DEF November Recap

Here’s what the DeFi Education Fund (DEF) has been up to in November 2024. If you have any questions or would like to learn more about a specific activity, please do not hesitate to reach out at contact@defieducationfund.org.

Joining 18 States in Suing the SEC

On November 14, 18 states and DEF filed a lawsuit against the SEC in the Eastern District of Kentucky to clarify the law related to digital assets and prevent the SEC from “continuing its unlawful campaign of regulatory overreach” in crypto.

The complaint asks the Court to issue an order enjoining the SEC from bringing further enforcement actions premised on the failure of digital asset secondary market trading platforms to register as securities exchanges, dealers, brokers, or clearing agencies, and to declare:

• that a “digital asset transaction is not an investment contract” under the securities laws “if it does not transfer any stake in any enterprise that the seller or anyone else has an obligation to manage for the asset owner’s benefit and share resulting profits”;

• that digital asset platforms that facilitate secondary transactions that lack those characteristics need not register as securities exchanges, dealers, brokers, or clearing agencies;

• that the SEC violated the Administrative Procedure Act (APA) by adopting a policy that secondary transactions in common digital assets are uniformly “investment contracts,” and platforms that facilitate such transactions are securities exchanges, broker-dealers, and clearing agencies subject to registration requirements; and

• that the SEC’s refusal to promulgate that policy through notice-and-comment rulemaking violated the APA.

For more information on this suit, check out the press releases from Nebraska, Kentucky, as well as the complaint itself. 

Publishing a New Paper on the BSA

On November 20, DEF published a new paper written by DEF's Lizandro Pieper and Gavin Zavatone entitled "Square Peg in a Round Hole: Why the Bank Secrecy Act Should Not Apply to Blockchain Participants." 

The paper investigates the history and design of the BSA, its application to crypto, and explains why software providers and operators across the technology stack are not subject to the BSA.

Furthermore, the paper argues why it is necessary for Congress to step in and clarify that the BSA is not applicable across the blockchain technology stack and enact something into law in the spirit of Congressman Tom Emmer’s Blockchain Regulatory Certainty Act and 

Congressman Warren Davidson's Keep Your Coins (KYC) Act.

Check out the full paper at the link. 

Submitting Another Comment Letter on the IRS’s “Broker Rulemaking”

On November 6, in collaboration with the Blockchain Association (BA) and the Texas Blockchain Council (TBC), DEF filed an additional comment letter to the Internal Revenue Service (IRS) in response to the Comment Request for Digital Asset Proceeds from Broker Transactions, which asks for comments related to the new tax form 1099-DA for reporting digital asset transactions in light of the Paperwork Reduction Act (PRA).

The comment letter argues, among other things, that Treasury’s estimates regarding the burden on brokers to comply with the rule—originally 2.15 million hours and later adjusted to 2.25 million hours—is inaccurate and grossly underestimated, misleadingly focusing on the reporting requirement on a “per customer” rather than a “per transaction” basis, resulting in a vastly understated workload for brokers who may need to process multiple forms for each customer. 

Check out the full letter at the link. 

November Financial Disclosures

We are continuing to share a more detailed look into our financial disclosures. You can find the November 2024 breakdown below. If you would like to look at our 2024 financial breakdowns, please click here. 

Donations Received	$9,774
Grants
Lobbyists	$40,000
Public Relations	$7,500
Policy Litigation
Marketing
Merchandise
Operating Expense	$7,953
Payroll and Associated Taxes	$122,813
Professional Fees
Accounting	$10,895
Legal	$8,908
Other Consultants	$4,000
Transacting Fees	$1,720
Insurance	$1,953
Tax & Licenses	$375
Other Overhead	$9,674

November Media

Print/Online

• CoinDesk: Republican State AGs and DeFi Lobby Sue SEC Over Crypto Enforcement Actions

  • Miller Whitehouse-Levine, the chief executive officer of DEF, said in a statement that the suit was targeting SEC "overreach."

"DeFi, and crypto broadly, promises to make financial services and the digital economy more accessible, efficient, interoperable, dependable, and consumer-focused," he said. "The SEC currently stands as a barrier to realizing this promise."

• Fox Business: 18 states sue SEC over 'unconstitutional overreach' of digital assets

  • Led by Kentucky Attorney General Russell Coleman, the lawsuit was jointly filed in a Kentucky district court in partnership with 17 other Republican attorneys general from Nebraska, Tennessee, West Virginia, Iowa, Texas, Mississippi, Montana, Arkansas, Ohio, Kansas, Missouri, Indiana, Utah, Louisiana, South Carolina, Oklahoma and Florida. 

The complaint was filed in collaboration with crypto advocacy group DeFi Education Fund, which advocates for sound policy in the decentralized finance space.

• DL News: How two Biden-era rules risk destroying ‘dream of DeFi’ before Trump’s term starts

  • But thematically, the bills do the same thing, DeFi Education Fund CEO Miller Whitehouse-Levine told DL News. They look to apply existing regulations to the sector, against its ethos of decentralisation.

• DL News: Crypto’s lobbying machine isn’t done yet. Here’s why it’s raised another $78m

  • “There’s been a splintering in priorities post election with the absence of the Gary Damocles hanging over everyone’s head,” Miller Whitehouse-Levine, CEO of crypto lobby group DeFi Education Fund, told DL News.

• Capitol Account: Talking Housing Policy With HPC's DeMarco

  •  A new report out this week from the DeFi Education Fund highlights the current “ambiguous regulatory landscape” for this “new frontier of financial technology” and calls on Congress to provide clarity. It notes that Treasury’s Fincen has issued guidance that indicates developers aren’t covered by the Bank Secrecy Act. But that hasn’t stopped federal prosecutors from charging the Tornado Cash coders with money laundering and sanctions violations.

“For a lot of the industry, people are worried and don’t know where they stand on things,” says Laz Pieper, the DeFi fund’s policy associate who authored the paper. “We think Congress is the best avenue for making that clarity.”

• The Block: US CFPB finalizes its rule for large nonbank firms offering digital payments, but excludes crypto

  • Lizandro Pieper, policy associate at the DeFi Education Fund, said Congress should be the "primary force" in adopting rules for digital assets, not regulatory agencies. "We are pleased that the CFPB considered our concerns and excluded digital asset transactions from its finalized rule today," Pieper said in an emailed statement to The Block. "The rule will now only consider US dollar transactions in its larger participant threshold."

Blog Posts

• Illicit Finance Remains Rampant in TradFi

  • Authored by Gavin Zavatone 

For up-to-date information about what’s happening in D.C. and what we are up to, please follow us on Twitter @fund_defi and subscribe to our Substack.