WEBVTT

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<v Speaker 1>It is another example I think of how the US

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<v Speaker 1>is now going to be behind other countries where you know,

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<v Speaker 1>US citizens aren't even able to access the same assets

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<v Speaker 1>that people are in other places, and we don't even

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<v Speaker 1>know why, Like we don't even know if there is

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<v Speaker 1>a principal basis for that reason, you know, for that distinction.

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<v Speaker 2>Welcome into the Thinking Crypto Podcast. I'm your host Tony

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<v Speaker 2>Edward and with me today is Amanda Tuminelli, who's the

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<v Speaker 2>chief legal officer at the DeFi Education Fund. Amanda, great

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<v Speaker 2>to see you, great to have you back on.

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<v Speaker 3>Thank you so much for having me. It's great to

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<v Speaker 3>be back.

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<v Speaker 2>So, Amanda, you testified the Congressional DeFi hearing that took

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<v Speaker 2>place I believe was last week. Great job and it

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<v Speaker 2>was amazing to see Congress holding a hearing about DeFi.

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<v Speaker 2>I feel like we've come so far. What was the

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<v Speaker 2>goal of that hearing and what were some takeaways for you?

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<v Speaker 1>Well, first, thank you for the kind words, and it

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<v Speaker 1>was really great to see Congress hold a hearing about DeFi.

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<v Speaker 1>It was the first one that was exclusively focused on DeFi,

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<v Speaker 1>and the point was to engage with the reality of

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<v Speaker 1>the technology, to learn about DeFi, to you know, have

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<v Speaker 1>that symbolic moment of Congress actually engaging directly with the

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<v Speaker 1>industry that they.

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<v Speaker 3>Are trying to learn about.

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<v Speaker 1>So we definitely were thrilled that they noticed that hearing

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<v Speaker 1>and wanted us to speak at it.

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<v Speaker 3>And I was lucky to sit next to.

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<v Speaker 1>Some really talented and smart experts in the space.

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<v Speaker 2>Yeah, I saw some clips. There seems to be some naysayers,

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<v Speaker 2>you know, some members of Congress, who are you know,

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<v Speaker 2>trying to paint DeFi your crypto in a negative light.

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<v Speaker 2>But overall there was some positive takeaways and it's great

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<v Speaker 2>that we're having a dialogue. So maybe this is a

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<v Speaker 2>start to get us to legislation, right.

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<v Speaker 1>Yeah, I think this is This has to be the

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<v Speaker 1>starting point, right, Like, actually trying to learn about what

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<v Speaker 1>DeFi is and how it works and why it's valuable

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<v Speaker 1>has to be the starting point before members of Congress

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<v Speaker 1>seek to regulate it or legislate about it. Of course,

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<v Speaker 1>not everybody was there to learn, and really just some

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<v Speaker 1>people just wanted to make their points on why they

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<v Speaker 1>think we're all criminals, but we expected that, and honestly

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<v Speaker 1>it was.

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<v Speaker 3>Better than expected.

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<v Speaker 1>Like truly, I think we were prepared to answer much

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<v Speaker 1>more difficult questions if we needed to, and I think

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<v Speaker 1>it actually did show that generally everybody was really trying

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<v Speaker 1>to you know, do like have this good this first

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<v Speaker 1>hearing in good fase.

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<v Speaker 2>And I don't know if you could if you agree

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<v Speaker 2>with this, but it seems like the number of people

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<v Speaker 2>who are pro crypto or is starting to outweigh those

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<v Speaker 2>who are anti crypto due to advocate see education, look

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<v Speaker 2>lobbying as well from the industry, it seems that the

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<v Speaker 2>tide is changing. You still have your naysayers, your detractors,

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<v Speaker 2>but for the most part, I think many are on

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<v Speaker 2>both sides of Yalla ready to embrace this technology.

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<v Speaker 1>So you're saying we're winning. Yeah, Yeah, I think you're right.

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<v Speaker 1>I think that I even you know, anecdotally right, like

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<v Speaker 1>even in my friends and family. I feel like this

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<v Speaker 1>sentiment about crypto has been changing since I took this job.

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<v Speaker 3>A year and a half ago. So I agree with you.

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<v Speaker 1>There is definitely a shift happening, and I think it's

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<v Speaker 1>because there are a ton of people building in this space,

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<v Speaker 1>developing projects and doing so in a way that it

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<v Speaker 1>is fundamentally good and valuable, And like those voices are

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<v Speaker 1>being heard more and more.

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<v Speaker 2>I don't know if you can answer this. Are there

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<v Speaker 2>plans to have a round two of this? Maybe next year?

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<v Speaker 3>Oh?

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<v Speaker 1>I truly don't know. I hope so, Like I would

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<v Speaker 1>assume that there would be more hearings about DeFi just

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<v Speaker 1>based on past patterns of how Congress treats this kind

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<v Speaker 1>of thing, But there's nothing that I know of right

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<v Speaker 1>now in the works. There are other hearings happening right

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<v Speaker 1>now about the SEC their regulation by enforcement. All five

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<v Speaker 1>commissioners will be in front of Congress soon, So there

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<v Speaker 1>are other hearings happening that I think we're all very

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<v Speaker 1>interested in.

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<v Speaker 2>Yeah, to your point, one happening today, there's a couple

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<v Speaker 2>next week. Chairgainster is going to be at one, then

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<v Speaker 2>all five commissioners. I'm actually really excited for that. I,

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<v Speaker 2>you know, I want to see what it's going to

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<v Speaker 2>be like because on one side of the SEC has

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<v Speaker 2>to purse market way to they have a different view

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<v Speaker 2>on crypto than a Gainser and the other two Democrat commissioners.

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<v Speaker 2>So I don't know how how much fireworks is going

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<v Speaker 2>to be, but hopefully it's a good dialogue.

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<v Speaker 1>I know, I can't remember how long it's been since

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<v Speaker 1>the last time, but I think it's been a few

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<v Speaker 1>years since all five sat there at the same table.

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<v Speaker 1>And like you said, it will definitely be interesting. They

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<v Speaker 1>are going to have a range of things to say

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<v Speaker 1>response to member questions for sure.

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<v Speaker 2>Now, you know, Amanda, I thought the SEC was done,

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<v Speaker 2>you know, attacking crypto and look, they have a job

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<v Speaker 2>to do. They have to stop bad actors and scammers.

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<v Speaker 2>We're not We're not, you know, pushing back against that,

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<v Speaker 2>but we see the the sometimes unlawful attack against certain

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<v Speaker 2>companies that are legitimately just trying to do business. And

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<v Speaker 2>the SEC hit the ground running after de Summer break,

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<v Speaker 2>issuing a Wells notice against open See claiming that NFTs

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<v Speaker 2>on their platform are securities. SEC Commissioner has their purse

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<v Speaker 2>issued a dissent on this. What are your thoughts on

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<v Speaker 2>this situation?

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<v Speaker 1>Yeah, so, unfortunately, I don't think the SEC is stopping

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<v Speaker 1>its campaign against this industry. So, as you mentioned, the

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<v Speaker 1>open c announced that they had received a Wells notice.

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<v Speaker 1>I don't believe the actual details of the Wells notice

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<v Speaker 1>are out there other than just like the claim that

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<v Speaker 1>NFTs are securities. And you know, I think it's great

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<v Speaker 1>that there has been this trend of people making public

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<v Speaker 1>that they've received a Wells notice, because it's important to

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<v Speaker 1>call attention to the fact that the SEC is unduly

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<v Speaker 1>focused on crypto projects, NFT projects. And you know, this

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<v Speaker 1>is not the first time the SEC has targeted an

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<v Speaker 1>NFT project. There's obviously, you know, at least two past

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<v Speaker 1>actions that we can that you know, we know of,

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<v Speaker 1>and there's the recent lawsuit of the NFT industry fighting

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<v Speaker 1>back and actually suing the SEC. So Jonathan Mann and

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<v Speaker 1>Brian Frye, who are both NFT creators, sued the SEC

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<v Speaker 1>for like the exact opposite implication, right that NFTs are

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<v Speaker 1>not securities, and that case is definitely going to be

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<v Speaker 1>one to watch because in that also if you haven't

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<v Speaker 1>read the complaint, it's just a very fun complaint to read.

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<v Speaker 1>Jason Gottlieb and Morrison Cohen represents them and he himself

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<v Speaker 1>as a musician, so I feel like this this really

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<v Speaker 1>aligned with his also personal passions in addition to just

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<v Speaker 1>you know, excellent work in the industry. But as the

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<v Speaker 1>complaint explains, like art should not be considered even if

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<v Speaker 1>it is released in the form of an NFT, should

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<v Speaker 1>not be considered a security. This empowers, you know, NFTs

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<v Speaker 1>empower artists to sell their work in a way that

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<v Speaker 1>actually makes money for them directly, and why should they

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<v Speaker 1>not be able to, you know, earn royalties on that

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<v Speaker 1>and control the ownership over their art. So I think

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<v Speaker 1>that though the SEC you know, may at some point

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<v Speaker 1>decide to take action against open Seat, we don't know.

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<v Speaker 1>It's early in the early in the process. When you

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<v Speaker 1>receive a WELLS, they'll at least be fighting the opposite

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<v Speaker 1>implication in this reinforcement challenge.

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<v Speaker 2>I love that the industry is going on the offensive.

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<v Speaker 2>Like you said, there everyone is coming on saying, hey,

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<v Speaker 2>we got a WELLS notice. So the SEC is doing this,

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<v Speaker 2>putting it out in the open, and like you said,

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<v Speaker 2>folks are proactively launching lawsuits and things along those lines.

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<v Speaker 2>It's kind of like punching back against the bully a bit.

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<v Speaker 2>And I'm really happy to see the industry do that

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<v Speaker 2>because years ago, I remember when Ripple got sued everyone

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<v Speaker 2>everyone kind of ran to their corners, like, let's see

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<v Speaker 2>what's going to happen, right, But now everyone's in the

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<v Speaker 2>open and like, hey, we're going to fight back in court.

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<v Speaker 1>Absolutely, and you know that's something that we're doing a

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<v Speaker 1>DF two.

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<v Speaker 3>We have our air drop case.

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<v Speaker 1>Which I know we talked about in the past, where

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<v Speaker 1>you know, where we sued the SEC along with our

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<v Speaker 1>co plaint of saying that we would like a declaration

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<v Speaker 1>that air drops free air drops are not securities transactions.

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<v Speaker 3>So there's that.

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<v Speaker 1>There's the ledgele X case, which is, you know, asking

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<v Speaker 1>the court to declare that a digital trading platform in

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<v Speaker 1>the form of ledgele X's digital trading platform is not

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<v Speaker 1>a securities exchange.

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<v Speaker 3>So there's a number of these, and I think there

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<v Speaker 3>will be more.

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<v Speaker 2>Yeah, with regardless to the air drops. I saw yesterday

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<v Speaker 2>Congressman Tom and Or and patrom Henry sent a letter

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<v Speaker 2>excuse me, to the SEC asking for clarity around crypto

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<v Speaker 2>air jobs. And that's a big thing because I won't

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<v Speaker 2>disclose the name of the project, but I was trying

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<v Speaker 2>to work with someone with a game that would do

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<v Speaker 2>an air drop, and guess what their legal team is

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<v Speaker 2>so worried that they're like, hey, we can't do it,

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<v Speaker 2>we can't do it even though there's no investment. There's

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<v Speaker 2>no trading of the token. It's just an air drop

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<v Speaker 2>that you can use in the game to buy skins

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<v Speaker 2>and so forth, but there's no like trading in the

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<v Speaker 2>open market. They're still scared because they don't know if

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<v Speaker 2>the set is going to come after it.

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<v Speaker 1>And rightfully so, you know, I understand that take there

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<v Speaker 1>is it should not be the case that a free

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<v Speaker 1>air drop is considered an investment contract. There is no

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<v Speaker 1>investment of money by definition, but because the SEC has

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<v Speaker 1>done such a poor job regulating the space and has

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<v Speaker 1>been so inconsistent and given absolutely no proactive, prospective guidance

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<v Speaker 1>to the industry. Of course that you know, projects have

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<v Speaker 1>to work that if they do a free hour drop

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<v Speaker 1>that they'll be targeted next. That is, you know the

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<v Speaker 1>reason why we brought our suit.

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<v Speaker 2>Yeah, now, hester purs descent, I would look at your

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<v Speaker 2>take on that was pretty fiery, and I love that

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<v Speaker 2>she's doing this as well. What was your take on

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<v Speaker 2>her descent?

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<v Speaker 1>Yeah, I mean she's never boring, right, It's it was

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<v Speaker 1>a great read. In addition to making good, good legal points,

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<v Speaker 1>it was also just fun to read. And I think

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<v Speaker 1>that it evidence is that, like, there's even people at

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<v Speaker 1>the SEC who themselves don't agree with the way that

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<v Speaker 1>the Commission has been regulating the space, but so in

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<v Speaker 1>that in that descent, she makes clear their NFTs were

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<v Speaker 1>also an issue there. She makes clear that with these

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<v Speaker 1>facts where the NFT would entitle the holder to access

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<v Speaker 1>to I think it was a private membership club or restaurant,

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<v Speaker 1>and the NFT got you access and possibly on a

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<v Speaker 1>who was like a discount or something, but like got

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<v Speaker 1>you into the restaurant, and you still would then have

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<v Speaker 1>to pay for everything that you order when.

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<v Speaker 3>You get there.

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<v Speaker 1>She makes clear that like that type of NFT is

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<v Speaker 1>not that's not an investment contract. Yeah, of course you

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<v Speaker 1>could resell your NFT, Like she makes the point if

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<v Speaker 1>you leave town and you don't live close to this

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<v Speaker 1>club anymore, and you want to resell your NFT, like,

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<v Speaker 1>of course you want the option to get out of

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<v Speaker 1>that private membership, but that that doesn't make your NFT

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<v Speaker 1>as security And she uses just like the most fun,

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<v Speaker 1>color colorful language.

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<v Speaker 3>I really enjoyed her saying. At the end, I think.

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<v Speaker 1>She said something like people should be able to experiment

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<v Speaker 1>with NFTs without consulting a high priced tea leaf reader,

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<v Speaker 1>a hem, A lawyer, and I you know, like I

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<v Speaker 1>appreciate the job. Like you know, it's as I said

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<v Speaker 1>to Congress, like there are people with decades of experience

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<v Speaker 1>giving legal advice in this space, and they cannot tell

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<v Speaker 1>their clients with certainty whether their projects comply with the

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<v Speaker 1>lay Like that's just the reality.

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<v Speaker 2>It's ridiculous. Can I think about Look, I grew up

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<v Speaker 2>trading baseball cards, basketball cards and so forth, and comic books.

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<v Speaker 2>And I think, okay, if I got a Lebron James

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<v Speaker 2>rookie card, and am I entering into a contract with

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<v Speaker 2>Lebron James if the value goes up because he's a

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<v Speaker 2>great basketball player, and I resell that card for a profit,

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<v Speaker 2>It's just ridiculous. I just don't get it. Where are

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<v Speaker 2>they coming from with this?

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<v Speaker 1>No, that's the exact right analogy. I mean, the collectibles

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<v Speaker 1>space would be next, right. I mean, I don't know

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<v Speaker 1>if that's where the SEC would go, but applying the

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<v Speaker 1>logic that the SEC is using to digital assets, collectibles would.

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<v Speaker 3>Therefore then be investment contracts. So I.

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<v Speaker 1>Mean, it seems like their review is literally anything that

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<v Speaker 1>you spend money on, or even receive for free that

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<v Speaker 1>you expect to go up in value is an investment contract,

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<v Speaker 1>and that's just way broader than any reasonable definition of

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<v Speaker 1>a security and also expands the authority way beyond what

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<v Speaker 1>Congress you know, has said their authority is.

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<v Speaker 2>So yeah, hopefully we can get some legislation through. I

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<v Speaker 2>saw yesterday Patrick McHenry, I think he was speaking at

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<v Speaker 2>some event, and he said he's hoping that during the

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<v Speaker 2>lame duck session they could potentially push I don't know

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<v Speaker 2>if the FIT twenty one bill or a different version

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<v Speaker 2>of it through the Senate. Chuck Schumer, I think about

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<v Speaker 2>a month ago at the crypto for Harris town Hall

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<v Speaker 2>large streams that he's willing to work to get this through.

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<v Speaker 2>So we got some support on both sides of the island.

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<v Speaker 2>Hopefully you can get clarity soon and we don't have

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<v Speaker 2>to wait another two years. But if not by the

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<v Speaker 2>end of this year, maybe early next year.

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<v Speaker 1>Yeah, I think that, you know, we absolutely applaud the

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<v Speaker 1>efforts of members of Congress to spend time on this

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<v Speaker 1>to try to figure out the right way forward. I

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<v Speaker 1>think it's going to be really tough to pass anything

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<v Speaker 1>during the lame dock. Of course, but you know, it's

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<v Speaker 1>it's I think the attention to it is important, and

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<v Speaker 1>I think next Congress we probably will see something, you know,

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<v Speaker 1>we will see some bill make it now.

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<v Speaker 2>There was another settlement or case with the SEC against

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<v Speaker 2>E Toro. I wish E Toro fought back, but they settled,

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<v Speaker 2>and I think they're only allowed to trade bigcoin, bitcoin cash,

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<v Speaker 2>and etheroreum in the United States now. But they didn't

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<v Speaker 2>adhere or didn't agree to that they did anything wrong,

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<v Speaker 2>and they're now they're leaving or they're taking a lot

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<v Speaker 2>a big part of their business overseas. What are your

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<v Speaker 2>thoughts on that settlement?

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<v Speaker 1>So I hear you, and I relate to the feeling

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<v Speaker 1>of like, ugh, you know, like I wish that they

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<v Speaker 1>were able to fight this off, But I also like,

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<v Speaker 1>do not begrudge any project.

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<v Speaker 3>In this space who.

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<v Speaker 1>Doesn't want to spend the time, resources, or risk the

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<v Speaker 1>outcome of an enforcement action actually going to court. It

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<v Speaker 1>takes millions of dollars and potentially years in court to

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<v Speaker 1>reach a resolution on the actual and action if the

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<v Speaker 1>SEC files. So I get it. I think that you know,

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<v Speaker 1>when you're running a business, you have to make that call.

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<v Speaker 1>And I don't begrudge them that at all. I do

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<v Speaker 1>wish the SEC would issue orders that were actually helpful

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<v Speaker 1>because now we have an order that was, you know,

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<v Speaker 1>relatively short and doesn't provide guidance to the industry, right Like,

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<v Speaker 1>I feel like we're always saying the same things, and

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<v Speaker 1>that's not on ETRO, that's on the SEC. Like they're

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<v Speaker 1>the ones who are going to draft this order and

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<v Speaker 1>put it out there and then point to it, right

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<v Speaker 1>Like they will point to it later and say like, look,

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<v Speaker 1>we you know, like you should be able to glean

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<v Speaker 1>from these settlement orders what we're doing in the space

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<v Speaker 1>and how we are regulating. But the order isn't say

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<v Speaker 1>anything like how did they arrive at bitcoin, bitcoin cash

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<v Speaker 1>and ethereum? I know, like we can try to cobble

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<v Speaker 1>together their past arguments on that, but what about all

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<v Speaker 1>the other tokens that were at issue? We now have

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<v Speaker 1>no guidance on any of those other tokens as to

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<v Speaker 1>what the SEC thinks they are. We don't know if

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<v Speaker 1>the SEC thinks they're all securities or not. So it's

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<v Speaker 1>just another example of the SEC regulating by enforcement and

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<v Speaker 1>not actually giving helpful guidance to the space.

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<v Speaker 2>Yeah, because like, if you're looking at the consensus consensus mechanism,

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<v Speaker 2>you know, is it proof of work? All proof of

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<v Speaker 2>work tokens are not securities? Well what about dose coin

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<v Speaker 2>and like coin? Why didn't you include those?

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<v Speaker 3>What e theorem?

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<v Speaker 2>Is it? All proof of steak tokens are not securities?

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<v Speaker 3>Well?

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<v Speaker 2>What about avalanche? What about cardono likes? There's no logic here,

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<v Speaker 2>it's just whatever, Gary Ganser and these people are thinking

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<v Speaker 2>in their heads exactly.

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<v Speaker 1>And you know, I I assume now that e Toro

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<v Speaker 1>I think, if I remember correctly, E Toro is gonna

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<v Speaker 1>just have those other tokens still available for trade just

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<v Speaker 1>outside the United States, right, And it is another example

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<v Speaker 1>I think of how the US is now going to

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<v Speaker 1>be behind other countries where you know, US citizens aren't

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<v Speaker 1>even able to act the same assets that people are

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<v Speaker 1>in other places, and we don't even know why, Like,

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<v Speaker 1>we don't even know if there is a principal basis

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<v Speaker 1>for that reason, you know, for that distinction.

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<v Speaker 2>So okay, so Amanda for the defined Education Fund, what

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<v Speaker 2>else do you guys have on your roadmap of at

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<v Speaker 2>remainder of a year and going into twenty twenty five, So.

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<v Speaker 1>We are gearing up to do another round of Amikas briefs.

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<v Speaker 1>We're going to put a brief in support in of

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<v Speaker 1>pert Sev's appeal. So that's the Tornado Cash software developer

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<v Speaker 1>who's in the Netherlands. You know, he was convicted on

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<v Speaker 1>the trial court level and he's now appealing. And what's

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<v Speaker 1>interesting is in the Netherlands an appeal is actually a

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<v Speaker 1>complete redo, so like unlike here where the record is,

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<v Speaker 1>you know, limited to what happened below, in the Netherlands,

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<v Speaker 1>it's a complete redo. You can do the facts again,

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<v Speaker 1>you can bring an experts again. So we're gonna work

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<v Speaker 1>with coin Center to put an Amikas brief into that case,

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<v Speaker 1>which we're working on right now. We are considering whether

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<v Speaker 1>we're going to put a meek Us brief into the

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<v Speaker 1>Samurai Wallet case. Also in that case, to highlight the

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<v Speaker 1>completely inconsistent position that the DOJ has taken versus the

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<v Speaker 1>twenty nineteen fin send guidance as to what constitutes a

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<v Speaker 1>money services business. I think that that is a really

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<v Speaker 1>problematic trend, and I hope it is not a trend,

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<v Speaker 1>but it seems like it may be a trend that

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<v Speaker 1>the DOJ is just saying the twenty nineteen guidance that

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<v Speaker 1>the industry followed for years is just guidance and they

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<v Speaker 1>don't have to pay any attention to it and can

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<v Speaker 1>charge cases however they see fits, even if people were

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<v Speaker 1>acting in good faith and following that guidance. So I

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<v Speaker 1>think that's an issue that's really important that we want

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<v Speaker 1>to speak on, and will of course be eyes open

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<v Speaker 1>for any efforts in Congress to work on a market

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<v Speaker 1>structure bill. You know, we will continue educating members of

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<v Speaker 1>Congress on DeFi and hopefully getting to do more DeFi

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<v Speaker 1>demos with those who, you know, maybe DeFi skeptical. So

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<v Speaker 1>that's that's the immediate road ahead. And then our cases

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<v Speaker 1>on you know, we our impact litigation cases are ongoing.

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<v Speaker 1>So we have that Babit case we talked about earlier,

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<v Speaker 1>which is the air drop case.

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<v Speaker 3>We are opposing the.

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<v Speaker 1>Motion to dismiss in the next couple of months, and we.

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<v Speaker 3>May have more cases to.

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<v Speaker 1>File soon, and I will tell you what I can

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<v Speaker 1>tell you more about them.

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<v Speaker 2>Well, I definitely want to have you back on when

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<v Speaker 2>those go live. But I appreciate all the great work

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<v Speaker 2>you guys are doing and helping the industry. But thank

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<v Speaker 2>you so much for joining me.

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<v Speaker 3>Amanda, thank you for having me.

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<v Speaker 1>It's great to be back On't think that