Vincent Nolan – Fintechnically Speaking

February 24, 2025March 28, 2025 by Duane Morris

The SEC’s New Cyber and Emerging Technologies Unit: What Does This Mean for the Crypto Enforcement Agenda?

By: Maruo Wolfe, Vincent J. Nolan III, Carolina Goncalves and Matthew A. Catania

On February 20, 2025, the Securities and Exchange Commission (SEC) announced the creation of the Cyber and Emerging Technologies Unit along with a list of its enforcement priorities which focus, in particular, on fraud. Crypto entrepreneurs and those looking to increase their involvement in the U.S. crypto and blockchain markets should note that the listed priorities contemplate that some blockchain and crypto activities will remain within the definition of securities and will therefore be subject to SEC jurisdiction if fraud is committed, making the Congress’ work on pending blockchain, crypto and stablecoin legislation all important for the advancement of the digital assets markets.

Read the full story on the Duane Morris LLP website.

Disclaimer: The content provided is for informational purposes only and does not constitute financial, investment, or legal advice. While our law firm has substantial experience in cryptocurrency law and regulation, we do not offer investment advice or opinions on cryptocurrency as an investment. Consult a financial advisor before investing.

February 10, 2025March 28, 2025 by Duane Morris

The Challenge of Digital Asset Regulation of NFTs

By: Mauro Wolfe and Vincent J. Nolan III

Following the January 23, 2025 White House Executive Order on crypto (see our post on that executive order here), and its aggressive timeline for developing a crypto-friendly regulatory environment, it appears that all levers of government have been switched “on” when it comes to the world of digital assets. From the Executive Office working group that includes the top agencies and government departments, to the halls of Congress, discussion of all things crypto – and especially the development of legislation (i.e., revamping FIT21), is at the forefront in Washington. In this article, we take a look at one aspect of the discussion: NFTs as digital assets and current proposed legislation to regulate.

NFTs are unique digital assets that represent the ownership of a digital item or real-world asset that are recorded on a blockchain. “Non-fungible” means that, unlike, say Bitcoin, where one Bitcoin is exactly the same as another Bitcoin in the same way one dollar bill is identical to another one-dollar bill, an NFT is a unique, one-of-a-kind digital asset showing ownership of a specific and unique asset, like a piece of art.

So, what is so special about NFTs and why are we interested? The future of NFTs could be big. There are numerous and interesting use cases for NFTs beyond digital images of apes (digital collectibles). The use cases include: digital identification, real estate, art and music, healthcare and medical research, metaverse transactions, car ownership, insurance, consumer rewards, banking and credit. The options are limitless. By some estimates, the global NFT market could reach $14 billion USD by 2027, or $265 billion by 2032, at a growth rate of 30% or more. So, getting legislation and regulation on NFTs wrong could be a deal breaker. NFTs use of blockchain makes proof of ownership fast, efficient, tamperproof, and verifiable.

What is the current state of legislative proposals on NFTs? For today’s article, we want to focus on the resurrection of the New Frontiers in Technology Act (the NFT Act), originally released in September 2024 in the 118^th Congress by Congressman Scott Timmons (R-SC) and co-sponsored by Congressman Ritchie Torres (D-NY). That bill has resurfaced and is aimed to be added in the crypto legislation passed by the House last year, known as FIT21, which is now in the process of being revised in preparation for another attempt at passage.

How does the NFT Act propose to deal with NFTs? The answer is: it is limited and “it’s complicated.” The NFT Act expressly removes “Covered Non-Fungible Tokens” from the definition of a security or an investment contract under US securities law and the now well-known Howey test. What kind of digital assets fall within this category? The NFT Act includes NFTs which are, “developed primarily for personal, family, or household consumption,” and includes things like: art, music, literary works, intellectual property, collectibles, merchandise, virtual land, or video game asset, among other categories.

However, within that definition, there are specific exclusions that relate to how the NFT is marketed or used. Specifically, if the NFT is a work of art, but the NFT is “marketed by an issuer or promoter… primarily as an investment opportunity,” or promises activity designed to increase the value of the NFT, then the NFT is no longer a Covered Non-Fungible Token and may be a security. Further, other exclusions apply. For instance, NFTs that represent digital ownership of securities or commodities will not be included in the definition of a Covered Non-Fungible Token. In effect, it appears that there are two categories for NFTs. They are either a security or a commodity. Finally, the NFT Act requires the Comptroller General of the U.S. to study NFTs and report to Congress within one year, addressing questions about the NFT market.

The NFT Act still needs some work. As drafted, it appears that the NFT Act does not directly address the role of NFT marketplace exchanges. Additionally, the NFT Act is very narrow and provides limited protection for market participants. For example, if a fine artist paints a picture, and creates an NFT through an art dealer who specializes in NFT art for collectors and an LLC subsequently acquires the NFT, is that a security or a commodity, or both? The answer is unclear and “it’s complicated.” Hopefully, we receive more clarity from Congress and the relevant regulators as to how NFTs will be treated and how this will all work.

Duane Morris continues to monitor developments in digital assets and the blockchain sector so we can adequately advise our clients. We look forward to seeing the next proposed piece of legislation that impact NFTs.

January 24, 2025March 28, 2025 by Duane Morris

By Executive Order, the Trump Administration Takes a Stance in Support of Crypto

By Mauro M. Wolfe and Vincent J. Nolan III

On January 23, 2025, President Donald Trump took the first major step to fulfill his campaign promise to make the United States the “crypto capital of the planet,” issuing an executive order entitled “Strengthening American Leadership in Digital Financial Technology.” The order outlines a strategic framework for promoting U.S. leadership in digital assets and financial technology.

Read the full story on the Duane Morris LLP website.

January 16, 2025March 28, 2025 by Duane Morris

Coinbase Wins Another Partial Victory in its Battle for Clarity on Crytpo Regulation

By Sheila Raftery Wiggins and Vincent J. Nolan III

Following its win in the Southern District of New York (SDNY) last week pausing the Securities and Exchange Commission’s (SEC) enforcement suit against it (see our recent blog post on the decision here), Coinbase, Inc. has won another partial victory in the Third Circuit Court of Appeals. This time, Coinbase successfully petitioned the Third Circuit to require the SEC to explain to Coinbase the reasons why it will not engage in crypto rulemaking.

Over the last several years, the crypto community has been very critical of the SEC’s enforcement by litigation approach, arguing that more clarity was needed on how to comply with the law. In July 2022, Coinbase filed a petition with the SEC, seeking to force the agency to engage in rulemaking and promulgate new rules clarifying how and when digital assets qualify as securities under existing federal securities laws. After some skirmishing in the Third Circuit over the timing of the SEC’s response, in December 2023, the SEC denied Coinbase’s rulemaking petition.

The SEC’s written denial was short, its reasoning contained in a single paragraph. It alluded to three bases for its decision: (1) it disagreed with Coinbase’s concerns (as set forth in the rulemaking petition) that application of existing securities law to the crypto environment was “unworkable;” (2) the SEC had other priorities; and (3) the SEC preferred to proceed incrementally.

While the SEC “suggested” these The Third Circuit found the SEC’s order “conclusory and insufficiently reasoned” and therefore in violation of the procedures under the Administrative Procedures Act. The court noted that any of the three grounds asserted in the SEC’s decision “could be sound and independently sufficient bases for denying a rulemaking petition.” But the SEC was required to provide more than conclusory statements and had to explain its reasoning to demonstrate that “its decision considered all important aspects presented by the petition and resulted from reasoned decision making.”

As a result, the Third Circuit granted Coinbase’s petition in part and remanded the matter to the SEC for a more complete explanation of the basis for the denial of the rulemaking petition.

The victory is only partial, however. Coinbase had also asked the Third Circuit to require the SEC to engage in rulemaking. The court declined to order the agency to institute rulemaking proceedings, finding that this was not the “extreme situation” that would warrant the “extraordinary remedy” of a court forcing an administrative agency to engage in rulemaking.

While the judges in the appellate panel were in agreement on the decision, there was some disagreement as to Coinbase’s argument that it had been denied fair notice and due process. Judge Stephanos Bibas, who joined the majority opinion, filed an interesting concurring opinion to address what he saw as a constitutional issue that is “not yet teed up,” but is waiting in the wings. Based on the due process principle that regulated parties should know what is required of them so they may act accordingly, Judge Bibas found that the SEC “repeatedly sues crypto companies,” yet “will not tell them how to comply” with the law. “[T]hat caginess,” according to Judge Bibas, “creates a serious constitutional problem; due process guarantees fair notice.”

While neither the decision itself nor Judge Bibas’ concurrence bring the clarity ultimately sought by the crypto community, the Third Circuit’s decision to require the SEC to explain its denial of Coinbase’s crypto rulemaking petition, coupled with last week’s decision by the SDNY to pause the SEC’s enforcement suit against Coinbase to allow the Second Circuit to opine on the SEC’s application of the securities laws to digital assets, ensure that these issues will now be addressed during and most likely by the Trump administration, which has promised to create a crypto-friendly environment.

January 14, 2025March 31, 2025 by Duane Morris

Court “Pauses” SEC Litigation Against Coinbase to Allow Appeal to Clarify the Relationship Between Crypto-Assets and Securities Law

By David Golden and Vincent J. Nolan III

Judge Katherine Polk Failla from the U.S. District Court for the Southern District of New York has paused the Securities and Exchange Commission’s (SEC) lawsuit against Coinbase, Inc. This rare move will allow Coinbase to appeal Judge Failla’s previous decision to deny Coinbase’s efforts to dismiss the SEC’s lawsuit.

In April 2024, Judge Failla, applying the Howey test used by courts to determine whether cryptocurrency transactions should be classified as investment contracts under federal securities laws, had denied Coinbase’s motion to dismiss the SEC’s complaint and allowed the suit to proceed, accepting (at that stage) the SEC’s argument that “Coinbase’s business of intermediating transactions in cryptocurrency amounted to the operation of an unregistered brokerage, exchange, and clearing agency in violation of federal securities laws.”

But on January 7, 2025, Judge Failla recognized that the varying decisions in recent years regarding application of the Howey Test (including the Ripple and Terraform cases) demonstrated fundamental difficulties in applying Howey to crypto transactions. Central to this decision was Coinbase’s argument that the tokens at issue are akin to commodities because they have no inherent value outside of the “ecosystem” in which they were issued or consumed and cited examples of other such commodities, including carbon credits, emissions allowances, and even expired Taylor Swift concert tickets. Judge Failla acknowledged the court’s use of the “digital ecosystem” in the application of the Howey test, noting that her own prior decision denying Coinbase’s motion to dismiss had concluded that “crypto-asset transactions met the ‘common enterprise’ prong of Howey because crypto-asset purchasers’ ability to profit depends on the development and expansion of the ecosystem.” Judge Failla ultimately agreed with Coinbase at least to the extent that “[t]here is indeed substantial ground to dispute how Howey is applied to crypto-assets and the role of the surrounding digital ecosystem in that analysis.”

This decision does not bring the clarity that many seek in the ongoing battle between the SEC and the crypto community. However, the “pause” could give much-needed time for Congress to enact new legislation, for a circuit court to rule on the application of the Howey test, for the Trump Administration to issue new executive orders, or for the new SEC Chairman to settle the case and provide further guidance on the issue.

November 14, 2024April 3, 2025 by Duane Morris

Impact of the Presidential Election on the Future of Digital Assets in the United States

By Vincent J. Nolan III

During his first term in office, President Trump expressed skepticism about cryptocurrencies, saying that he was “not a fan” and that they were based on “thin air.” However, statements made during the campaign leading to his election on November 5, as well as his family’s involvement in the crypto space, indicate that the new Trump administration now holds a favorable stance toward the industry. The post-election rally in cryptocurrency markets certainly indicates that the industry believes that the incoming Trump administration will be pro-crypto.

In this post, we will explore what the future of cryptocurrency might look like under a Trump-led government, how regulatory changes could unfold, and the potential timeline for meaningful reform.

1. A Pro-Crypto Administration

Based on his campaign rhetoric and the Trump family’s increasing involvement in crypto, it appears that President Trump will be a more crypto-friendly president than his predecessor. For example, his policy proposals have included the following:

Aggressively encouraging Bitcoin mining by having – in his words — “all the remaining Bitcoin to be MADE IN THE USA;”
Creating a strategic Bitcoin reserve to eliminate the $35-plus trillion U.S. debt;
Preventing the creation of a central bank digital currency; and
Eliminating oppressive regulation in the crypto space by, in part, firing U.S. Securities and Exchange Commission Chair Gary Gensler “on day one.”

While not all campaign promises become reality, it is likely that the new Trump administration will take an aggressively supportive stance toward cryptocurrency.

2. The SEC Under Fire

On the campaign trail, President-elect Trump pledged to the industry that he will fire SEC Chair Gary Gensler “on day one.” We would expect that Trump will attempt to carry out this promise immediately.

Under Gensler, the SEC has classified many digital assets as securities and, as a result, brought and litigated multiple cases against major crypto exchanges, projects and developers for allegedly selling unregistered securities and other alleged violations. This has led to tension with the crypto industry, with complaints that the SEC is regulating the industry through enforcement, that the regulatory environment is not clear, and that these efforts have impeded innovation and development of the crypto economy.

Whether President Trump can actually or effectively fire Gensler immediately remains to be seen. Gensler’s term currently runs through June 5, 2026, and, having been appointed and confirmed by the Senate, he can only be fired for cause. But as p.resident in his first term, Trump demonstrated that he did not want to be bound by the niceties of the federal appointment process and would creatively work to achieve his ends.

3. Congressional Movement Towards Crypto-Friendly Legislation

The U.S. crypto industry has been pushing hard for regulatory clarity. While the executive branch can take significant steps to shape policy, legislative action will be crucial for ensuring the long-term stability and growth of the crypto industry.

During his presidential campaign, President Trump declared that he will be a pro-crypto president. But it is important to recognize that the crypto industry’s political efforts were not limited to the presidential race and, as a result, over 250 (self-proclaimed) “pro-crypto” candidates were elected to Congress.

Under a Trump-led government, we would expect to see a concerted effort from both the administration and Congress to pass legislation that recognizes cryptocurrency as a legitimate asset class and establishes clear rules for its use and taxation, building upon prior efforts such as the passage of the Financial Innovation and Technology for the 21st Century Act in May 2024 by the House. By highlighting the economic potential of crypto and the need for the U.S. to remain competitive in the global digital economy, the Trump administration could leverage the first truly pro-crypto Congress to pass crypto-friendly legislation that clarifies the legal framework for digital assets.

4. A 12-18 Month Timeline for Crypto Legitimization

Regardless of what happens with the SEC chair, if the Trump administration successfully drives legislative action, we could see significant changes within the next 12 to 18 months.

New legislation that brings regulatory clarity could create new opportunities in the following ways:

Open the door for traditional financial institutions, including banks and large investment firms, to participate more actively in the crypto space. These institutions have largely been sidelined due to regulatory uncertainty and the risk of non-compliance with existing laws. Once a clear legal framework is established, these institutions would have more incentive to offer crypto-related products and services, such as custody, trading, and even crypto-based financial products;
Retail investors could benefit from greater legitimacy and protections within the crypto market;
It could lead to a surge in retail adoption, further driving the price and mainstream acceptance of digital assets; and
Losses in crypto and blockchain development to Asian markets could be reversed and the U.S. could again become a haven for innovation in the crypto space.

Conclusion: Crypto’s Bright Future in a Trump Administration

In summary, a second term for Donald Trump could be a game-changer for the cryptocurrency industry in the U.S. With a pro-crypto stance, potential changes at the SEC, and the push for favorable legislation, the next 12 to 18 months could see crypto move from a fringe asset class to a mainstream financial tool. The Trump administration’s focus on deregulation and fostering innovation, combined with pressure from industry stakeholders and the broader financial sector, could help pave the way for a more robust and legitimate cryptocurrency market in the U.S.

April 9, 2024April 3, 2025 by Duane Morris

Coinbase Effort to Dismiss SEC Suit Falls Short

A New York federal court has held that the SEC sufficiently pleaded that Coinbase—a well-known cryptocurrency exchange, broker, and clearing agency—operated as an unregistered intermediary of securities and engaged in the unregistered offer and sale of securities through its crypto staking program. In a partial win for Coinbase (and possibly others offering wallet services), the court dismissed the SEC’s claim that Coinbase acted as an unregistered broker by offering a crypto wallet application to its customers. The case is Sec. and Exch. Comm’n v. Coinbase, Inc., 23 Civ. 4738 (S.D.N.Y. Mar. 27, 2024).

This decision has important ramifications for all players in the crypto market, as it clears the way for the SEC to continue to act as the primary regulator of crypto in the absence of further regulatory direction from Congress and allows the SEC to continue aggressive enforcement in the crypto space.

Coinbase operates as one of the world’s largest crypto trading platforms that offers additional services that complement its crypto trading operations. Coinbase “Prime” is a service that institutional customers can use to execute large volumes of crypto trades through both Coinbase and third-party trading platforms. Coinbase “Wallet” is a self-custodial wallet that allows customers to store crypto assets on their own computers or mobile devices with the ability to connect to decentralized exchanges to trade these assets. Coinbase’s staking program allows customers to earn financial rewards (usually in the form of cryptocurrency) for transferring custody of assets to Coinbase, who in turn takes a commission from the staking profits and returns the balance to the customer.

On June 6, 2023, the SEC brought a lawsuit against Coinbase under the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC alleged that Coinbase violated the law by acting as an unregistered securities broker, an unregistered securities exchange, and an unregistered securities clearing agency. The SEC named a dozen popular crypto assets (including Solana and Chiliz) and argued that these assets met the legal definition of a “security” (in SEC parlance, an “investment contract”). Thus, the SEC alleged that Coinbase violated the law by working with these assets and not registering with the SEC. Coinbase moved to dismiss the SEC’s complaint, contending primarily that none of the crypto assets named by the SEC met the definition of an investment contract and Coinbase therefore was not subject to federal securities laws.

The decision, authored by Judge Katherine Polk Failla in the Southern District of New York, first held that the SEC was not violating regulatory and administrative law by instituting its enforcement action against Coinbase. The court then applied the well-known Howey test for investment contracts and held that the SEC plausibly alleged that at least some of the crypto asset transactions on Coinbase’s platform (including those on its Prime service) constituted investment contracts. After finding that the SEC plausibly alleged that Coinbase facilitated transactions in securities, the Court declined to dismiss the majority of the SEC’s claims alleging that Coinbase violated the federal securities laws. Additionally, the Court held that the SEC adequately alleged that Coinbase’s crypto staking program was an investment contract subject to federal securities law.

Notably, the court rejected Coinbase’s argument that secondary market transactions–those that involve an asset purchaser buying crypto assets from someone other than the original issuer–were excluded from the definition of investment contracts. Coinbase relied, among other cases, on the July 2023 decision in SEC v. Ripple by another judge in the Southern District of New York, which held that Ripple’s sales of XRP (a crypto token) on secondary platforms did not constitute securities transactions (SEC v. Ripple also held that sales of XRP to institutional investors did constitute securities transactions).

Without directly contradicting the Ripple decision, Judge Failla ruled that crypto transactions on the secondary market cannot be categorically excluded from constituting investment contracts. The Howey test makes no such distinction and Judge Failla found little logic to the attempt to draw a distinction between investors who buy directly from the issuer and those who purchase on the secondary market in reliance on “promises and offers made by issuers to the investing public.” In her opinion, Judge Failla cited favorably to the December 2023 decision SEC v. Terraform Labs, from yet another judge of the Southern District of New York, which rejected many of the same arguments Coinbase raised regarding transactions on the secondary market.

The court did, however, dismiss the SEC’s claim that Coinbase conducted unregistered securities brokerage activity through its “Wallet” application. The court noted that the Wallet application did not undertake routing activities traditionally carried out by securities brokers, including directing how and when to execute trades. Indeed, the SEC’s allegations conceded that Coinbase had no control over a user’s crypto assets via the “Wallet” application. This was ultimately fatal to the SEC’s claim because the SEC failed to adequately allege that Coinbase was acting as a broker.

The Coinbase decision provides the SEC with a win in two areas. First, the court held that the SEC’s aggressive crypto enforcement actions did not violate federal or regulatory law, paving the way for the SEC to continue acting as the primary U.S. crypto regulator. Second, the decision held as a matter of law that the SEC adequately alleged that Coinbase’s crypto services dealt in investment contracts. Finally, the balance of cases within the Southern District of New York has now tipped decidedly in favor of the conclusion that, when the elements of the Howey test are met, there is little distinction to be drawn between investors who buy directly from the issuer and those who purchase on the secondary market. While the SEC may not necessarily prevail at trial, this opens the door for further crypto enforcement actions and provides a strong basis for such actions to proceed past the pleading stage into the expensive and time-consuming process of discovery and motion practice.

January 10, 2024April 3, 2025 by Duane Morris

Webinar: U.S. Law Enforcement Targets Growing Global Crypto Market

Duane Morris and Khaitan & Co will present a Zoom webinar, U.S. Law Enforcement Targets Growing Global Crypto Markets: The Tiger in the Grass ‒ What Every Crypto Actor Must Know Now, on Thursday, January 18, 2024, from 4:30 p.m. to 5:30 p.m. IST. (Note: For those attendees located in the U.S., the time for this webinar is Thursday, January 18, 2024, from 6:00 a.m. to 7:00 a.m. Eastern.)

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October 10, 2023April 3, 2025 by Duane Morris

Webinar: U.S. Law Enforcement Targets Crypto in Asia: The Tiger in the Grass ‒ What Every Crypto Actor Must Know Now

Duane Morris will present U.S. Law Enforcement Targets Crypto in Asia: The Tiger in the Grass ‒ What Every Crypto Actor Must Know Now on Thursday, November 30, 2023, from 10:00 a.m. to 11:00 a.m. Singapore.

About the Program

Crypto entrepreneurs and their financers and advisers are facing unprecedented enforcement activity from the U.S. government, including the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ). The SEC, in particular, has taken an aggressive stance in applying U.S. securities law to internationally based cryptocurrencies, and international players in the crypto market are routinely being called to defend themselves in U.S.-based investigations and U.S. courts.

In this webinar, a Duane Morris team will discuss the basis for the SEC and DOJ’s assertion of jurisdiction over international actors so that crypto players can determine whether their actions may lead to the need to comply with U.S. securities laws. The panel will also discuss the various U.S. laws that could be triggered so that foreign crypto actors become more acquainted with U.S. laws and regulations. The focus of the webinar is to educate crypto players enough so that they understand the risks.

Speakers