Here’s what the DeFi Education Fund (DEF) has been up to in December. If you have any questions or would like to learn more about a specific activity, please do not hesitate to reach out.
December has been another busy month for the DeFi Education Fund team, from containing the fallout in D.C. as a result of FTX’s meltdown to challenging the CFTC in the Ooki DAO case. Here are some of the specific items we worked on this past month.
Capitol Hill Continues to React to FTX
Following November’s collapse of FTX, conversations on Capitol Hill have continued in full force with a heightened focus on what led to the collapse and what regulations are necessary to prevent something like this from happening again.
While not directly involved in either of the two hearings in November (Senate Banking & House Financial Services), we have continued to distinguish DeFi from CeFi to policymakers by illustrating how DeFi could have prevented the FTX fiasco.
Discussing these matters and looking ahead to the 118th Congress, DEF’s Policy Director Miller Whitehouse-Levine notes in a Fortune op-ed:
“Applying the same requirements to centralized and decentralized exchanges, intentionally or not, would be akin to applying the same requirements to airplanes and cars because they’re both used for transportation. Just because both modes convey you to a destination does not mean they should be bound to the same set of rules. Legislation that arises in the next Congress must be tailored to treat DeFi uniquely, with an understanding of its benefits, weaknesses, and potential.”
You can read the full op-ed here.
As we noted in our last monthly update, “the hill just got much taller and much steeper.” It is up to all of us to demonstrate the value of decentralized networks to our elected officials in order to protect the technology from burdensome regulatory obligations.
Ooki DAO v. CFTC
On December 7, Judge Orrick heard arguments in CFTC v. Ooki DAO. This first hearing focused on whether or not the CFTC appropriately served Ooki DAO by posting on a chatbot and forum.
In our allotted time before the Judge, we continued to assert that the CFTC had failed to demonstrate that appropriate notice was served and that the CFTC's theory of liability is unsound and cannot be stretched to encompass individual token holders. A more detailed summary of the first hearing can be found here.
Less than a week later, on December 12, Judge Orrick made a preliminary ruling requiring the CFTC to either serve the Founders of the predecessor of Ooki DAO or to showcase why service is impossible.
The Order explained that the Court was unaware that Bean and Kistner were token holders of Ooki DAO prior to the first hearing. Of note, the December 12th ruling did not resolve the alternative service issue.
Finally, on December 20, Judge Orrick ruled on the service issue, ruling that the service of the Ooki DAO was sufficient and that the CFTC’s case could move forward.
While this is disappointing, Judge Orrick’s order has a small silver lining in the fact that Judge Orrick noted that his determination that “Ooki DAO has the capacity to be sued does not necessarily establish that the DAO is an association that can be held liable under the CEA.”
We will continue to follow the case and will provide updates as we get them.
On Thursday, December 8th we hosted our inaugural “Hill Staff Happy Hour” at Takoda Navy Yard. The event attracted participants from more than 15 different offices on both sides of the aisle. We look forward to engaging with more incumbent and newly elected offices in 2023.
Op-Ed Authored by Miller Whitehouse-Levine
Conversely, we expect to see increased enforcement activity from federal and state regulatory agencies in 2023, which we expect to pick up in intensity due to FTX. Fortunately, we are a well organized industry with fantastic advocacy groups including the Blockchain Association, Coin Center, the Chamber of Digital Commerce, the DeFi Education Fund, and the Crypto Council for Innovation, each of which is staffed with phenomenally talented folks who are standing at the ready to represent the industry 24/7/365.
But Miller Whitehouse-Levine, policy director of The DeFi Education Fund, told TIME in a phone interview two weeks ago that “I don’t think this hearing is indicative of momentum behind the DCCPA. If anything, I think it has added much more to think about in the next few months.”
The DeFi Education Fund said in a statement Tuesday, "While we continue to wait for the further explanation as well as for the court to resolve the CFTC's motion for alternative service, which will not be done until the CFTC has attempted to serve the individuals, we continue to assert that the CFTC has failed to demonstrate that appropriate notice was served and that the CFTC's theory of liability is unsound."
“Because the stakes are so high and the novelty of the case — which I think we’ve all recognized here — we think it’s all the more important that the government be required to turn square corners on service here,” said James McDonald, representing advocacy group the DeFi Education Fund.
"They were planning on having a party of the century," recalls Miller Whitehouse-Levine, the policy director of the DeFi Education Fund, a crypto nonprofit. "The talk on the town was it's going to be the craziest DC Christmas party ever."
Miller Whitehouse-Levine, policy director of The DeFi Education Fund, told TIME in a phone interview that “I don’t think this hearing is indicative of momentum behind the DCCPA. If anything, I think it has added much more to think about in the next few months.”
Token Terminal: DeFi Education Fund – Policy education and advocacy to help DeFi
Miller Whitehouse-Levine, Policy Director at DeFi Education Fund (DEF) – a non-profit organization that explains decentralized finance to policymakers around the world and advocates for policies welcoming of decentralized financial infrastructure – joined us for an interview to walk through the basics of DEF and the important role that Policy work plays within crypto.
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.