Legal experts noticed Regulatory ambiguity creates a rash of ‘novel’ lawsuits
Regulatory uncertainty surrounding crypto has created a “fertile environment” for crypto-related lawsuits and enforcement to grow, according to lawyers from Choate Hall & Stewart LLP. “Litigation and enforcement activity is likely to accelerate in the current regulatory climate, perhaps in unpredictable ways,” says lawyers from Choate Hall & Stewart LLP.
In a study piece published on Law360 on June 28, lawyers from Choate Hall & Stewart LLP, including Mike Gass, Diana Lloyd, and Alex Bevans, noted cumulative evidence that “novel applications of existing laws” are being used to sue against users and investors of cryptocurrency, 7forecasting this movement to only accelerate over time:
“High market capitalization, alongside widely discussed regulatory uncertainty, has created fertile ground for litigation and enforcement to grow.”
The lawyers quoted several cases as examples, including the trial of a U.S. citizen for violating sanctions using crypto, several lawsuits brought on by the SEC in recent years, as well a rising number of class action lawsuits and private litigation.
The authors said, “Cryptocurrency trading platforms and those trading in and using cryptocurrency must recognize that litigation and enforcement activity is likely to accelerate in the current regulatory climate, perhaps in unpredictable ways”.
The United States Department of Justice (DOJ) issued its first criminal complaint in May against an unnamed U.S. citizen through the U.S. District Court for the District of Columbia for using crypto to violate sanctions
under the International Emergency Economic Powers Act (IEEPA).
Lawyers from the firm, including Mike Gass, co-chairperson of the complex trial and appellate practice at the firm, said that this illustrates an “increased willingness of government agencies to pursue criminal charges against those violating old laws with new forms of currency.”
More recently, crypto lending platform BlockFi was allotted a $100 million fine in February for failing to register its retail crypto lending product.
The lawyers said about the LBRY case “demonstrates the SEC’s willingness to target smaller projects like LBRY as much as large projects like Ripple.”
The lawyers also found in research that the number of crypto enforcement actions between 2019-2021 was greater than every year to that point joint.
The lawyers believe that the SEC and DOJ are composed to increase their enforcement efforts, and will “likely be willing to pursue novel theories.”
“Crypto-related private litigation also shows no sign of letting up. Increased regulatory certainty may help stem the litigation tide, but it is unclear whether this will happen anytime soon.”
