Crypto-Enforcement Around the World

Postscript | Securities Law
Crypto-Enforcement Around the World
Douglas S. Eakeley* & Yuliya Guseva† with Leo Choi‡ & Katarina Gonzalez§, Rutgers Center for Corporate Law and Governance, Fintech and Blockchain Research Program**

Vol. 94, Postscript (May 2021)
94 S. Cal. L. Rev. Postscript 99 (2021)

Keywords: cryptocurrency, Technology, SEC, CFTC, cryptoasset

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INTRODUCTION

The market for cryptoassets is burgeoning as distributed ledger technology transforms financial markets. With the extraordinary growth in the crypto-markets comes the need for regulation to promote efficiency, capital formation, and innovation while protecting investors. With the need for regulation comes enforcement. The blockchain revolution in capital and financial markets has already attracted the attention of enforcement agencies in many jurisdictions. In this Article, we elaborate on crypto-related enforcement and report on the results of the Enforcement Survey conducted by the Rutgers Center for Corporate Law and Governance Fintech and Blockchain Research Program.

We find that the United States Securities and Exchange Commission (“SEC” or “Commission”) brings more enforcement actions against digital-asset issuers, broker-dealers, exchanges, and other crypto-market participants than any other major crypto-jurisdiction. By the same token, its enforcement entails more serious penalties. In addition to reviewing the international data, we provide detailed comparisons of the crypto-enforcement actions of the United States Commodity Futures Trading Commission (“CFTC”) and the crypto-enforcement program of the SEC. Whereas SEC enforcement has been relatively stable, CFTC cases have been trending up. By contrast, enforcement in foreign jurisdictions seems to be subsiding. Our data raise theoretical questions on regulation via enforcement, its effect on financial innovation, and regulatory competition.

In Part I, we start with discussing the pros and cons of regulation by enforcement, as well as its consequences for innovation and a possible outflow of capital. Part II describes the methodology of the research. Part III presents the main findings. Parts IV and V discuss SEC and CFTC enforcement data, respectively, while Part VI compares the enforcement actions of the two regulators.

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*. Alan V. Lowenstein Professor of Corporate and Business Law, Co-Director of the Center for Corporate Law and Governance, Rutgers Law School (douglas.eakeley@law.rutgers.edu).

†. Professor of Law, Director of the Fintech and Blockchain Program, Rutgers Law School (yg235@rutgers.law.edu).

‡. J.D., Rutgers Law School 2020, Fintech Program Researcher 2019–2020, Associate at Sosnow& Associates PLLC (leo@jobsactlawyer.com).

§. J.D., Rutgers Law School, Fintech Program Researcher 2019–2020, E-Commerce and Contracts Manager at WingIt Innovations LLC (klg190@scarletmail.rutgers.edu).

**. The Blockchain and Fintech Research Program is generously supported by the University Blockchain Research Initiative, the Ripple Impact Fund, and Silicon Valley Community Foundation. The authors would like to thank the participants of the Yale Law School 2020 Conference on Law and Macroeconomics and the 2020 Annual Meeting of the American Society of Comparative Law, UCLA Law School, for their comments and suggestions.

Anti-Anti-SLAPP: How the Judiciary’s Narrowing of California’s Anti-SLAPP Law Could Thwart Legislative Intent

Andy Black

Since 2015, state Anti-Strategic Lawsuits Against Public Participation (“anti-SLAPP”) laws that were enacted to prevent litigious plaintiffs from silencing a defendant’s First Amendment rights have come under attack from state and federal courts.[1] California Civil Procedure § 425.16 (“§425.16”), California’s anti-SLAPP law, is particularly susceptible to this judicial narrowing, as it is widely considered the broadest anti-SLAPP statute in the country.[2] Indeed, the California Supreme Court in the 2019 case FilmOn.com Inc. v. Double Verify Inc. narrowed § 425.16’s applicability by articulating a stricter context-based standard for protected conduct under the statute’s catchall subdivision, § 425.16(e)(4).[3]

This Article argues that this stricter standard is unwarranted in light of § 425.16’s legislative intent, previous California Supreme Court § 425.16 rulings, and the reasonable protections built in to § 425.16 for plaintiffs. Moreover, the court’s underlying frustration with § 425.16 overuse will likely be exacerbated, not ameliorated, by this stricter standard. Additionally, the vulnerable defendants § 425.16 was intended to help, in particular online watchdogs, will likely suffer the most under this stricter standard. This Note concludes that the California Legislature should act to clarify § 425.16(e)(4) or risk continued judicial efforts to narrow its applicability and potentially thwart its legislative purpose.

Patent Subject Matter Eligibility in the Post-Alice Wonderland: USPTO Guidance and a Push for More Clarity

Trevor J.C. Foster

The United States patent system has long been considered the gold standard of global patent systems, in part because of the consistency and strength of the protections that it has granted to inventors.1 The rapid growth of the United States economy during the nation’s early years is often attributed in part to the patent system adopted by the country,2 and the strength of the United States patent system allows the United States to remain among the world’s most innovative countries despite falling behind other countries in areas relevant to innovation such as higher education and researcher concentration.3 A hallmark of a strong patent system is predictability.4 “In a strong patent system, patent rights are granted to particular inventions in a predictable manner, and patent infringement similarly is enforced in a predictable manner.”5 This predictability reinforces the strength of the patent system by allowing inventors to protect their inventions and efficiently allocate resources for future innovation.6

Until relatively recently, the rules regarding patent eligible subject matter were clear and predictable—courts and the United States Patent and Trademark Office, or USPTO, should interpret subject matter eligibility requirements broadly.7 This expansive subject matter eligibility interpretation was widely criticized as resulting in patents that were both too broad and too vague, 8 which resulted in the judiciary revisiting the issue of patent subject matter eligibility in a series of cases culminating in Alice Corp. Proprietary Ltd. v. CLS Bank International.9 In Alice, the Supreme Court reified a two-step analytical framework for patent subject matter eligibility.10 This framework, which was established in part to clarify patent-eligible subject matter, has been heavily criticized as being “chaotic,” a “real mess,” and even putting patent subject matter eligibility into a “state of crisis.”11 The application of this framework has proven to be “unpredictable and impossible to administer in a coherent consistent way.”12

In the years since Alice, there has been much legal scholarship and research regarding how to resolve the ambiguity surrounding patent subject matter eligibility, but nothing has successfully resolved the issue in practice. In January 2019, the USPTO promulgated guidance on the issue of patent subject matter eligibility.13

This Note will begin by providing a brief discussion of patent subject matter eligibility. Next, the Note will discuss the January 2019 Guidance promulgated by the USPTO and how the Guidance aims to alter the two-step analytical framework from Alice, before assessing whether this Guidance has appeared to have any substantial effect on the federal judiciary in the first year since the Guidance was promulgated.

Douglas S. Eakeley, Yuliya Guseva with Leo Choi & Katarina Gonzalez, Rutgers Center for Corporate Law and Governance, Fintech and Blockchain Research Program

Shutting Down the School-to-Prison Pipeline

Maja Tosic

When a student misbehaves, race plays a role in how harshly the student is disciplined. Given the long history of racial discrimination in the United States, as well as prevalent implicit biases, Black and Latino students are disciplined at higher rates with stiffer punishments than their white peers. This higher level of discipline leads to a downward spiral of poor school performance and attendance, involvement in illegal activity, and arrest and imprisonment. Ultimately, Black and Latino students fall victim to a school-to-prison pipeline that many white students are not pushed into despite similar misbehavior. In order to protect students from the pipeline, equalize educational opportunities, and create a safe and welcoming school environment, it is necessary for the federal government to invalidate disciplinary policies that cause an unjustified, disparate impact.
Under President Obama, a first-ever policy guidance on student discipline was issued, which stated that not only are intentionally discriminatory policies unlawful per Title VI of the Civil Rights Act of 1964, but so too are facially neutral policies that cause an unjustified disparate impact. The Trump Administration rolled back the policy guidance, citing that a disparate impact policy is not a Title VI violation per current precedent and that invalidating disparate impact disciplinary policies makes schools less safe and more prone to shootings. This Note will examine those arguments and will conclude that the disparate impact standard is supported by current precedent, does not increase the rate of school shootings, and ultimately should be reinstated. The disparate impact standard is a necessary safeguard against negative, implicit attitudes and is an important step in eradicating the school-to-prison pipeline.

The Supersecretary in Chief

Kathryn E. Kovacs

Postscript | Administrative LawThe Supersecretary in Chiefby Kathryn E. Kovacs* Vol. 94, Postscript (November 2020)94 S. Cal. L. Rev. Postscript

Resolving the Merits of the Emoluments Cases: Either Way, Several Presidents Were Wrong

Jesse Mentz

In this Note, I offer a summary, a realization, a conclusion, and an explanation: a summary of what I found to be the most convincing arguments of each side, noting both the plaintiffs’ and defendant’s efforts to characterize history as uniquely supporting their favored interpretation; a realization of the impossibility of perfect historical consistency in any interpretation; a conclusion that in light of unavoidable historical inconsistency, the Foreign Emoluments Clause does indeed apply to President Trump’s hotel revenues; and an explanation of one possible way to view the inconsistent application of the clause in view of my conclusion that it does apply.
Under my proposed view, the fact patterns of all the introductory stories fall within the scope of the Emoluments Clause(s) —they are all “emoluments” under the broad definition—but the difference in the propriety of the behavior is based primarily on what is outside the fact patterns: the appearance of the possibility of corruption. The reason these cases are being brought against the forty-fifth president and not the first has much more to do with the perception of who the presidents were and are, and the public’s corresponding intuitive sense of the possibility of corruption. This understanding is one possible explanation of how Washington could purchase land at a public auction designed to raise funds for the founding of the new capital without raising flags, but Trump cannot similarly lease hotel space from the government and avoid scrutiny.

On the Imperative of Civil Discourse: Lessons from Alexander Hamilton and Federalist No. 1 -Postscript

Donald J. Kochan

Postscript | Constitutional LawOn the Imperative of Civil Discourse: Lessons from Alexander Hamilton and Federalist No. 1by Donald J. Kochan*

Judging Corpus Linguistics

Brian G. Slocum & Stefan TH. Gries

In this short essay, in the spirit of offering general concerns about corpus analysis and legal interpretation, we largely focus on Lee and Mouritsen’s efforts in addressing the above issues.6 We argue that Lee and Mouritsen’s conceptualization of the potential role for corpus linguistics within legal interpretation is inadequate and underestimates the difficulty of judicial adoption of corpus analysis methods. Corpus analysis can provide useful information about the functioning of language, but it is crucial to neither understate the role of context in determining statutory meaning nor overstate the potential contribution of corpus analysis to legal interpretation.

2021 Federal Clerkships: Can Order Emerge From Chaos?

Carl Tobias

This is a perfect juncture for analyzing 2021 federal judicial clerkships. Many aspirants recently finished half of their legal education. Six appeals courts’ members have agreed to honor a new Federal Law Clerk Hiring Plan (hereinafter referred to as “the pilot”) that is currently in its second year. The pilot directly proscribes seeking and permitting clerkship applications and recommendation letters until June 15, 2020 and prohibits student clerkship interviews and judicial offers before June 16, 2020.1 However, certain judges within these six tribunals will not respect the pilot during its second year, even though jurists in the seven remaining courts of appeals might follow the new plan. The Administrative Office of the United States Courts (“AO”) extended 2L students OSCAR access in February while suspending in January 2014 the 2003 clerk hiring plan—whereby 3L employment began near Labor Day—and judges will soon consider aspirants. Clues offered below may assist prospects in securing the coveted positions which start in 2021.