Will the SEC Kill Crypto?! with Jake Chervinsky & Amanda Tuminelli

Transcript

welcome to bankless where we explore the frontier of Internet money and we protect that Frontier from Rogue unelected Regulators whose sole Focus appears to be stopping anyone from exploring and settling on that crypto Frontier Bank close Nation on Monday the SEC announced their lawsuit against CZ and binance on Tuesday yesterday while coinbase's Chief legal officer was busy testifying in front of the house agricultural committee about a new and Progressive Market structure bill for digital assets the SEC announced their lawsuit against coinbase what are they accusing coinbase of exactly allowing Securities to trade on his platform an activity that is integral and fundamental to both coinbase and the entire crypto industry and is also an activity that the SEC

themselves approved of when they allowed coinbase to become a public company back in 2021. so what gives what gives is the question and today on the show we're bringing on two legal Minds to help answer that question legal Minds from outside of coinbase we had Paul Grewal on yesterday to give us the coinbase perspective but today on the show we have Jake Stravinsky and Amanda tumanelli from the blockchain association and the defy education fund to give their independent objective perspectives on the matters at hand but before we get into that uh into the conversation with Jake and Amanda first got to talk about asymmetrics protocol if you are familiar with pool together asymmetrics is like pool together except for each staking is regular old 4.55

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into the show but just a little bit more before we get into the conversation with Jake and trubinsky Bank list we've produced three other podcast episodes about this subject matter at hand so if you listen to Jake and Amanda here on the show today but you have further questions you can make sure to not miss these episodes bankless has got you covered on Tuesday Ryan and I did an hour-long episode where we comprehensively covered both the binance and coinbase suits and compared and contrasted the differences between each one we also discussed the issue of the crypto assets as Securities and talked about why Gensler picked which assets to be Securities I wish I knew the answer that same day we also did a 30-minute episode with Paul Grewal the coinbase chief legal officer getting his statements and perspectives about the details on the case and this morning we

did an episode with Ryan selkis that went out to be as a call to arms for the crypto industry claiming that and now is the time to make a full court press in Washington not in 2024 not next bull market the fight is here the fight is now and the fight is Big so if this current news from the SEC has you worried and confused don't worry not only do we have all the content to get you up to speed but the tldr tldr of all of it is that don't worry the crypto Industries got this so that's my rant and it's over let's go and get right into the show with Jake and Amanda but first a moment to talk about these fantastic sponsors that make the show possible especially Kraken a preferred exchange for crypto in 2023 if you do not have an account with Kraken consider

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policymakers around the world and advocates for policies welcoming of Defense decentralized Financial infrastructure Jake and Amanda welcome to bankless awesome to be here Amanda so is it you're new to the show Jake we've had uh on a handful of times uh so as the the welcome to bankless for the first time uh can you just give us your background and what you're up to and and uh just where your perspective comes from sure absolutely so um I joined DF a couple of months ago from private practice so while I was in private practice at Cobra and Kim I was focused on White Collar criminal defense and securities and more and more in the past few years I was focused on representing clients in the blockchain space and the D5 space so I was able to

come from a place of seeing uh what happens internally with a client once a regulator does send a subpoena or start an action against somebody in this space which has really helped me as I've transitioned to Def and one thing that we want to do and I'm sure we'll talk more about this is use the court system in addition to the legislative branch to advocate for the rights of defy users and developers so I hope that my background will lend itself to doing that work in the future well I definitely appreciate having a second legal mind on here because my limited Layman questions can only go so far so having two of you here I think is going to be really really great uh Jake I want to start this first question with you

um like I said in the intro yesterday the SEC charged the two largest crypto exchanges with being unregistered Securities exchanges and then named a handful of very large popular crypto assets to be Securities so Jake the date today is June 7th 2023 we are 13 years into this crypto experiment can you explain just this moment for us it feels like a big deal but can you can you say why can you place Us in the Arc of history as the crypto industry has developed and is now going toe-to-toe with um the biggest regulator of financial markets that the world has yeah happy to do that and I think it's it's worth noting that I feel like I'm only on the show with very horrible things have happened so yeah that is sort of the situation that we find ourselves in now

um look I think where we are is at the end of a very long multi-year process that the SEC has been engaging in through its enforcement division to either regulate or it seems now like ban crypto in the United States and this is not an uncommon thing for the SEC we've talked about this I'm sure on our shows before that what they tend to do uh when they see some type of activity that they think is a violation of federal law is they start with the low-hanging fruit right they go after the the defendants who they feel are either under-resourced can't really defend themselves or who have so clearly violated the law that of course the SEC or the regulatory agency bringing the action is going to win the case and they do this in order to establish what they view as precedents

that they can then take and use in the next case against a slightly harder Target and then take that and use it against a slightly harder Target and we've seen that from the SEC ever since I want to say The Ether Delta enforcement action it was in like 2018 I want to say right so this is sort of a five-year process of the SEC going after these exchanges the venues where digital assets predominantly trade and after ether Delta they went after I want to say it was bixie and then they went after bittrex and now here we are the SEC taking a shot at the two by far largest crypto exchanges in the entire world finance and coinbase this really is I think the moment where the SEC has finally revealed in you know true color

the fact that they are not trying to bring this industry into compliance they are trying to push this industry out of the United States by saying to these exchanges come in and register but then totally refusing to provide any way for the exchangers to do that and then running to Federal Court to say for the first time ever in a complaint that what those exchanges are doing is at its core unlawful and cannot continue in the United States so like you said in your very good rant to start this out um I think we're you know we're in the fight now and we know where the SEC is coming from and we have our work cut out so the the image that I'm getting Drake is that uh the SEC started with ether Delta uh which I don't think very many people who are new to bankless or new to

crypto will remember but it was the first do you call it decentralized exchange prototype that we ever had and it was the smallest fish in the ocean uh things have gotten bigger and bigger and bigger ever since uh ether Delta had a centralization vector which is where the SEC got its first foothold and I think what you're saying is it's it's just gone from there so first the small fish then some medium fish and now where you're at the two biggest fish in the ocean coinbase and binance and it's been just a progressive escalation of trying to take down these exchanges one by one by one and what I think what you're saying is just like the the we are now seeing the sec's true colors in that they were never in trying to allow these

things to find a compliant path forward they were always trying to eliminate these players from the game is that is that a fair way to summarize this it's exactly right and I think it's it's worth noting that the reason that the SEC would go after exchanges specifically is because of the disintermediated and decentralizing nature of the crypto ecosystem right what they need to do if they want to ban this industry and this technology in the U.S is they need to find those Central points where if they can control those points they can make it as hard as possible for Americans to get access to the system and that right now is still through those custodial centralized exchanges like coinbase or like binance I think they'll have a much tougher

fight on their hands if they decide they want to go after the folks who are actually working in the decentralized environment within crypto but yeah I think that's exactly what they're up to and I think to both of your points um if you want more of an indication of the motivations here like without putting any gloss on it like let's just look at the facts of the timeline of the past week right we get a draft Market structure bill on Friday which would purport to actually prospectively regulate the things that the SEC says that it wants to be able to regulate and then on Monday we get the binance complaint and on Tuesday we get the coinbase complaint and 10 states I think it was 10 maybe maybe a few less send cease and desist orders to coinbase at the same time right those facts alone

without any gloss look like a coordinated attack on the industry yeah go for it Jake oh I was just gonna say I think the timing is remarkable and I know we all like to wear our tinfoil hats in crypto and be paranoid and uh hurl conspiracy theories around but I would not put it past the SEC that they saw the market structure Bill come out they do not like it the SEC I'm guessing is going to oppose that bill this you know you see Gary gunsler go on TV saying we don't need new legislation we already have all the authority that we need under federal law to regulate this industry and they may well have timed these complaints for the purpose of distracting from the market structure bill it's sort of a sad State of Affairs that we have to think that that's how

one of our Regulators is acting but I I wouldn't put it past this as easy to be acting that way yeah the the other thing about this is the coinbase and binance suit that dropped one after another like first binance then coinbase the next day and it really um it really takes kind of some wind out of coinbase sales because then coinbase is placed at right approximately to binance and binance does have some like things that coinbase would have never done right like funneling customers funds through private uh uh and entities controlled by CZ coinbase to the best visibility has been as buttoned up as possible and it's in there the SEC placed coinbase is suit right next to binance's suit and now Gary Gensler gets to go on Squawk Box and say this entire

industry is based on non-compliance when really it was just binance that was playing that game and so the the it seems to be that Gary Gensler and the SEC are playing dirty and I think the question that everyone is asking is why does he because he doesn't have to play dirty he could be a more amenable regulator he could be more accepting he could do his what we would feel as doing his job better and from from my perspective that we have the the crypto lawyer commentator met a law man and many others who think that the SEC is going to lose this case against coinbase I don't know if that's if you guys share that opinion but that seems to be the

conclusion that I mean my limited legal brain can can come to but also others but why what gives Gary Gensler the confidence to be so bold and to be in in from my perspective and others unconstitutional why does he have so much confidence perspective here yeah I um I think it comes down to as everything in life does knowing what game you're playing right what you want from the SEC and for its leadership is to be playing the game of coming up with good policy and good regulation that addresses risks and financial markets while also encouraging Innovation protecting investors facilitating Capital permission and entering their own early markets right that's what it's supposed to be doing I do not think that

is the game that chair gamzler is playing right I think the the game that he is playing is um rather to seize as much Authority for his agency as possible for the purpose frankly of bolstering his own credentials as an effective regulator the the rumor about him and you know of course the favorite game uh you know parlor gaming DC is psychoanalyzing Garrett Gensler from a distance I try not to do that too much but you know the the word on him is um he has significant political ambition for a long time the rumor was that he wanted to be the treasury secretary the way that you become the treasury secretary in perhaps his mind is you make headlines and you satisfy a core contingent of people who can help you to

achieve that role in this case that may be crypto Skeptics in Congress and potentially in the in the administration um in the White House who feel very strongly that there is no value to crypto and so for him to advance his career he would not follow the stated mission of the SEC but rather to use every lever that he can pull to attack the industry I guess the other piece I'll add and then I'm curious what Amanda thinks about this is I do think the SEC will lose the case against coinbase I don't think chair Gensler will lose that case because I think he will be long gone by the time there is a resolution to this case right so what he gets is all the benefits of the

headlines in the press and his day on squat box right sure against all else going on squat box we always get to hear him on CNBC when these things happen but then he does not have to suffer the consequences of the embarrassment of the commission losing the case once that happens three four five years down the road yeah um I mean I think a few things like just to add on to what Jake is saying I think you don't have to look any farther than what uh Gensler said yesterday right we don't need more digital currency we already have digital currency it's called the US dollar so I think to um purport to regulate uh an asset class that you don't think should exist uh would be really inconsistent right um but I think in terms of whether

coinbase will win or lose I think we're we're here to play the long game as an industry and I'm sure coinbase is here to play that as well right they are very well funded with excellent legal counsel and I'm sure they will mount a full-throated defense to these allegations and I think that as Jake said um chair gunsler may not be around to see the outcome of the case but coinbase is really going to give them a run for their money and they're going to be in a district that is actually pretty well versed in cryptocurrency the judges in the southern district will you know have had some experience with it and I think that they'll be able to explain why this complaint um

was not drafted with the best interest of the market uh or the efficiency of the market or the promotion of capital formation in mind so the the there's a common Trope that uh in the crypto space and and just really about politics in general that the short-term incentives of four-year election Cycles I don't know how long I think the the SEC chairs five years but either either way the re-election or the constant churning of seats of power gives people short-term time short-term time Horizons right Gary Gensler only needs to have short-term victories and he doesn't have to deal with the consequences of long-term losses uh and so I see that that playing out here um Jake you said uh uh the way we like to wear our tinfoil hats and here in the

crypto world I definitely do um I'm reminded like Gary there seems to be the Gary Gensler Elizabeth Warren axis that's part of like very connected to the Biden Administration and not too long ago Elizabeth Warren did her famous I'm building an anti-crypto army tweet uh which I mean is obviously super unpopular with the crypto world but I'll probably probably uh fair to say that like her base is like nice like it uh and and so that's that's the Elizabeth Warren side of things Gary Gensler and Elizabeth Warren have been like rumored to be shoulder to shoulder and this is all part of the Biden Administration and uh interestingly Elizabeth Warren a very anti-bank um politician has started to find the

alignment of the banks and so Mike and my tinfoil hat goes there's this whole like axis of power which is the Biden Administration Elizabeth Warren Gary Gensler the treasury Department and the banks and all of these incentives are amalgamating into this force that gives Gary the confidence uh that we see when he goes on Squawk Box and says hey we already have digital assets it's called the digital dollar Amanda I'll run that that conspiracy theory by you how does that land with you um historically I have not been a huge fan of conspiracy theories but I will play the game um I think that I um I don't know if I would have put it in exactly those terms I think that what's really disappointing

to me especially in the case of progressives like Elizabeth Warren is and Jake and I talk about this all the time I think there's actually a lot of progressive values in crypto that they should be aligning with right so the idea of democratizing Finance the idea of bringing access to finance to underserved communities in this country you know there's Representatives like Richie Torres who does recognize that who is a traditionally very Progressive politician I am disappointed that Elizabeth Warren and AOC and those who want to serve underrepresented populations who historically have not been treated well by Banks um are not jumping on board for crypto that like this is crypto was here to solve these problems and to provide more access to people so I think

um to the extent that there is that conspiracy uh in existence I am disappointed that that is the case um but I don't know if I I think it might be giving people a little too much credit to say that they're so coordinated with the banking system it feels a lot like they just don't understand the technology and they don't understand its uh capabilities 100 agree with that and I I I'll follow you maybe part way down this Rabbit Hole David but not all the way I think look yeah there's a group of people in different parts of the government who have this view either number one that they genuinely think crypto is a scam and should not exist in the United States or number two that it is politically advantageous for them to take that position whether they believe

it or not I think like really interesting question literature dancer believes any of what he is saying now the man taught a class at MIT about the value and interesting aspects of crypto and then goes on TV yesterday to say there's no value to it at all you know which which one is true I think interesting question but I I also think that we're going to see a change as we get toward the next election in that approach right for for Senator Warren it's one thing she's in Massachusetts she is going to win her re-election there is no question about that she can say whatever she wants about crypto it's never going to hurt her I think what you want to do though is look at other Democrats who are not following that view uh representative Torres who Amanda mentioned great example very Progressive

Democrat in the house on the financial services committee very active in crypto I wouldn't call him necessarily A Champion but he has a very intelligent well-informed take on the value of this technology and why we should support it rather than kill it I also think we have to look at Senator Sharon Brown who is the chair of the Senate Banking Committee an extraordinarily important position for our purposes he's up for re-election in Ohio very different from Massachusetts right you could call it a swing state you could say at this point it's actually leaning on the Republican side and I think for him he's gonna have to ask himself and get some advice from folks working with him as to whether this same message building an anti-cryptal army is going to be

palatable to the Ohio voters the way that Senator Warren may think it is to the Massachusetts voters and I think once that calculus starts coming into play we might see a shift in tone from some important Democrats who thus far have maybe seemed in that camp but actually so let's move forward in time here and let's let's assume that Gary gets what he wants and he gets to be treasury secretary and he threw crypto in the trash bin as a means to an end to get there uh does that mean that like now that he got what he wants he gets to like go easy on us because now we don't matter anymore or do you think he like double down he doubles down and be like Oh I'm going to continue to hammer on crypto because that's what got me into the seat of power and so I'm

going to just continue that activity like should should how can we think about like the temporal nature of Gary Gensler in the chair of the SEC if he ultimately does get what he wants and becomes secretary and then also does that depend on the administration because this is only a Biden Administration uh conversation correct play forward us uh Us in Time Jake okay so um I'm gonna do some real speculation here but but um happy to to give you my best guess at this I think first of all he will not be treasury secretary anytime soon that's not gonna happen so his best bet would have been if secretary Yellen the current treasury secretary had decided to step down after the midterm elections there were rumors

that she was going to she decided to stay she's actually been not bad at all for crypto um she doesn't like crypto but she's not trying to kill crypto in any way shape or form so the next time that that might happen would be in 2025 after assuming President Biden is is re-elected um chair Gensler could either you know take the treasury secretary position um or you know decide to stay at the SEC or maybe just step down and do something else I think you know if President Biden doesn't win re-election Gary Gensler is out for sure right no Republican is going to keep him around I also think it is just unlikely that he will get that position in a second widen term probably if and again speculating what he's doing is trying to make a name for himself so

that being next Democratic president whoever that is and whenever that is will consider him for the treasury secretary position consider that he was the cftc chair before he took some time out of government and then became the SEC chair he's not you know an old guy he's got plenty of time left in his career so that'll be my guess in terms of timing what would he do I have no idea what a treasury secretary counselor in 2029 thinks about crypto right I would say don't underestimate the willingness of folks like this to Pivot if it is to their advantage and maybe by that point it will be more advantageous for him to be Pro crypto than anti and I wouldn't you know say that anything he's said on squat box you know this decade would stop him from saying the opposite

next decade just like his MIT courses and what's going on today so that's my best guess at that Amanda does that resonate with you as well yes um I'm not sure I can add a lot to what she said I think that um he's better at prediction uh predicting the future than I am but um I will tell you that we have a very fun graphic um at def of the things that chair Gensler said years ago and things he has said recently and I think we're going to be adding to it um for years to come so I that is the only prediction that I feel confident making oh the fact the idea that the story arc of Gary Gensler is only at towards the beginning um definitely definitely scares me

there's a few other topics that uh I want to get to not coinbase and Gary now has a date with a federal judge so that uh is pretty cool and then there's also just legislation in Congress we had this Market structure bill go through the um the agricultural committee so I want to talk about these two subjects in the second half of the show but first before we get there alone went to talk about these fantastic sponsors that make the show possible learning about crypto is hard until now introducing metamask learn an open educational platform about crypto web 3 self-custody wallet management and all the other topics needed to onboard people into this crazy world of crypto metamask learn is an interactive platform with each lesson offering a simulation for the task at hand giving you actual practical experience for navigating web 3. the

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that it could it could take a while but what what might we get out of that what Clarity could we get out of uh what would ultimately become a court date between coinbase and the SEC Amanda what are you hopeful for um so I am hopeful for a fair analysis of the issues I think that you're right that it could take some time before we actually get into the substance of the issues right so the complaint just went in um coinbase either has 21 or 60 days depending on procedure most likely 60 days before they even have to respond right so we're talking about two months before we even get a response and most likely that's probably going to be a motion to dismiss which we'll just test the allegations of the complaint itself

right just like is there enough in there um on first glance to even sustain those claims um so at that point it's not about even what's like true or supported by evidence it's simply about how they alleged enough to get past a motion to dismiss then we enter some kind of Discovery phase which could be limited could take a long time and we won't actually get to the substance of the issues until we get all the way all the way to summary judgment which I'm sure your listeners are familiar with because Ripple is currently awaiting a summary judgment decision right so it's not until we get to summary judgment that we actually hear from Witnesses hear what the evidence might say and might show and actually get into the substance of the issues so I think it could be months to years before that happens but I am

hopeful that at the point that we are at a summary judgment decision um that the judge has had a full hearing of what this technology does what coinbase does has fairly considered all of the evidence and has rendered a decision based on all of those considerations so I think the crypto industry myself included is largely ready for that date just to happen just because we can have our finally have our opinions validated yes this is good technology no coinbase isn't doing anything wrong et cetera et cetera I think the the thing that might be new here that I'm hopeful for is that we actually get a window of transparency into the SEC because the SEC has to come to the table and be like here's our

thought process here is uh what the internal operations of the SEC is like I don't know what we could get and that's kind of my question to you is what what could we glean from the internals of the SEC that might provide us insight as to the motivations and aspirations of Gary Gensler is there anything that we might get out of this yeah so I don't want to be too much of a downer here but I don't know how much we're going to get on the internal machinations of the SEC there is a discovery period where coinbase can seek that kind of Discovery from the SEC and ask for documents I expect the SEC to fight and claim every privilege they can over their internal documents and their internal conversations but I would also also just flag that anybody can send a foia request to the SEC and ask

for that information under the Freedom of Information Act and that is something that def will be exploring in the future and I know ba has also sent some foyer requests and probably will do more so we don't even have to wait is my point um there could be uh ways to get at that information sooner but in this litigation I think that the discovery period could give us some internal Communications could give us some memos some non-privileged documents about what the SEC has considered um in the way and the way they've talked about Securities right for all these years that we've all been talking about the way they talk about securities I don't know if it was a foia request that I saw but I saw a request go out to the uh the SEC Gary genser's office

asking for information about the financials around the Gary Gensler influencer videos uh I don't know if you guys saw this tweet but it's like hey how much of those costs I think was the request and the SEC responders like we don't have any of those records uh so like no no transparency there but I think that goes as a you know a plus one to the idea that Gary Gensler is trying to become a very public figure using these influencer videos trying to get like the Limelight and that it makes me a little bit um bearish on the idea that when we open up the window into the SEC that there will actually be something to look at there because if it's just Gary Gensler and his motivations he gets to kind of keep that internally inside of his own brain right like if he wants to be

influencer Gary he doesn't need like to inform the rest of the SEC about that strategy can you check my check my reasoning on that Amanda sure so yeah I mean thinking about what like key documents could look like right that would actually get to what you're talking about and give us some insight I think there could be internal Communications or memos that are prepared before Jergens or any of the SEC Commissioners go to a meeting right or go to a public appearance so there's the possibility that we will get some of that but I I take your point that a lot of this uh might not actually be communicated to anybody except uh chair against Lauren his closest non-work colleagues um and I I think that ultimately if we

can get some insight into how the SEC has either been inconsistent about their takes on Securities or that they have predetermined before even uh before rulemaking right because that's where we are right now they've predetermined what is the security and what is not a security without a full and fair analysis of that that would be really helpful yeah I I guess I would just add it well first of all Amanda is one of the absolute best litigators I know so I would never doubt her uh her assessment of the likelihood of us getting something out of Discovery I I will validate for you though David how important this issue is right we have this problem with the SEC which is they make all these decisions behind closed doors rather than through a public

process what they should be doing is engaging in a public process right either through rulemaking or otherwise to find out what do people actually think about this right we are the taxpayers we pay their salaries they should be listening to us and they also like I was saying before should be making decisions that are aligned with their mission rather than decisions that are aligned with advancing the political careers of specific unelected leaders of that agency and the problem is we don't know what's really going on because the SEC is not forthcoming about what happens behind closed doors and I think that's why my hope is coinbase will fight aggressively even if they're like creative success of getting that information is pretty low but I think

Ripple set an extraordinary precedent for the industry by fighting so hard to look behind the curtain as to you know what the SEC was thinking about xrp what the you know the Genesis of the very important Watershed speech that uh that bill himman gave a long time ago um you know sort of what sort of led to that and what the thinking was I would hope that coinbase will try to push the envelope on this as well and try to figure out what is the SEC really thinking in bringing these enforcement actions and what Ripple has done will help in the coinbase case because they're in the same district right while it's not precedent that this coinbase judge would have to follow it is supposed to inform what the judge is considering so they coinbase will be

able to use any win that Ripple has experienced to say you should do something similar here is there any world where this actually turns into the crypto industry being able to bite back at the SEC like right now like coinbase is on the defensive binance is on the defensive but many people in the crypto world have said like hey what the SEC is doing is unconstitutional it's against its uh its its stated purpose uh I don't know if this if the world were to Legal is relevant here but just like is there any world where Gary Gensler gets in trouble and we can take him down is that is that possible is that within the realm of possibility at all Jake I think you should uh jump in here

but I will just say up front that I'm glad you asked that because we I think that and I know Jake shares this view the industry should be looking to do something proactively instead of reactively and that is something that like b-i-n-d-e-f is currently thinking very hard about and something we are planning to work on so there is the option to bring a pre-inforcement challenge against the SEC to accuse them of like an administrative procedures act violation right that's available and um that is something that we are going to be working on in terms of taking uh chair Gensler down personally I'll let Jake comment more on more on that um but I think that as an industry especially if we could work together to do it I think that there are proactive

measures we can and should be taking well Amanda gives it uh to me to give the bad news which is I don't think there's anything we can do to check answer himself right if you're out for Revenge I don't think uh I don't think you're gonna get satisfied by anything we can do in court um but the point that she raises an extremely important one so let me let me give you some thoughts about this um as an industry and as a community we have a problem right now right the problem is we have an enforcement agency that wants to destroy our industry and we are sitting ducks we wait to find out which cases the SEC wants to bring and then they bring them and then we try to defend ourselves in a reactive stance and the the issue here is the SEC picks

cases that are favorable to it right fact patterns that are preferential for the SEC they bring those suits against defendants that they feel good about going after and they bring those cases in courts where they think they will get judges who are susceptible to their arguments or where the case law in the circuit court that those district courts are bound by is more favorable to them than in other courts right so we are sitting ducks what is the solution to this problem it's for us to go on offense right for us to basically run the exact same type of Playbook which is to pick issues we feel good about and then bring those issues to courts where we feel good about the judges and the applicable law and to bring those cases

on fact patterns where we feel confident that we can tell the best possible story about that case right this is not a new idea this is called impact litigation it's been going on for decades and decades it just hasn't been going on in the crypto industry and I think to the extent that we are going to fight an existential battle over this technology in federal courts we cannot win if we are only on defense so a very important thing that with the blockchain association and the Deep by education fund are working on is figuring out where can we get offensive where can we bring our own cases to start clarifying that in fact the sec's view of the law is wrong it turns out that an airdrop is not an investment of money if you get

something for free then that is not a security right the the idea that any asset with a shared market price equals a common Enterprise is a Preposterous idea and we just need to get those issues in front of the right courts and start getting rulings that go our way and that will change the dynamic here in a huge way and hopefully not too long from them and I think something that motivates both ba the blockchain association and the D5 education fund is we are trade Association so we are particularly well positioned to be able to do that we are you know fortunately not facing the existential threat that many people in the industry as a protocol or blockchain company are facing so we're able to take

those positions and make those arguments um and I think that's what makes us feel passionate that's what makes us feel like Advocates and what we were what we're you know really motivated to do right now so I I think I heard um your guys's answers be bucketed into two categories there's there's the hey we're going to go on the offensive about the rulemaking of the way that the SEC treats crypto our industry our platforms our companies and our assets and then there was the other answer is like can we get Gary Gensler in trouble uh and so it sounds like we have tons of optionality with going Toe to Toe with the SEC offensively in the trench warfare courts by courts court case by court case to make sure that our Industries are

treated appropriately according to the rule of law that sounds like there's like a green light we should totally be doing that and not only should we be doing that we are doing this with the blockchain association and then the D5 education fund and then I just want to go back to because like this is the part of the conversation that excites me the getting Gary Gensler in trouble part the Jake said you're bearish on this I just want to check the understanding of just like the the option the odds of we we can point towards Gary Gensler and he and say that this man is using the SEC C to promote himself as a political figure as an increase to to run up the the ladder of political offices into a bitter bigger and bigger position of power and he has uh just not been that

he has misused the chair of the leadership of the SEC and in that end that is not something that Jake you are particularly optimistic about correct okay because you asked so nicely let me give you the the more optimistic Hotel version of this or at least some ideas um I'll give you a few okay first of all um I think the best way for us if we want to uh you know make a point about chair counselor's conduct he's not in the courts it's in Congress right he answers to Congress and I don't know if he watched but he got dragged in front of the house Financial Services committee for like a six-hour hearing during which a lot of people berated him for how horrible he was doing and that is at least a little bit soothing for the soul right I think we can expect

more of that but I also think we can push further in Congress representative of Torres who we were talking about earlier sent a letter to the SEC basically accusing chair counselor of I can't remember exactly what the the nature of the letter was but explaining his doubts about how charging was doing I think to the extent that we can put not legal pressure but political pressure on him that is where we are most likely to be successful if he feels like you know what this approach to crypto is actually not winning me friends among Democrats in Congress that's where we can make a change and that's why I mentioned Senator brown right the Senate Banking Committee is the Senate committee that has jurisdiction over the SEC if Senator Brown was to start changing his tone

about crypto and about how Trivago is acting that is a way to really make a change so so put that in one bucket is is a congressional strategy in court I do think there are two things that are at least worth talking about although Amanda who's a real lawyer as opposed to me will tell me I'm crazy one of them is I believe chair Gensler should have to recuse himself from any vote related go and you should watch for a paper that I and my policy Council Marissa Koppel are planning to publish hopefully in the next few weeks that makes this legal argument that chair counselor has prejudged all digital assets as Securities and as such he is not able to neutrally and impartially decide how the SEC should approach enforcement

decisions and perhaps other decisions about this industry so stay tuned for that I think that's a novel interesting argument if nothing else the other is I think we can embarrass him by winning some of these cases right if he doesn't leave before coinbase wins some great Victory if grayscale wins its case over gbtc if we can bring some other type of case not related to the sec's interpretation of the Howie test but instead for example that the SEC has violated the administrative procedures act by making all these decisions behind closed doors instead of through a notice and comment rulemaking process that involves the public that's another way that we can put pressure reports so I think there are a lot of options I just usually you don't get it the individuals

you go after the agencies and I think ultimately that's that's probably what happens here yes I was hoping that you were going to mention the paper that I know that you're working on Jake because I think that that is really helpful and even though it may not be that like that is a formal affirmative defense in a court case to say he's prejudged what is a security and what isn't um I do think Optics matter and I do think judges do like listen to that stuff right I think that it is important to socialize a judge to what your adversary actually is motivated by and what they're actually doing behind the scenes I think it does matter um and there are some lawyers who stage much of their uh war in the Press right as opposed to in the courtroom so I think that all of that stuff matters but

I will say that I've always thought the best revenge is living well and I think if we are playing a long game and crypto uh flourishes and we win the day like ultimately like that's probably gonna feel the best and really piss off chair Gensler right so that's kind of where I'm coming from oh I I 100 aligned with that philosophy I think crypto as soon as we can get our feet uh under us and making meaningful prog progress with good strong Innovation that doesn't strike fear into the hearts of Founders and developers that would be great and I will say Amanda I do think that that might begin with a pantsing of Gary Gensler in a court but that is just my my opinion uh guys this has been a really great conversation there's one

last conversation piece that I want to talk about before before I let you guys go and that is the um the the bill that is in uh and going to be proposed in front of Congress the McHenry Thompson Hill Johnson they released a digital asset Market structure bill on June 2nd just quick Vibe check on that bill how does that make you feel inside Jake we'll start with you yeah Vibes Are Good Vibes are Vibes are strong we're feeling good about this so the so the market structure bill is a discussion draft it's in its very earliest phases but it's a very serious effort one of the um most serious we've seen and definitely the leading bill now to actually solve some of these problems that we've been talking about for the last 45 minutes or so the purpose of the market structure

bill is to say here is an actual path for a digital asset exchange to register with the SEC and address some of the very valid concerns that the SEC has about risk in crypto markets and here's how token creators and Distributors can also register their tokens and handle all the types of risks that come up with that without also throwing out all the benefits of decentralization and disintermediation this has always been the problem with the federal Securities laws it's not that we think the Securities laws shouldn't exist unless you're an anarchist which you know I say that with all due respect but I think most most of us think that regulation is appropriate to address issues like a token Creator having special access to

information that really should be disclosed to the holders of that token in order for them to understand the purpose of their investment or for an exchange that creates a secondary market for digital assets to have Market surveillance right to make sure that loss trading and manipulation aren't happening right to address illicit Finance risk and all other you know types of issues like that everyone supports that the problem is the federal Securities laws as they exist today are incompatible with crypto because they assume the presence of an intermediary in a very particular type of arrangement that just doesn't work for crypto and is totally unnecessary to destroy the benefit of this technology the market structure bill is an extremely serious attempt to create a path for compliance

that actually works for crypto it has the support of the chairs and ranking members of the digital asset subcommittees in both the house financial services and house agriculture committees the fact that they are talking together on this is extremely notable and they are looking to move this forward very quickly so I think it's probably not worth you know for the the audience of non-layers and non-policy folks probably not worth digging too deep into the details of the bill unless you want to right now because I think a lot of it will change as time goes on but I think this is a really exciting development and something that should give us hope that maybe we can get this legislation done ideally before the end of this Congress maybe in the next Congress but long before the SEC can destroy this industry by bringing enforcement action after

enforcement action yeah I will just quickly Echo what Jake said I think Vibes are good I think the industry has been asking for regulation and Clarity for a long time and I am really um happy to see a serious effort being made that we can all start a conversation around like Jake said this is going to change we're going to go through many drafts of it and but at the very least it is the reason for us to be doing what we keep what we've been doing which is educating lawmakers about digital assets and D5 for Def and having those conversations around an actual piece of proposed legislation and it may be a long time before it's resolved but that means we have a long Runway to be

having those conversations and continuing that conversation so I think that it's um I think it's it's just a great beginning even though there is kind of like this what feels like a crisis point this week I think like we've been saying we're playing a long game and this bill is one reason to have a wider perspective than just what's going on this week Jake Amanda this has been just a fantastic conversation I've I've learned quite a lot in this last hour or so and I will say well there does seem to be a shift of the crypto Market out of the United States towards towards the east towards Asia I feel like there's so much to be optimistic and excited about inside of the United States while it does seem dark and gloomy it also kind of feels like a bottom as in don't sell

the bottom of the United States don't paper hand the United States especially when things seem to be just turning around and we have a lot of things to look forward to so Jake Amanda thank you for helping me just walk through this conversation and giving me so much to be optimistic about about the the state of Regulatory Affairs inside the United States thank you if people if listeners uh feel moved about some particular part of this conversation maybe they want to help pants Gary Gensler maybe they want to help this bill get moved along uh how how might you guys suggest that they can take action and actually help move the needle in favor of the crypto industry Jake I'll throw that one to you first um yeah so um if you're a company working on crypto in the US join the blockchain association if you want to

support the extraordinary efforts of the DFI education fund and you have a few dollars to spare um please donate every dollar matters a huge amount um follow Amanda on Twitter she's the most important crypto lawyer that you're not following right now she's gonna be a huge part of winning this is because Jake doesn't need any more followers he's just saying that um and that too and yeah and stay tuned because you know the day is going to come where we say to everybody we need you to call your senators and your representatives to tell them to vote in favor of this Market structure bill and when that time comes everyone needs to be paying attention and needs to get active so stay tuned keep listening to bankless and uh and we'll make it happen Amanda same question to you uh if people feel moved where should where should

they go what should they do Jake just covered everything in that answer um I would just I don't have a lot to add I think that Jake's right he is off one of the best people to follow and to get up to date news from and the blockchain association is doing great work as is the defy education fund and we're hoping to work together to do some of that impact litigation we've already been talking about so if you want to know more please get in touch defyeducationfund.org we also have been asking for developers to reach out to us we want to know what um you're concerned about what your questions are we want to speak for developers in the space so please get in touch if you have um questions or want to talk through anything and we look forward to continuing the conversation with you

David thanks for having us on thanks for coming on Jake Amanda this has been great bankless nation you know the deal risks and disclaimers eth is risky crypto is risky D5 is risky while these are some of the smartest lawyers in crypto they are not your lawyers you can lose what you put in we are headed west this is the Frontiers not for everyone but we are glad you are with us on the bankless journey thanks a lot