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Key Emerging Legal Trends in the Digital Assets Space

Learn about the three key areas regarding emerging legal issues in the digital assets space that legal professionals should be monitoring in the year ahead.
Jennifer Petersen
April 13, 2022
3 min

Digital assets crossed a number of important milestones in 2021 in their continuing march to prominence as an asset class. As reported by CNBC.com, the virtual currency market reached a combined $2 trillion in value, the first major crypto company went public with the IPO of Coinbase, major Wall Street banks such as Goldman Sachs stepped up their participation across various digital assets, and Non-Fungible Tokens (NFTs) exploded onto the scene with the backing of high-profile athletes and celebrities. 

This significant acceleration in the pace of innovation and growth in the digital assets space is expected to continue in 2022. “Between the popularity of certain (crypto) coins and the interest in NFTs, we’re looking at a potentially groundbreaking 2022,” said investor Kevin O’Leary to Kiplinger

At the same time, these pioneering technologies are creating a host of new legal issues, requiring traditional paradigms of regulation to be re-evaluated. These considerations include regulation of cryptocurrency and financial technology, securities issues and private litigation trends, and intellectual property guidance related to NFTs. 

LexisNexis recently hosted a webinar regarding emerging legal issues in the digital assets space, featuring three partners from Skadden: Alexander Drylewski; Peter Morrison; and Stuart Levi. Based on the presentations from these experts, here are two key areas that legal professionals should be monitoring in the year ahead: 

SEC regulation of digital assets

Mr. Drylewski noted that newly appointed SEC Chairman Gary Gensler has made it clear that he believes the SEC should be the primary regulator of the cryptocurrency industry as his view is that digital currencies fall within the definition of a security. Moreover, Mr. Drylewski pointed to public comments from SEC Commissioner Caroline Crenshaw, who has expressed concern that a lack of comprehensive regulation in the decentralized finance space could pose substantial risks to investors. He walked through a number of recent examples of how regulatory focus on companies in the digital assets space has intensified. 

Indeed, the day following the LexisNexis webinar, Mr. Drylewski’s comments proved prescient. The SEC may be under some pressure to implement a more aggressive enforcement agenda in 2022, while Democrats are in control of Congress, according to a January 20, 2022 report in the Wall Street Journal

Private litigation involving cryptocurrency

Mr. Morrison provided an update on recent developments with respect to private securities and civil lawsuits involving various types of digital assets. The breadth in the cases reviewed illustrate the wide range of potential disputes that legal professionals need to monitor in the year ahead. 

Mr. Morrison described recent and/or current private litigation involving:  

  • Investors alleging fraud and other malfeasance in Initial Coin Offerings and other digital token offerings; 
  • A putative class action lawsuit against celebrities and others who promoted EthereumMax tokens, alleging false and misleading statements; 
  • Buyers of NFTs who are seeking damages from creators of NBA Top Shots for not allowing them to cash out their NFTs fast enough; 
  • A putative class action litigation targeting a crypto mining firm that alleges securities fraud; and 
  • A complaint involving nearly 1,000 crypto traders who are seeking damages from online exchange Binance, for violations of federal and state securities laws.  

Mr. Morrison noted that almost all types of digital asset market participants have now been drawn into some sort of private litigation action, a trend that is likely to accelerate in 2022. 

This article was written by Jennifer Petersen from Above the Law and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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Jennifer Petersen

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