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Quinn Emanuel Digital Assets and Blockchain Newsletter - May 2021

Business Litigation Reports

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Just Minted: News Sweep April-May 2021:

  • SEC Commissioner Hester Peirce released a revised proposal for a cryptocurrency “safe harbor” that would exempt those who develop cryptocurrencies with the goal of creating decentralized or functional networks from the securities registration requirements. The safe harbor would protect developers during a three-year initial development period. At the end of that period, the SEC will determine whether the cryptocurrency must be registered as a security, based in part by analyzing a submission from the developers’ counsel regarding whether the network has achieved decentralization or functionality. During the three-year period, the developers would need to comply with some specified public disclosure requirements.

  • Bitcoin’s price dropped following statements by Chinese authorities calling for a “crack down on mining and trading of the cryptocurrency.” Among others, Chinese Vice Premier Liu He stated that tighter regulation of cryptocurrency, including bitcoin, was necessary to protect China’s financial system. Bitcoin’s price also displayed volatility following statements by thought leaders on the environmental impact of the currency

  • A class action lawsuit filed on May 12 in New York against Dapper Labs, Inc. appears to be the first legal challenge to the sale of nonfungible tokens (“NFTs”). The suit, Friel v. Dapper Labs, Inc. et al., alleges that Dapper Labs’ sale of NBA Top Shot Moments—NFTs of highlights from NBA basketball games—constitutes a sale of unregistered securities in violation of Section 12(a)(1) of the United States’ Securities Act.

  • President Joe Biden’s administration has proposed to alter reporting rules for tax purposes, including by requiring that transfers of at least $10,000 of cryptocurrency to be reported to the Internal Revenue Service.

  • After filing 11 class actions alleging that various cryptocurrencies were unregistered securities in 2020, Selendy & Gay PLLC and Roche Cyrulnik Freedman LLP have withdrawn several of their lawsuits. These firms did so after decisions by Southern District of New York Judges Hellerstein and Cote dismissed two of the suits on several grounds.

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