It is another example I think of how the US is now going to be behind other countries where you know, US citizens aren't even able to access the same assets that people are in other places, and we don't even know why, Like we don't even know if there is a principal basis for that reason, you know, for that distinction.
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leveraging this and this product once again. Just launch so you can check it out folks and earn on your profit taking that you do from your crypto trading. So incredible stuff. If you'd like to learn more about uphold on this new great service, visit the link in the description. Welcome into the Thinking Crypto Podcast. I'm your host Tony Edward and with me today is Amanda Tuminelli, who's the chief legal officer at the DeFi Education Fund. Amanda, great to see you, great to have you back on.
Thank you so much for having me. It's great to be back.
So, Amanda, you testified the Congressional DeFi hearing that took place I believe was last week. Great job and it was amazing to see Congress holding a hearing about DeFi. I feel like we've come so far. What was the goal of that hearing and what were some takeaways for you?
Well, first, thank you for the kind words, and it was really great to see Congress hold a hearing about DeFi. It was the first one that was exclusively focused on DeFi, and the point was to engage with the reality of the technology, to learn about DeFi, to you know, have that symbolic moment of Congress actually engaging directly with the industry that they.
Are trying to learn about.
So we definitely were thrilled that they noticed that hearing and wanted us to speak at it.
And I was lucky to sit next to.
Some really talented and smart experts in the space.
Yeah, I saw some clips. There seems to be some naysayers, you know, some members of Congress, who are you know, trying to paint DeFi your crypto in a negative light. But overall there was some positive takeaways and it's great that we're having a dialogue. So maybe this is a start to get us to legislation, right.
Yeah, I think this is This has to be the starting point, right, Like, actually trying to learn about what DeFi is and how it works and why it's valuable has to be the starting point before members of Congress seek to regulate it or legislate about it. Of course, not everybody was there to learn, and really just some people just wanted to make their points on why they think we're all criminals, but we expected that, and honestly it was.
Better than expected.
Like truly, I think we were prepared to answer much more difficult questions if we needed to, and I think it actually did show that generally everybody was really trying to you know, do like have this good this first hearing in good fase.
And I don't know if you could if you agree with this, but it seems like the number of people who are pro crypto or is starting to outweigh those who are anti crypto due to advocate see education, look lobbying as well from the industry, it seems that the tide is changing. You still have your naysayers, your detractors, but for the most part, I think many are on both sides of Yalla ready to embrace this technology.
So you're saying we're winning. Yeah, Yeah, I think you're right. I think that I even you know, anecdotally right, like even in my friends and family. I feel like this sentiment about crypto has been changing since I took this job.
A year and a half ago. So I agree with you.
There is definitely a shift happening, and I think it's because there are a ton of people building in this space, developing projects and doing so in a way that it is fundamentally good and valuable, And like those voices are being heard more and more.
I don't know if you can answer this. Are there plans to have a round two of this? Maybe next year?
Oh?
I truly don't know. I hope so, Like I would assume that there would be more hearings about DeFi just based on past patterns of how Congress treats this kind of thing, But there's nothing that I know of right now in the works. There are other hearings happening right now about the SEC their regulation by enforcement. All five commissioners will be in front of Congress soon, So there are other hearings happening that I think we're all very interested in.
Yeah, to your point, one happening today, there's a couple next week. Chairgainster is going to be at one, then all five commissioners. I'm actually really excited for that. I, you know, I want to see what it's going to be like because on one side of the SEC has to purse market way to they have a different view on crypto than a Gainser and the other two Democrat commissioners. So I don't know how how much fireworks is going to be, but hopefully it's a good dialogue.
I know, I can't remember how long it's been since the last time, but I think it's been a few years since all five sat there at the same table. And like you said, it will definitely be interesting. They are going to have a range of things to say response to member questions for sure.
Now, you know, Amanda, I thought the SEC was done, you know, attacking crypto and look, they have a job to do. They have to stop bad actors and scammers. We're not We're not, you know, pushing back against that, but we see the the sometimes unlawful attack against certain companies that are legitimately just trying to do business. And the SEC hit the ground running after de Summer break, issuing a Wells notice against open See claiming that NFTs
on their platform are securities. SEC Commissioner has their purse issued a dissent on this. What are your thoughts on this situation?
Yeah, so, unfortunately, I don't think the SEC is stopping its campaign against this industry. So, as you mentioned, the open c announced that they had received a Wells notice. I don't believe the actual details of the Wells notice are out there other than just like the claim that
NFTs are securities. And you know, I think it's great that there has been this trend of people making public that they've received a Wells notice, because it's important to call attention to the fact that the SEC is unduly focused on crypto projects, NFT projects. And you know, this is not the first time the SEC has targeted an NFT project. There's obviously, you know, at least two past actions that we can that you know, we know of, and there's the recent lawsuit of the NFT industry fighting
back and actually suing the SEC. So Jonathan Mann and Brian Frye, who are both NFT creators, sued the SEC for like the exact opposite implication, right that NFTs are not securities, and that case is definitely going to be one to watch because in that also if you haven't read the complaint, it's just a very fun complaint to read.
Jason Gottlieb and Morrison Cohen represents them and he himself as a musician, so I feel like this this really aligned with his also personal passions in addition to just you know, excellent work in the industry. But as the complaint explains, like art should not be considered even if it is released in the form of an NFT, should
not be considered a security. This empowers, you know, NFTs empower artists to sell their work in a way that actually makes money for them directly, and why should they not be able to, you know, earn royalties on that and control the ownership over their art. So I think that though the SEC you know, may at some point decide to take action against open Seat, we don't know.
It's early in the early in the process. When you receive a WELLS, they'll at least be fighting the opposite implication in this reinforcement challenge.
I love that the industry is going on the offensive. Like you said, there everyone is coming on saying, hey, we got a WELLS notice. So the SEC is doing this, putting it out in the open, and like you said, folks are proactively launching lawsuits and things along those lines. It's kind of like punching back against the bully a bit.
And I'm really happy to see the industry do that because years ago, I remember when Ripple got sued everyone everyone kind of ran to their corners, like, let's see what's going to happen, right, But now everyone's in the open and like, hey, we're going to fight back in court.
Absolutely, and you know that's something that we're doing a DF two.
We have our air drop case.
Which I know we talked about in the past, where you know, where we sued the SEC along with our co plaint of saying that we would like a declaration that air drops free air drops are not securities transactions.
So there's that.
There's the ledgele X case, which is, you know, asking the court to declare that a digital trading platform in the form of ledgele X's digital trading platform is not a securities exchange.
So there's a number of these, and I think there will be more.
Yeah, with regardless to the air drops. I saw yesterday Congressman Tom and Or and patrom Henry sent a letter excuse me, to the SEC asking for clarity around crypto air jobs. And that's a big thing because I won't disclose the name of the project, but I was trying to work with someone with a game that would do an air drop, and guess what their legal team is so worried that they're like, hey, we can't do it, we can't do it even though there's no investment. There's
no trading of the token. It's just an air drop that you can use in the game to buy skins and so forth, but there's no like trading in the open market. They're still scared because they don't know if the set is going to come after it.
And rightfully so, you know, I understand that take there is it should not be the case that a free air drop is considered an investment contract. There is no investment of money by definition, but because the SEC has done such a poor job regulating the space and has been so inconsistent and given absolutely no proactive, prospective guidance to the industry. Of course that you know, projects have to work that if they do a free hour drop
that they'll be targeted next. That is, you know the reason why we brought our suit.
Yeah, now, hester purs descent, I would look at your take on that was pretty fiery, and I love that she's doing this as well. What was your take on her descent?
Yeah, I mean she's never boring, right, It's it was a great read. In addition to making good, good legal points, it was also just fun to read. And I think that it evidence is that, like, there's even people at the SEC who themselves don't agree with the way that the Commission has been regulating the space, but so in that in that descent, she makes clear their NFTs were
also an issue there. She makes clear that with these facts where the NFT would entitle the holder to access to I think it was a private membership club or restaurant, and the NFT got you access and possibly on a who was like a discount or something, but like got you into the restaurant, and you still would then have to pay for everything that you order when.
You get there.
She makes clear that like that type of NFT is not that's not an investment contract. Yeah, of course you could resell your NFT, Like she makes the point if you leave town and you don't live close to this club anymore, and you want to resell your NFT, like, of course you want the option to get out of that private membership, but that that doesn't make your NFT as security And she uses just like the most fun, color colorful language.
I really enjoyed her saying. At the end, I think.
She said something like people should be able to experiment with NFTs without consulting a high priced tea leaf reader, a hem, A lawyer, and I you know, like I appreciate the job. Like you know, it's as I said to Congress, like there are people with decades of experience giving legal advice in this space, and they cannot tell their clients with certainty whether their projects comply with the lay Like that's just the reality.
It's ridiculous. Can I think about Look, I grew up trading baseball cards, basketball cards and so forth, and comic books. And I think, okay, if I got a Lebron James rookie card, and am I entering into a contract with Lebron James if the value goes up because he's a great basketball player, and I resell that card for a profit, It's just ridiculous. I just don't get it. Where are they coming from with this?
No, that's the exact right analogy. I mean, the collectibles space would be next, right. I mean, I don't know if that's where the SEC would go, but applying the logic that the SEC is using to digital assets, collectibles would.
Therefore then be investment contracts. So I.
Mean, it seems like their review is literally anything that you spend money on, or even receive for free that you expect to go up in value is an investment contract, and that's just way broader than any reasonable definition of a security and also expands the authority way beyond what Congress you know, has said their authority is.
So yeah, hopefully we can get some legislation through. I saw yesterday Patrick McHenry, I think he was speaking at some event, and he said he's hoping that during the lame duck session they could potentially push I don't know if the FIT twenty one bill or a different version of it through the Senate. Chuck Schumer, I think about a month ago at the crypto for Harris town Hall large streams that he's willing to work to get this through. So we got some support on both sides of the island.
Hopefully you can get clarity soon and we don't have to wait another two years. But if not by the end of this year, maybe early next year.
Yeah, I think that, you know, we absolutely applaud the efforts of members of Congress to spend time on this to try to figure out the right way forward. I think it's going to be really tough to pass anything during the lame dock. Of course, but you know, it's it's I think the attention to it is important, and I think next Congress we probably will see something, you know, we will see some bill make it now.
There was another settlement or case with the SEC against E Toro. I wish E Toro fought back, but they settled, and I think they're only allowed to trade bigcoin, bitcoin cash, and etheroreum in the United States now. But they didn't adhere or didn't agree to that they did anything wrong, and they're now they're leaving or they're taking a lot a big part of their business overseas. What are your thoughts on that settlement?
So I hear you, and I relate to the feeling of like, ugh, you know, like I wish that they were able to fight this off, But I also like, do not begrudge any project.
In this space who.
Doesn't want to spend the time, resources, or risk the outcome of an enforcement action actually going to court. It takes millions of dollars and potentially years in court to reach a resolution on the actual and action if the SEC files. So I get it. I think that you know, when you're running a business, you have to make that call.
And I don't begrudge them that at all. I do wish the SEC would issue orders that were actually helpful because now we have an order that was, you know, relatively short and doesn't provide guidance to the industry, right Like, I feel like we're always saying the same things, and
that's not on ETRO, that's on the SEC. Like they're the ones who are going to draft this order and put it out there and then point to it, right Like they will point to it later and say like, look, we you know, like you should be able to glean from these settlement orders what we're doing in the space and how we are regulating. But the order isn't say anything like how did they arrive at bitcoin, bitcoin cash
and ethereum? I know, like we can try to cobble together their past arguments on that, but what about all the other tokens that were at issue? We now have no guidance on any of those other tokens as to what the SEC thinks they are. We don't know if the SEC thinks they're all securities or not. So it's just another example of the SEC regulating by enforcement and not actually giving helpful guidance to the space.
Yeah, because like, if you're looking at the consensus consensus mechanism, you know, is it proof of work? All proof of work tokens are not securities? Well what about dose coin and like coin? Why didn't you include those?
What e theorem?
Is it? All proof of steak tokens are not securities?
Well?
What about avalanche? What about cardono likes? There's no logic here, it's just whatever, Gary Ganser and these people are thinking in their heads exactly.
And you know, I I assume now that e Toro I think, if I remember correctly, E Toro is gonna just have those other tokens still available for trade just outside the United States, right, And it is another example I think of how the US is now going to be behind other countries where you know, US citizens aren't even able to act the same assets that people are in other places, and we don't even know why, Like, we don't even know if there is a principal basis
for that reason, you know, for that distinction.
So okay, so Amanda for the defined Education Fund, what else do you guys have on your roadmap of at remainder of a year and going into twenty twenty five, So.
We are gearing up to do another round of Amikas briefs. We're going to put a brief in support in of pert Sev's appeal. So that's the Tornado Cash software developer who's in the Netherlands. You know, he was convicted on the trial court level and he's now appealing. And what's interesting is in the Netherlands an appeal is actually a complete redo, so like unlike here where the record is, you know, limited to what happened below, in the Netherlands,
it's a complete redo. You can do the facts again, you can bring an experts again. So we're gonna work with coin Center to put an Amikas brief into that case, which we're working on right now. We are considering whether we're going to put a meek Us brief into the Samurai Wallet case. Also in that case, to highlight the completely inconsistent position that the DOJ has taken versus the twenty nineteen fin send guidance as to what constitutes a
money services business. I think that that is a really problematic trend, and I hope it is not a trend, but it seems like it may be a trend that the DOJ is just saying the twenty nineteen guidance that the industry followed for years is just guidance and they don't have to pay any attention to it and can charge cases however they see fits, even if people were
acting in good faith and following that guidance. So I think that's an issue that's really important that we want to speak on, and will of course be eyes open for any efforts in Congress to work on a market structure bill. You know, we will continue educating members of Congress on DeFi and hopefully getting to do more DeFi demos with those who, you know, maybe DeFi skeptical. So that's that's the immediate road ahead. And then our cases on you know, we our impact litigation cases are ongoing.
So we have that Babit case we talked about earlier, which is the air drop case.
We are opposing the.
Motion to dismiss in the next couple of months, and we.
May have more cases to.
File soon, and I will tell you what I can tell you more about them.
Well, I definitely want to have you back on when those go live. But I appreciate all the great work you guys are doing and helping the industry. But thank you so much for joining me.
Amanda, thank you for having me.
It's great to be back On't think that