district court in Manhattan ruled that Kik was a digital currency security in a messaging platform.7 The SEC has accused Kik of engaging in an unregistered securities sale in 2019 when it sold its new digital tokens for $ 100 million.8 Kik Kin insists it is not safe; Instead, he said, it was money intended for use in a Kick market.9

The court ruled. Hawaii By rejecting Kiki’s argument, Kiki’s claim that the Kiki marketplace is a joint venture and that Kin’s credentials are based on Kine’s “entrepreneurship and management efforts” means that Kiki’s credentials “only benefit from another effort.” .10 Recognizing that the decision was a matter of fact, the court emphasized that “every crypto-currency, with its release, requires a separate and fact-based analysis.”11

Earlier in 2020, another federal judge in Manhattan accepted the SEC’s request for an injunction banning the launch of a new cryptocurrency blockchain.12 Telegram, the popular messaging app, has raised $ 1.7 billion from investors to set up its own Telegram Open Network blockchain in 2018.13 In return, Telegram promised investors that they would receive the “Gram” digital currency launched by the Telegram blockchain.14 However, the SEC sued Telegram in 2019 for selling unregistered securities to investors.15 While Telegram acknowledged that investment contracts were guarantees, it argued that they did not guarantee Gram guarantees.16

The court ruled:[i]The cryptocurrency invested in cryptocurrency by members of a decentralized community connected to blockchain technology is not a joint venture itself, but is managed by this user community, which is not considered secure. Test spread [Howey]. ”17 However, the SEC has determined that Telegram’s current Gram distribution plan is in the hands of the Securities and Exchange Commission. Hawaii Test. . . . ”18 The court ruled that investors were expected to reap the benefits of the telegram’s blockchain development and implementation.19

A recent judge’s ruling confirmed that the cryptocurrencies are cryptocurrencies no I do not Warranties

A.D. In 2016, the plaintiffs filed a lawsuit against Cowor Fezgerald, a former vice chairman of the Court of Appeals for Connecticut.20 Earlier, the SEC said in a statement that the plaintiffs’ courage in securing Fresher’s trading partner was a guarantee.21

Hashlets were sold as part of a computer power plant used for Bitcoin mining.22 Hashlett investors have been promised share of the profits from Hashlet-powered Bitcoin mining.23 The plaintiffs realized that the business supported by Fraser was much less than the computing power allowed, so they lost their investment.24

He asserted that his confession had been obtained through torture and that his confession had been obtained through torture.25 His defense was based primarily on the testimony of two plaintiffs who claimed that individual mining decisions affected their daily profits.26 Fraser argues that this individual control means that the Hashels are not a joint venture and that the profits are not made by the efforts of others.27 So, Fraser argues, Hashlets are not satisfied. Hawaii Test28

The Fraser defense group urged the court to rule that the cryptocurrency products are not legally guaranteed.29 However, the court rejected the appeal and sent the case to the judges.30 Applying HawaiiJudges find Fraser not responsible for security breach because Hashlets and three other products in question no I do not Warranties.31

look forward to

This recent ruling by the jury is significant because the SEC has rejected its position on the Hashlets in terms of federal security laws. But asking the court to decide the case in this case may be more important than the outcome.

In court, judges decide legal questions, and judges decide truthful questions. In other words, the judge will tell the judges what the law is, and the judge will apply the facts of the case. In the absence of facts, the court may render the case in the hands of the judges and rule on the matter as a matter of law. By allowing the judges to decide whether the crypto products are secured in this case, the court ruled that the claim was not just a legal matter and that the factual claims did not rule out the case.

Whether or not other courts will proceed with the case may depend on the individual case. Certainly, cryptocurrency products and the conditions under which they are created, distributed and used make it very difficult to predict how courts and judges will evaluate them. But the willingness to allow Connecticut court judges to decide what to do – and not – a security will not go unnoticed by other courts in the near future. Indeed, the Connecticut Court’s approach to resolving the thorny issue of how digital assets should be treated under federal guarantees could provide a roadmap for other stakeholders involved in the dispute.