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DEF’s February Recap  

Here’s what the DeFi Education Fund (DEF) has been up to in February 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.


Filing Amicus Brief in Support of Kraken 

On February 29th, DEF filed an amicus brief in federal court in the Northern District of California in support of Kraken’s motion to dismiss the Security and Exchange Commission’s (SEC’s) complaint.


In our brief, we aim to explain the various incorrect and often inconsistent legal positions the SEC employs in its attempts to justify its position that digital asset transactions are securities transactions. 


Our brief starts off by explaining why digital assets “typically are not themselves investment contracts” and flag for the court that even the SEC has taken inconsistent positions on that issue when pressed by courts in oral arguments.


We argue against the SEC’s belief that digital assets become securities simply because the buyer of a digital asset believes that the asset will increase in value due to the efforts of the assets’ creator, or if the creator makes public statements saying they will increase its value.


Furthermore, we refute one of the SEC’s recently deployed theories that digital assets are securities because their value is tied to an “ecosystem,” a term the SEC has never defined. To demonstrate the absurdity of the SEC’s theory and give the court a tangible example, we explain why Pokémon cards are NOT securities even though they should be classified as such under this theory.


The SEC’s case against Kraken raises many of the same issues found in the SEC’s cases against Coinbase and Binance, as well as LEJILEX and CFAT’s lawsuit against the SEC.


DEF will continue to support industry players and if you have any questions on our work in this area please do not hesitate to reach out. 


And don’t forget to check out the full amicus brief and DEF’s Amanda Tuminelli’s thread on the matter. 


Arguing for the Need for Impact Litigation in CoinDesk

In response to recent news from LEJILEX and the Crypto Freedom Alliance of Texas, who brought a pre-enforcement challenge against the Securities and Exchange Commission (SEC), DEF’s Chief Legal Officer, Amanda Tuminelli penned an op-ed in CoinDesk discussing how the industry could use “impact litigation” to get much needed regulatory clarity. 


In the piece, the two note: 


“It may seem unusual to think of the judiciary as the branch of government where individuals can appeal for better policy. After all, the legislature (Congress) is responsible for passing laws, and the executive (the White House and the administrative agencies, including the SEC) is responsible for enforcing them. But for many decades, the courts have played a crucial role in shaping the law to serve public policy goals and benefit society. Using impact litigation to present the courts with key questions of national significance is a tried-and-true method for bringing about meaningful change.”


The piece also touched on the necessary conditions for which using impact litigation can be useful, connecting that to the experiences of the U.S. digital asset sector. 


And be sure to check out a blog post from DEF outlining the suit brought by CFAT and LEJILEX and what it could mean for the industry. 


DEF Provides Update on Organizational Funding

On February 2, DEF provided an update to the community on our organizational funding. Part of our commitment to keeping the community informed on how we use our UNI.


As mentioned in our announcement: 


“Over the next 18 months, we will be selling our remaining UNI tokens to help fund our work through 2025, which will be four years after the initial UNI grant that funded DEF. We’ll be moving a quarter of our UNI tokens out of our multisig each quarter this year to make these monthly sales.”


Be sure to check out the full announcement


Media


Blog Post


Op-Eds


Print/Online

  • Industry groups Blockchain Association and DeFi Education Fund made similar assertions in a joint brief on Thursday, telling the California court the Kraken suit is "yet another attempt by the SEC to sweep practically all digital assets within its regulatory purview" under its investment contract theory.

  • Amanda Tuminelli, chief legal officer for crypto advocacy group the DeFi Education Fund, said in a statement to Law360 that the LEJILEX case sends a message to the SEC that industry participants intend to challenge the regulator on its crypto authority. "A ruling on the important questions raised by this suit would provide precedent for other federal courts to follow and would achieve a modicum of clarity for the sector in the United States," said Tuminelli. The DEF is not involved in the lawsuit.

  • The DeFi Education Fund (DEF), which also submitted a comment letter in 2022, said on Tuesday that the SEC’s new rule is “misguided and unworkable…“While the SEC acknowledged receiving comments discussing DeFi, including our concerns, the SEC not only failed to confront the substance of our concerns but also failed altogether to articulate any discernible path to compliance for DeFi market participants,” DEF said. “Imposing obligations on entities in the DeFi ecosystem that cannot be complied with is wrong, impractical, and hostile to innovation.”

  • The DeFi Education Fund (DEF), which also submitted a comment letter in 2022, said on Tuesday that the SEC’s new rule is “misguided and unworkable…While the SEC acknowledged receiving comments discussing DeFi, including our concerns, the SEC not only failed to confront the substance of our concerns but also failed altogether to articulate any discernible path to compliance for DeFi market participants,” DEF said. “Imposing obligations on entities in the DeFi ecosystem that cannot be complied with is wrong, impractical, and hostile to innovation.”

  • The DeFi Education Fund was among crypto groups that objected to the original proposal. The group called Tuesday's final version "misguided and unworkable…The SEC not only failed to confront the substance of our concerns but also failed altogether to articulate any discernible path to compliance for DeFi market participants," the organization said in a statement. "Imposing obligations on entities in the DeFi ecosystem that cannot be complied with is wrong, impractical, and hostile to innovation."

  • The DeFi Education Fund called the adopted rulemaking on Tuesday "misguided and unworkable.."While the SEC acknowledged receiving comments discussing DeFi, including our concerns, the SEC not only failed to confront the substance of our concerns but also failed altogether to articulate any discernible path to compliance for DeFi market participants," CEO Miller Whitehouse-Levine said in an emailed statement. "Imposing obligations on entities in the DeFi ecosystem that cannot be complied with is wrong, impractical, and hostile to innovation."

  • “The breadth and ambiguity of the proposal’s qualitative standards would raise many questions about the status of investors who use AMMs, other DeFi protocols, and other all-to-all execution protocols,” DeFi Education Fund CEO Miller Whitehouse Levine wrote in a letter.


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.


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