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Speaker 1: know why, Like we don't even know if there is
Speaker 1: a principal basis for that reason, you know, for that distinction.
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Speaker 2: Welcome into the Thinking Crypto Podcast. I'm your host Tony
Speaker 2: Edward and with me today is Amanda Tuminelli, who's the
Speaker 2: chief legal officer at the DeFi Education Fund. Amanda, great
Speaker 2: to see you, great to have you back on.
Speaker 3: Thank you so much for having me. It's great to
Speaker 3: be back.
Speaker 2: So, Amanda, you testified the Congressional DeFi hearing that took
Speaker 2: place I believe was last week. Great job and it
Speaker 2: was amazing to see Congress holding a hearing about DeFi.
Speaker 2: I feel like we've come so far. What was the
Speaker 2: goal of that hearing and what were some takeaways for you?
Speaker 1: Well, first, thank you for the kind words, and it
Speaker 1: was really great to see Congress hold a hearing about DeFi.
Speaker 1: It was the first one that was exclusively focused on DeFi,
Speaker 1: and the point was to engage with the reality of
Speaker 1: the technology, to learn about DeFi, to you know, have
Speaker 1: that symbolic moment of Congress actually engaging directly with the
Speaker 1: industry that they.
Speaker 3: Are trying to learn about.
Speaker 1: So we definitely were thrilled that they noticed that hearing
Speaker 1: and wanted us to speak at it.
Speaker 3: And I was lucky to sit next to.
Speaker 1: Some really talented and smart experts in the space.
Speaker 2: Yeah, I saw some clips. There seems to be some naysayers,
Speaker 2: you know, some members of Congress, who are you know,
Speaker 2: trying to paint DeFi your crypto in a negative light.
Speaker 2: But overall there was some positive takeaways and it's great
Speaker 2: that we're having a dialogue. So maybe this is a
Speaker 2: start to get us to legislation, right.
Speaker 1: Yeah, I think this is This has to be the
Speaker 1: starting point, right, Like, actually trying to learn about what
Speaker 1: DeFi is and how it works and why it's valuable
Speaker 1: has to be the starting point before members of Congress
Speaker 1: seek to regulate it or legislate about it. Of course,
Speaker 1: not everybody was there to learn, and really just some
Speaker 1: people just wanted to make their points on why they
Speaker 1: think we're all criminals, but we expected that, and honestly
Speaker 1: it was.
Speaker 3: Better than expected.
Speaker 1: Like truly, I think we were prepared to answer much
Speaker 1: more difficult questions if we needed to, and I think
Speaker 1: it actually did show that generally everybody was really trying
Speaker 1: to you know, do like have this good this first
Speaker 1: hearing in good fase.
Speaker 2: And I don't know if you could if you agree
Speaker 2: with this, but it seems like the number of people
Speaker 2: who are pro crypto or is starting to outweigh those
Speaker 2: who are anti crypto due to advocate see education, look
Speaker 2: lobbying as well from the industry, it seems that the
Speaker 2: tide is changing. You still have your naysayers, your detractors,
Speaker 2: but for the most part, I think many are on
Speaker 2: both sides of Yalla ready to embrace this technology.
Speaker 1: So you're saying we're winning. Yeah, Yeah, I think you're right.
Speaker 1: I think that I even you know, anecdotally right, like
Speaker 1: even in my friends and family. I feel like this
Speaker 1: sentiment about crypto has been changing since I took this job.
Speaker 3: A year and a half ago. So I agree with you.
Speaker 1: There is definitely a shift happening, and I think it's
Speaker 1: because there are a ton of people building in this space,
Speaker 1: developing projects and doing so in a way that it
Speaker 1: is fundamentally good and valuable, And like those voices are
Speaker 1: being heard more and more.
Speaker 2: I don't know if you can answer this. Are there
Speaker 2: plans to have a round two of this? Maybe next year?
Speaker 3: Oh?
Speaker 1: I truly don't know. I hope so, Like I would
Speaker 1: assume that there would be more hearings about DeFi just
Speaker 1: based on past patterns of how Congress treats this kind
Speaker 1: of thing, But there's nothing that I know of right
Speaker 1: now in the works. There are other hearings happening right
Speaker 1: now about the SEC their regulation by enforcement. All five
Speaker 1: commissioners will be in front of Congress soon, So there
Speaker 1: are other hearings happening that I think we're all very
Speaker 1: interested in.
Speaker 2: Yeah, to your point, one happening today, there's a couple
Speaker 2: next week. Chairgainster is going to be at one, then
Speaker 2: all five commissioners. I'm actually really excited for that. I,
Speaker 2: you know, I want to see what it's going to
Speaker 2: be like because on one side of the SEC has
Speaker 2: to purse market way to they have a different view
Speaker 2: on crypto than a Gainser and the other two Democrat commissioners.
Speaker 2: So I don't know how how much fireworks is going
Speaker 2: to be, but hopefully it's a good dialogue.
Speaker 1: I know, I can't remember how long it's been since
Speaker 1: the last time, but I think it's been a few
Speaker 1: years since all five sat there at the same table.
Speaker 1: And like you said, it will definitely be interesting. They
Speaker 1: are going to have a range of things to say
Speaker 1: response to member questions for sure.
Speaker 2: Now, you know, Amanda, I thought the SEC was done,
Speaker 2: you know, attacking crypto and look, they have a job
Speaker 2: to do. They have to stop bad actors and scammers.
Speaker 2: We're not We're not, you know, pushing back against that,
Speaker 2: but we see the the sometimes unlawful attack against certain
Speaker 2: companies that are legitimately just trying to do business. And
Speaker 2: the SEC hit the ground running after de Summer break,
Speaker 2: issuing a Wells notice against open See claiming that NFTs
Speaker 2: on their platform are securities. SEC Commissioner has their purse
Speaker 2: issued a dissent on this. What are your thoughts on
Speaker 2: this situation?
Speaker 1: Yeah, so, unfortunately, I don't think the SEC is stopping
Speaker 1: its campaign against this industry. So, as you mentioned, the
Speaker 1: open c announced that they had received a Wells notice.
Speaker 1: I don't believe the actual details of the Wells notice
Speaker 1: are out there other than just like the claim that
Speaker 1: NFTs are securities. And you know, I think it's great
Speaker 1: that there has been this trend of people making public
Speaker 1: that they've received a Wells notice, because it's important to
Speaker 1: call attention to the fact that the SEC is unduly
Speaker 1: focused on crypto projects, NFT projects. And you know, this
Speaker 1: is not the first time the SEC has targeted an
Speaker 1: NFT project. There's obviously, you know, at least two past
Speaker 1: actions that we can that you know, we know of,
Speaker 1: and there's the recent lawsuit of the NFT industry fighting
Speaker 1: back and actually suing the SEC. So Jonathan Mann and
Speaker 1: Brian Frye, who are both NFT creators, sued the SEC
Speaker 1: for like the exact opposite implication, right that NFTs are
Speaker 1: not securities, and that case is definitely going to be
Speaker 1: one to watch because in that also if you haven't
Speaker 1: read the complaint, it's just a very fun complaint to read.
Speaker 1: Jason Gottlieb and Morrison Cohen represents them and he himself
Speaker 1: as a musician, so I feel like this this really
Speaker 1: aligned with his also personal passions in addition to just
Speaker 1: you know, excellent work in the industry. But as the
Speaker 1: complaint explains, like art should not be considered even if
Speaker 1: it is released in the form of an NFT, should
Speaker 1: not be considered a security. This empowers, you know, NFTs
Speaker 1: empower artists to sell their work in a way that
Speaker 1: actually makes money for them directly, and why should they
Speaker 1: not be able to, you know, earn royalties on that
Speaker 1: and control the ownership over their art. So I think
Speaker 1: that though the SEC you know, may at some point
Speaker 1: decide to take action against open Seat, we don't know.
Speaker 1: It's early in the early in the process. When you
Speaker 1: receive a WELLS, they'll at least be fighting the opposite
Speaker 1: implication in this reinforcement challenge.
Speaker 2: I love that the industry is going on the offensive.
Speaker 2: Like you said, there everyone is coming on saying, hey,
Speaker 2: we got a WELLS notice. So the SEC is doing this,
Speaker 2: putting it out in the open, and like you said,
Speaker 2: folks are proactively launching lawsuits and things along those lines.
Speaker 2: It's kind of like punching back against the bully a bit.
Speaker 2: And I'm really happy to see the industry do that
Speaker 2: because years ago, I remember when Ripple got sued everyone
Speaker 2: everyone kind of ran to their corners, like, let's see
Speaker 2: what's going to happen, right, But now everyone's in the
Speaker 2: open and like, hey, we're going to fight back in court.
Speaker 1: Absolutely, and you know that's something that we're doing a
Speaker 1: DF two.
Speaker 3: We have our air drop case.
Speaker 1: Which I know we talked about in the past, where
Speaker 1: you know, where we sued the SEC along with our
Speaker 1: co plaint of saying that we would like a declaration
Speaker 1: that air drops free air drops are not securities transactions.
Speaker 3: So there's that.
Speaker 1: There's the ledgele X case, which is, you know, asking
Speaker 1: the court to declare that a digital trading platform in
Speaker 1: the form of ledgele X's digital trading platform is not
Speaker 1: a securities exchange.
Speaker 3: So there's a number of these, and I think there
Speaker 3: will be more.
Speaker 2: Yeah, with regardless to the air drops. I saw yesterday
Speaker 2: Congressman Tom and Or and patrom Henry sent a letter
Speaker 2: excuse me, to the SEC asking for clarity around crypto
Speaker 2: air jobs. And that's a big thing because I won't
Speaker 2: disclose the name of the project, but I was trying
Speaker 2: to work with someone with a game that would do
Speaker 2: an air drop, and guess what their legal team is
Speaker 2: so worried that they're like, hey, we can't do it,
Speaker 2: we can't do it even though there's no investment. There's
Speaker 2: no trading of the token. It's just an air drop
Speaker 2: that you can use in the game to buy skins
Speaker 2: and so forth, but there's no like trading in the
Speaker 2: open market. They're still scared because they don't know if
Speaker 2: the set is going to come after it.
Speaker 1: And rightfully so, you know, I understand that take there
Speaker 1: is it should not be the case that a free
Speaker 1: air drop is considered an investment contract. There is no
Speaker 1: investment of money by definition, but because the SEC has
Speaker 1: done such a poor job regulating the space and has
Speaker 1: been so inconsistent and given absolutely no proactive, prospective guidance
Speaker 1: to the industry. Of course that you know, projects have
Speaker 1: to work that if they do a free hour drop
Speaker 1: that they'll be targeted next. That is, you know the
Speaker 1: reason why we brought our suit.
Speaker 2: Yeah, now, hester purs descent, I would look at your
Speaker 2: take on that was pretty fiery, and I love that
Speaker 2: she's doing this as well. What was your take on
Speaker 2: her descent?
Speaker 1: Yeah, I mean she's never boring, right, It's it was
Speaker 1: a great read. In addition to making good, good legal points,
Speaker 1: it was also just fun to read. And I think
Speaker 1: that it evidence is that, like, there's even people at
Speaker 1: the SEC who themselves don't agree with the way that
Speaker 1: the Commission has been regulating the space, but so in
Speaker 1: that in that descent, she makes clear their NFTs were
Speaker 1: also an issue there. She makes clear that with these
Speaker 1: facts where the NFT would entitle the holder to access
Speaker 1: to I think it was a private membership club or restaurant,
Speaker 1: and the NFT got you access and possibly on a
Speaker 1: who was like a discount or something, but like got
Speaker 1: you into the restaurant, and you still would then have
Speaker 1: to pay for everything that you order when.
Speaker 3: You get there.
Speaker 1: She makes clear that like that type of NFT is
Speaker 1: not that's not an investment contract. Yeah, of course you
Speaker 1: could resell your NFT, Like she makes the point if
Speaker 1: you leave town and you don't live close to this
Speaker 1: club anymore, and you want to resell your NFT, like,
Speaker 1: of course you want the option to get out of
Speaker 1: that private membership, but that that doesn't make your NFT
Speaker 1: as security And she uses just like the most fun,
Speaker 1: color colorful language.
Speaker 3: I really enjoyed her saying. At the end, I think.
Speaker 1: She said something like people should be able to experiment
Speaker 1: with NFTs without consulting a high priced tea leaf reader,
Speaker 1: a hem, A lawyer, and I you know, like I
Speaker 1: appreciate the job. Like you know, it's as I said
Speaker 1: to Congress, like there are people with decades of experience
Speaker 1: giving legal advice in this space, and they cannot tell
Speaker 1: their clients with certainty whether their projects comply with the
Speaker 1: lay Like that's just the reality.
Speaker 2: It's ridiculous. Can I think about Look, I grew up
Speaker 2: trading baseball cards, basketball cards and so forth, and comic books.
Speaker 2: And I think, okay, if I got a Lebron James
Speaker 2: rookie card, and am I entering into a contract with
Speaker 2: Lebron James if the value goes up because he's a
Speaker 2: great basketball player, and I resell that card for a profit,
Speaker 2: It's just ridiculous. I just don't get it. Where are
Speaker 2: they coming from with this?
Speaker 1: No, that's the exact right analogy. I mean, the collectibles
Speaker 1: space would be next, right. I mean, I don't know
Speaker 1: if that's where the SEC would go, but applying the
Speaker 1: logic that the SEC is using to digital assets, collectibles would.
Speaker 3: Therefore then be investment contracts. So I.
Speaker 1: Mean, it seems like their review is literally anything that
Speaker 1: you spend money on, or even receive for free that
Speaker 1: you expect to go up in value is an investment contract,
Speaker 1: and that's just way broader than any reasonable definition of
Speaker 1: a security and also expands the authority way beyond what
Speaker 1: Congress you know, has said their authority is.
Speaker 2: So yeah, hopefully we can get some legislation through. I
Speaker 2: saw yesterday Patrick McHenry, I think he was speaking at
Speaker 2: some event, and he said he's hoping that during the
Speaker 2: lame duck session they could potentially push I don't know
Speaker 2: if the FIT twenty one bill or a different version
Speaker 2: of it through the Senate. Chuck Schumer, I think about
Speaker 2: a month ago at the crypto for Harris town Hall
Speaker 2: large streams that he's willing to work to get this through.
Speaker 2: So we got some support on both sides of the island.
Speaker 2: Hopefully you can get clarity soon and we don't have
Speaker 2: to wait another two years. But if not by the
Speaker 2: end of this year, maybe early next year.
Speaker 1: Yeah, I think that, you know, we absolutely applaud the
Speaker 1: efforts of members of Congress to spend time on this
Speaker 1: to try to figure out the right way forward. I
Speaker 1: think it's going to be really tough to pass anything
Speaker 1: during the lame dock. Of course, but you know, it's
Speaker 1: it's I think the attention to it is important, and
Speaker 1: I think next Congress we probably will see something, you know,
Speaker 1: we will see some bill make it now.
Speaker 2: There was another settlement or case with the SEC against
Speaker 2: E Toro. I wish E Toro fought back, but they settled,
Speaker 2: and I think they're only allowed to trade bigcoin, bitcoin cash,
Speaker 2: and etheroreum in the United States now. But they didn't
Speaker 2: adhere or didn't agree to that they did anything wrong,
Speaker 2: and they're now they're leaving or they're taking a lot
Speaker 2: a big part of their business overseas. What are your
Speaker 2: thoughts on that settlement?
Speaker 1: So I hear you, and I relate to the feeling
Speaker 1: of like, ugh, you know, like I wish that they
Speaker 1: were able to fight this off, But I also like,
Speaker 1: do not begrudge any project.
Speaker 3: In this space who.
Speaker 1: Doesn't want to spend the time, resources, or risk the
Speaker 1: outcome of an enforcement action actually going to court. It
Speaker 1: takes millions of dollars and potentially years in court to
Speaker 1: reach a resolution on the actual and action if the
Speaker 1: SEC files. So I get it. I think that you know,
Speaker 1: when you're running a business, you have to make that call.
Speaker 1: And I don't begrudge them that at all. I do
Speaker 1: wish the SEC would issue orders that were actually helpful
Speaker 1: because now we have an order that was, you know,
Speaker 1: relatively short and doesn't provide guidance to the industry, right Like,
Speaker 1: I feel like we're always saying the same things, and
Speaker 1: that's not on ETRO, that's on the SEC. Like they're
Speaker 1: the ones who are going to draft this order and
Speaker 1: put it out there and then point to it, right
Speaker 1: Like they will point to it later and say like, look,
Speaker 1: we you know, like you should be able to glean
Speaker 1: from these settlement orders what we're doing in the space
Speaker 1: and how we are regulating. But the order isn't say
Speaker 1: anything like how did they arrive at bitcoin, bitcoin cash
Speaker 1: and ethereum? I know, like we can try to cobble
Speaker 1: together their past arguments on that, but what about all
Speaker 1: the other tokens that were at issue? We now have
Speaker 1: no guidance on any of those other tokens as to
Speaker 1: what the SEC thinks they are. We don't know if
Speaker 1: the SEC thinks they're all securities or not. So it's
Speaker 1: just another example of the SEC regulating by enforcement and
Speaker 1: not actually giving helpful guidance to the space.
Speaker 2: Yeah, because like, if you're looking at the consensus consensus mechanism,
Speaker 2: you know, is it proof of work? All proof of
Speaker 2: work tokens are not securities? Well what about dose coin
Speaker 2: and like coin? Why didn't you include those?
Speaker 3: What e theorem?
Speaker 2: Is it? All proof of steak tokens are not securities?
Speaker 3: Well?
Speaker 2: What about avalanche? What about cardono likes? There's no logic here,
Speaker 2: it's just whatever, Gary Ganser and these people are thinking
Speaker 2: in their heads exactly.
Speaker 1: And you know, I I assume now that e Toro
Speaker 1: I think, if I remember correctly, E Toro is gonna
Speaker 1: just have those other tokens still available for trade just
Speaker 1: outside the United States, right, And it is another example
Speaker 1: I think of how the US is now going to
Speaker 1: be behind other countries where you know, US citizens aren't
Speaker 1: even able to act the same assets that people are
Speaker 1: in other places, and we don't even know why, Like,
Speaker 1: we don't even know if there is a principal basis
Speaker 1: for that reason, you know, for that distinction.
Speaker 2: So okay, so Amanda for the defined Education Fund, what
Speaker 2: else do you guys have on your roadmap of at
Speaker 2: remainder of a year and going into twenty twenty five, So.
Speaker 1: We are gearing up to do another round of Amikas briefs.
Speaker 1: We're going to put a brief in support in of
Speaker 1: pert Sev's appeal. So that's the Tornado Cash software developer
Speaker 1: who's in the Netherlands. You know, he was convicted on
Speaker 1: the trial court level and he's now appealing. And what's
Speaker 1: interesting is in the Netherlands an appeal is actually a
Speaker 1: complete redo, so like unlike here where the record is,
Speaker 1: you know, limited to what happened below, in the Netherlands,
Speaker 1: it's a complete redo. You can do the facts again,
Speaker 1: you can bring an experts again. So we're gonna work
Speaker 1: with coin Center to put an Amikas brief into that case,
Speaker 1: which we're working on right now. We are considering whether
Speaker 1: we're going to put a meek Us brief into the
Speaker 1: Samurai Wallet case. Also in that case, to highlight the
Speaker 1: completely inconsistent position that the DOJ has taken versus the
Speaker 1: twenty nineteen fin send guidance as to what constitutes a
Speaker 1: money services business. I think that that is a really
Speaker 1: problematic trend, and I hope it is not a trend,
Speaker 1: but it seems like it may be a trend that
Speaker 1: the DOJ is just saying the twenty nineteen guidance that
Speaker 1: the industry followed for years is just guidance and they
Speaker 1: don't have to pay any attention to it and can
Speaker 1: charge cases however they see fits, even if people were
Speaker 1: acting in good faith and following that guidance. So I
Speaker 1: think that's an issue that's really important that we want
Speaker 1: to speak on, and will of course be eyes open
Speaker 1: for any efforts in Congress to work on a market
Speaker 1: structure bill. You know, we will continue educating members of
Speaker 1: Congress on DeFi and hopefully getting to do more DeFi
Speaker 1: demos with those who, you know, maybe DeFi skeptical. So
Speaker 1: that's that's the immediate road ahead. And then our cases
Speaker 1: on you know, we our impact litigation cases are ongoing.
Speaker 1: So we have that Babit case we talked about earlier,
Speaker 1: which is the air drop case.
Speaker 3: We are opposing the.
Speaker 1: Motion to dismiss in the next couple of months, and we.
Speaker 3: May have more cases to.
Speaker 1: File soon, and I will tell you what I can
Speaker 1: tell you more about them.
Speaker 2: Well, I definitely want to have you back on when
Speaker 2: those go live. But I appreciate all the great work
Speaker 2: you guys are doing and helping the industry. But thank
Speaker 2: you so much for joining me.
Speaker 3: Amanda, thank you for having me.
Speaker 1: It's great to be back On't think that