#489 Dave Rodman on Law in the Decentralized World

Dave Rodman is the Managing Partner of The Rodman Law Group. He specializes in business, cannabis, crypto, IP, hemp, and securities law. In this conversation, we discuss the decentralized world, state recognized DAO entities, pseudonymity with legal repercussions, accreditation laws, schedule 1 drugs, Satoshi Nakamoto, and regulatory environment. ======================= The Stacks 2.0 mainnet launched on January 14, 2021. Stacks, which you may recognize as Blockstack, is a layer-1 blockchain that uses the Bitcoin blockchain as a secure base-layer and enables developers to harness its power in new ways. Stacks makes Bitcoin more than digital gold, enabling apps and smart contracts on Bitcoin--unlocking innovation, new value, and a new way to earn BTC. Visit http://www.stacks.co for more information. ======================= Coinbase Wallets are adding support for .crypto and .zil domains through their partnership with Unstoppable Domains. Unstoppable Domains provides an all-in-one solution for blockchain domains. You can send money using these new domains instead of long Bitcoin wallet addresses, while also storing your domain in Coinbase's collectibles section. Go to unstoppabledomains.com in the dapp browser to register and manage your domains. ======================= As one of the largest and oldest Bitcoin exchanges in the world, Kraken is consistently named one of the best places to buy and sell crypto online, thanks to our excellent service, low fees, versatile funding options and rigorous security standards -- but this is only part of the story. We’ve been on the forefront of the blockchain revolution since 2011: http://www.kraken.com

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Dave Rodman is the managing partner of the Rodman Law Group. He specializes in business, cannabis, crypto, intellectual property, hemp, and securities law. In this conversation, we discuss the decentralized world, state-recognized DAO entities, pseudonymity with legal repercussions, accreditation laws, Schedule I drugs, Satoshi Nakamoto, and regulatory environment. I really, really enjoyed this conversation with Dave, and I hope you do as well. Before we get into the episode, though, I want to quickly talk about our sponsors.

• 0:44Anthony Pompliano?

  First up is Blockstack. Apps and smart contracts are coming to Bitcoin, along with a brand-new way to earn Bitcoin. Stacks 2.0 will give developers powerful new tools, including a smart contract language called Clarity that was made for Bitcoin and jointly developed with Algorand, as well as a new consensus mechanism that rewards the network with both Stacks tokens and Bitcoin. Stacks, which you may recognize as Blockstack, unlocks new use cases and functionality for the world's most secure blockchain, Bitcoin, without modifying Bitcoin itself. The door for developers and entrepreneurs to activate the billions of dollars of capital currently passively held on Bitcoin are now wide open. Proof of Transfer, or POX, is the groundbreaking consensus mechanism that makes this all possible. POX connects the Stacks blockchain to Bitcoin, opening up XTX mining on the network and

• 1:29Anthony Pompliano?

  enabling stacking, where STX holders can earn regular Bitcoin rewards for supporting consensus. Stacks, apps, and smart contracts on Bitcoin. You should go to stacks.co for more information. Again, stacks.co for more information. Next up is unstoppable domains. They're absolutely killing it right now. They have human-readable wallet addresses, so rather than having a long string of letters and numbers, you now have this human-readable thing, something like pomp.crypto, that .crypto domain allows you to say, "Hey, send me my Bitcoin to pomp.crypto." You don't have to use a long string of letters and numbers. It's the wallet address, you can use pomp.crypto. Or whatever .crypto name you want.

• 2:12Anthony Pompliano?

  They recently partnered with OKCOIN and OKCOIN is the first exchange to support human readable domains. Really big deal here. Coinbase Wallet also supports .crypto domains through their partnership with Unstoppable Domains. So head on over to unstoppabledomains.com and buy your .crypto name today. Again, it's just like normal domain names. If someone else buys it before you do, you can't have it. So I got Pomp .crypto, none of y'all getting it. No one gets it. I have it. If you have a name in mind, go to unstoppabledomains.com and buy your .crypto domain today. Lastly is Kraken. As one of the largest and oldest Bitcoin exchanges in the world, Kraken is consistently named one of the best places to buy and sell crypto online, thanks to their excellent

• 2:57Anthony Pompliano?

  service, low fees, and versatile funding options and rigorous security standards. But that is only part of the story. They have been on the forefront of the blockchain revolution since 2011. Kraken is the OG of crypto exchanges. That's right. K R A K E N dot com. Kraken.com. The OG of Bitcoin exchanges. So if you want to work with a company that is one of the largest and oldest in the world, meaning that they've stood the test of time, they've been around for a decade, they're consistently named one of the best places to buy and sell crypto online, head on over to kraken.com. K R A K E N dot com. Kraken.com. All right, let's get in this episode with Dave.

• 3:42Anthony Pompliano?

  I hope you guys enjoy this one.

• 3:44Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 4:16Anthony Pompliano?

  All right, guys. Bang, bang. I've got a special treat. Got Dave here with me. Thank you so much for doing this, sir.

• 4:21Speaker 02

  Absolutely. Thanks for having me.

• 4:23Anthony Pompliano?

  For sure. Let's just jump right into your background. You're a lawyer and you work on some very, very innovative industries. So we're going to talk about a whole bunch of different stuff there, but just where did you grow up and how did you get into law?

• 4:35Speaker 02

  Yeah, so I grew up in Aspen, Colorado, and basically always wanted to be a lawyer right up until I was about to graduate from college. And in quick succession, I was like, oh, wait, no, I'm going to be a doctor. Oh, wait, no, I'm going to be in finance. And so went to work for Merrill Lynch right during the crisis. So we were in collateral management for credit default swaps in 2008. I knew that Lehman was going under like two weeks before everybody else did. Obviously couldn't trade on it. And I got to watch the entire thing dissolve from like backstage. It was incredible.

• 5:13Speaker 02

  And myself and a couple of coworkers found a bunch of errors in Merrill's codes as they were calculating the exposure. And basically, over the course of a couple of months, we saved Merrill about $3.5 billion in collateral exposure. I was the highest reviewed employee in the office. I got a $1,000 bonus, no raise. So I took my three weeks vacation, went back home to Aspen and studied for the bar exam. Went to law school in 2010 and focused with my finance background focused on securities law and intellectual property.

• 5:56Speaker 02

  Graduated securities law and intellectual property is not the biggest practice area in Denver, Colorado. And so one of my really good friends from law school, Nadav Ashen, who's actually now my partner, was working for a cannabis firm in Denver. And there was a firm that shared office space with his firm that needed an attorney. I applied for the job and never looked back. Been in cannabis law ever since. And that has led to hemp law, CBD law, and then eventually crypto. And I can, we'll go into how it all happened. But the important thing is that when I first started doing cannabis law,

• 6:38Speaker 02

  the people who were calling themselves corporate marijuana lawyers were basically just defense attorneys who had had marijuana clients who are now saying that they were business attorneys. So with my background, I was actually able to clear out a pretty good niche pretty quickly. So much so that fast forward to 2019, I was able to bring Nadav Ashen, the guy who put me in the cannabis law on as my partner, which was kind of a cool, full circle experience.

• 7:05Anthony Pompliano?

  So what's so funny to me is you start out in cannabis law and a lot of people don't know how connected these two industries are, right? They know that they're innovative. They know that they are definitely kind of, you know, people who like to kind of push the edge of innovation are attracted to both of them. But most people don't understand that the cannabis industry is really cut off from the financial system. And therefore they've had to adopt Bitcoin and cryptocurrencies. So talk a little bit about as you're doing cannabis law, how you come across Bitcoin and crypto?

• 7:36Speaker 02

  Yeah, so interestingly, totally unrelated is how I got into it. A good friend of mine who was in finance and was working in Thailand called me up and started to talk about this thing he wanted to do called an ICO. And, you know, being in the cannabis space, funding is, all of my clients are banks and have been banks since 2017. It's a common myth, but the problem with the industry is funding because you cannot get good funding. So he starts to describe this whole ICO thing and my immediate thought was, oh my God, we can use this to fund cannabis companies. That didn't actually happen, but it was enough to get me super, super motivated to learn the space.

• 8:21Speaker 02

  And so basically, for a period in the late 2016 or 2017, I'd wake up at like eight in the morning. I'd work as a cannabis attorney till about midnight. And then from midnight to maybe two or three every night, I would be cramming on what this whole ICO rule was, how crypto worked. I mean, I bought my first Bitcoin in 2013 and kind of forgot about it for a bit.

• 8:49Speaker 02

  As I started doing this, I started to kind of like sort of digitally follow my buddy around the internet, trying to pick up pieces. And then one night I was like, "Hey, you know what the Howey test is, right?" Like, he's in finance, I assumed he understood it. He had no idea. And so I explained to him, like, "Hey, this is very likely to be the sale of securities." And then, like, literally two days later, there was a big article posted in Hacker Noon, where someone kind of explained the Howey test to the masses. And that sort of relationship flipped, and he started to chase me around, asking me questions, and became general counsel for that company,

• 9:32Speaker 02

  or outside general counsel, got involved with a firm in Thailand that is very big in the crypto space. They flew me out there, and we started doing work for them,

• 9:46Speaker 02

  and then slowly started to bring it back to our practice here, where now cannabis is still our biggest area, followed by hemp, but then blockchain crypto is our third biggest area and our fastest growing. And quite frankly, it's one of the most interesting spaces I've ever been in, and I'm in some pretty interesting spaces.

• 10:05Anthony Pompliano?

  Yeah. And so when you think through kind of the crypto business that you've got, it's fast-growing, there's lots of companies that seem to be popping up every day. What exactly are these clients looking for when it comes to legal representation or legal advice?

• 10:20Speaker 02

  That's a great question. They don't know what they're looking for on a whole, and they don't know what they need. And it's a very interesting self-conviction. Cannabis and crypto are so similar in one sense, but in the other sense, they're very different in that everyone in cannabis knows they have to have an attorney. They know that they can't start out without having good legal counsel, because it's federally illegal, and there are really nuanced components to this. And there's a lot of overlap there, but in the crypto space, these guys are all devs and engineers and they're they're coding the future and they kind of have this blind spot for how slow regulation works. And how long it takes for these things to catch up to them.

• 11:06Speaker 02

  You know, that initial client that I was talking about, they were convinced that they didn't need to have an entity. And I had to walk them through how when you don't have an entity, you have unlimited liability personally. And they're like, no, it exists in the ether. It's all decentralized. Like, yeah, until someone sues you or sues your group and then you're all general partners. And we've seen that a lot recently as these DAO first

• 11:31Speaker 02

  organizations have come about and they have these highly minded ideas and believe me, I'm super passionate about it. But it was my job to kind of be Chicken Little and follow them around and say, you know, this is what could happen. This is how you're exposing yourself. I know you don't want to listen to this. I know you want to move fast, but like if you don't want to go to jail or you know, experience massive civil liability, you have to listen to me. And it's not just an idle thing. Like we actually have a client who was in the blockchain space. We weren't very clear. We weren't advising him on this project. He went to jail for related to the sale of unregistered securities.

• 12:14Speaker 02

  So it's real and the enforcement action,

• 12:19Speaker 02

  the investigation started like five years ago and it only came to a head in 2019. So that's the single most difficult aspect of this industry is getting the founders and the innovators to realize that while we might get, we will get there someday. We will get to the point where, you know, a DAO is recognized as an entity just on its own, for example. But we're not there yet and the

• 12:49Speaker 02

  the amount of time that it takes to get there, there's a lot of enforcement that can happen. So that's that's really, that's what we do in the space is

• 13:00Speaker 02

  Help people apply existing case law, existing experience in corporate securities law work, in IP work, and we help them protect what they've built even though they're pushing the limit so much.

• 13:14Anthony Pompliano?

  So I'm going to talk a little bit kind of further down this rabbit hole, right? Of decentralization, I think people who are listening to the podcast know it's one of my main focuses moving forward. Is I just think that centralization is now a business risk and decentralization will be the default, right? And so when we go down that path, that feels like there's not a lot of precedent when it comes to the legal system. Walk me through kind of what do we know and kind of what is precedent in the decentralized world? And how much of what we're seeing kind of play out right now will eventually end up having to be the case law? Like, like there's just uncharted territory. We haven't gone to court yet over some of this stuff.

• 13:58Anthony Pompliano?

  And so like, there's going to be kind of those seminal cases that end up being the precedent. It's just that they haven't happened yet. Like, just how do you view the intersection of decentralized technologies and organizations with the law?

• 14:11Speaker 02

  Specifically on decentralization, I think that, one, we have not seen any cases bought yet. I think we will. And I think the way we will see it is this, this imputation of a general partnership and what that means. And to kind of, and then to explain why that's so important, if you and I started, like, we started a new podcast. It's you and Dave and Pam, we're just doing stuff. We don't put any corporate form around it. It's not an LLC, it's not a C corp, it's not a formalized partnership. The government imputes what's called a general partnership. And so you and I are 50/50, equally liable for all of the actions of our project, of our, of our, of our partnership.

• 14:56Speaker 02

  And that means all of our assets are completely at risk if someone sues us and they win. For whatever the suit, it doesn't matter what suit is about, there's a damages claim.

• 15:09Speaker 02

  Uh, liability. So over the years, uh, you know, over the course of, you know, from the uh, East India Trading Company with the first actual corporations to, you know, the nineteen eighties in Wyoming with the LLC creation, we as lawyers have figured out ways to limit our liability uh, so that just the company houses the liability. Um, and I think that the disregarding of these corporate forms by some of these uh, decentralized organizations. When you then have a claim against them for, again, for whatever reason, a lawyer is going to look at this and they're going to say, okay, there's no corporate form.

• 15:51Speaker 02

  Who is participating? What's their percentages? You know, even if there's, they're all, there's a hundred of them and they all have one percent. That's who's going to get sued. That's who's going to be dragged into court. And I'm, I'm ignoring the whole aspect of like the anonymous component and um, multi-state wallets and, uh, you know, with enough resources, those things will come to light. You will find these humans and those will be the people who are liable. So that is the case that we will see. We will see that will be the controlling case law. Um, unless you can get a statutory crea- uh, uh, uh, entity created at the state level, any state, let's call, call it the United States right now, but like

• 16:35Speaker 02

  just the way you can form an LLC in Colorado, you can form a C corp in Colorado. If we can create a, uh, a, a, a state-recognized entity as a DAO uh, that then affords that entity the liability protections that a company would, that would mitigate that sort of, uh, that sort of precedent-setting case. Um, and would, would, you know, nip all this in the bud. I don't think that's gonna happen. Um, we're, my firm's kicking around, uh, lobbying with, uh, i- i- the, uh, with the, the Colorado legislature to see if we could try to create something like that. But what I think will cause that is, uh,

• 17:20Speaker 02

  some, some big disaster will happen to some decentralized, uh, organization and everybody else will go, oh shit, I need to talk to, sorry, I don't know if I can swear on this, I apologize. Fine. Um, I need to talk to a lawyer, um, so that, that doesn't happen to me. And so when you think through this, this is fascinating to me.

• 17:38Anthony Pompliano?

  People because I think that they look at these DAOs and they say, oh, it's decentralized. One, sometimes they're actually not decentralized, but but I think the hope is that you can actually build decentralized technology. And so how do you look at the balance between the promise of the decentralized kind of autonomous organization? Within a legal structure, does the legal structure kind of mitigate or, you know, almost like silence the decentralization because now there is a legal structure, there's lawyers involved. There's something to go after or how does that kind of work if we fast forward and we say, okay, there's going to be legal challenges. Eventually, we're going to get to this like state recognized DAO entity.

• 18:24Anthony Pompliano?

  How do you think that kind of plays out full well, knowing that like this could change in the future?

• 18:30Speaker 02

  So.

• 18:32Speaker 02

  Yes, on one hand, there is the sort of thought that you could create the corporate rafting and now there is something to go after. But I would argue that when that doesn't exist, we're going back to that general that GP kind of connotation. And the example where it was you and me 50 50, it's actually a little bit worse than that. In that it's we're jointly and severally liable. So if they can get a hold of both of us, then you and I are each, you know, 50 50, whatever our quote unquote ownership is responsible. But if they can only get a hold of me, then they can hold me 100% responsible for both of our actions.

• 19:14Speaker 02

  So while I can see on one hand, while, you know, someone in someone working in the decentralized space might say, well, I don't want to, I don't want to wrap up my DAO in something that's targetable or that's, you know, located in Wyoming, Colorado. But at the same time, you know, if they're a citizen in the United States and and they get their company gets targeted, whether that's by the government or by a civil lawsuit. They themselves are already the target and they are completely responsible if they're the only ones who can be found. So that I think that is a sort of recognition that people don't quite have yet.

• 19:54Anthony Pompliano?

  And so

• 19:54Speaker 02

  That's a question.

• 19:56Anthony Pompliano?

  You did. How does pseudonymity or anonymity play into this, right? In terms of if I'm out there with my real name and I can be found online. What happens if I am using a Twitter handle, but you don't actually know who I am? Or literally in a, you know, kind of, and that would be like a Satoshi Nakamoto situation, right? Like a pseudonymous name or actually just literally anonymous, like nobody knows who did this, but now it's out there. Is this something where just like, hey, people spend enough money and like they'll eventually figure it out? Is this, you could convict like a pseudonymous person? And then if they ever get uncovered, then the conviction sticks to them. Like, how does that work?

• 20:43Speaker 02

  So, yeah, that is a really good question. And I'm actually a Gitcoin kernel mentor there, block two programming. We had a big conversation yesterday with, with all of the fellows. And the answer to that is, one, you certainly could delay the inevitable being pseudonymous or fully anonymous. That is, that is true. And I want to be clear that this is a separate analysis from Satoshi. That's, that's different. And I can go into that why, but

• 21:20Speaker 02

  if the US government, for example, decides that they want to come after you, they're going to come after you. They're going to use chain analysis. They're going to use NSA. They're going to use whatever they can at their, at their fingertips. They will eventually figure you out unless you are just hacker extraordinaire and you've covered all your tracks. You know, eventually with enough resources, and I would argue the US government has enough resources. They will pierce that anonymity.

• 21:51Speaker 02

  Where the sort of delay comes in is when you then back down from that and you're looking at civil rights and you've got attorneys who are, you know, maybe suing, I don't know, something like Sushi Swap or Uniswap, like the anonymity that might be there will certainly pose difficulties. There'll be evidentiary questions, but ultimately, I think the answer is enough resources, pseudonymity will be set aside. It's just a question of whether or not you need law enforcement to do that, or, you know, a well-funded individual to

• 22:31Speaker 02

  do that. And I think that's sort of up for debate. I don't know if we've got, we're anywhere near that yet. But that's, a lot of people will argue that, say, well, I'm anonymous, nobody knows this, or I'm located in the Czech Republic and I've got a company in Mauritius, like, you know, what's the risk? And it's like, you know, that's, it's just delaying. If something's gonna happen, it's gonna happen.

• 22:56Anthony Pompliano?

  You mentioned Satoshi Nakamoto kind of being a separate case. Explain that a little bit.

• 23:01Speaker 02

  So, I mean, I don't think that we're gonna see the US government figuring out, or at least publicly, who Satoshi is. I think that it's so far back and it's so foundational that, and, you know, Bitcoin has been basically deemed a commodity by the CFTC. They're more focused on more recent things. So if someone tried to do a pseudonymous launch of a new token, SEC is gonna catch that. They're looking now. I don't think there's any incentive to them to try to piece together what happened at the sounding of Bitcoin.

• 23:44Speaker 02

  And even if they did, I'm not sure how much, you know, what would they accomplish at that point? I honestly don't believe that there would be anything worth that spend of resource. It's definitely, you know, the DeFi stuff that is clearly

• 24:01Speaker 02

  implicating some of the the banks receive acts, things that would impugn the Patriot Act. We're talking about billions of dollars. That is where they're going to focus. That is where the pseudo anonymous founders are gonna are gonna be experiencing government heat.

• 24:22Anthony Pompliano?

  Got it. And so if we kind of look at, let's say, a really kind of what I would consider a cut and dry example of where some of this complexity plays out. So let's say that I build a decentralized exchange and that decentralized exchange is actually decentralized. I can't take it down, even if the government comes and puts a gun to my head and no one else can. So it's kind of a fully decentralized censorship resistant exchange. And then people go on and they start to trade what ends up being deemed illegal securities, where whether they are non accredited investors or there was some issue with the actual securities being offered originally, whatever it is.

• 25:06Anthony Pompliano?

  What is the precedent or how do you think through? Is the founder of that decentralized exchange responsible for what happens on the exchange? If, let's say, the founder was 18 when they started it and they put it out in the world. And then at 25, they're like, you know what? Maybe I don't want to be as, you know, take on the state and screw the system. And like, I want to take it down, but I actually can't take it down. Like, how does all that play out?

• 25:37Speaker 02

  Sure. So there's no clear answer to that exactly. I will say that we have a fairly good piece of data with Ether Delta. You know, as a decentralized, as a decentralized exchange, but they were still able to like, figure out who was responsible. And that person still had control. And I think control is a key concern here. So if you have a truly decentralized exchange and put it up there and you literally can't control it anymore. You know, that is going to.

• 26:12Speaker 02

  Limit the ability of law enforcement to come after you. It doesn't necessarily eliminate it and it certainly doesn't eliminate civil liability. Everybody forgets that like, we're not just talking about criminal sanctions here. We're talking about what could a plaintiff's attorney extract from you? And then, most of these people, if they're gonna, you know, maybe there's some few, some truly egalitarian and high-minded devs who literally do a fair launch and have no pre-mind, have no tokens. It's just up there, but reality, most of these have some kind of holdback from themselves.

• 26:57Speaker 02

  And that, that holdback, the idea that you're gonna get an increase in value based on what you held back as far as, say, a governance token, that absolutely brings the securities laws right back into play, 34 Act, 33 Act, and of course, the private securities litigation cause of action.

• 27:17Anthony Pompliano?

  And so if they don't hold back any of the tokens, if they literally just say, "I'm gonna make zero economic benefit from this," does that change that evaluation?

• 27:26Speaker 02

  I think it does. I think it does. I mean, if you really could have, could point to that fact pattern and say, you know, someone just released this in the wild and it's automated and it has, they have no way to affect change, and like, that's really key, like, no way to affect change. You know, some of these things are kind of out in the wild, but you get enough of the founders together, they, in theory, tweak stuff, you know, for, and it's not, not like they're doing anything shady there. It's that they, they wanna be able to stick something or something that breaks. But if they don't have that ability, yeah, I think that just releasing that, what was in effect, basically a piece of code, an AMM that just runs, I think you'd have a very difficult time coming after somebody like that.

• 28:11Anthony Pompliano?

  Yeah. And so really what you end up doing is you're basically putting a balance between economic benefit and legal liability. Right? And so if you want no legal liability, that means you should probably take no economic benefit. If you're okay with some legal liability, then you can take economic benefit. You got to figure out where, you know, kind of where your priorities lie or kind of where your risk tolerance is.

• 28:31Speaker 02

  Yeah. And, and like, you know, it, it might not just be a specific product analysis. Like if you've got a master plan and over here, you've got something, an NFT project. And over here, you want to make this NFT project function. You have this, this AMM that is totally, you know, you, you want it to run by itself. If, if, if you could draw the connection where you need one to the other, you certainly could impute liability that way.

• 29:03Anthony Pompliano?

  What about like decentralized lending? That feels to me like it is less obvious, the ways that founders could make mistakes. Then like, let's say an exchange that traded, you know, illegal securities, like that seems pretty cut and dry to me. But when it comes to lending or some of these other financial service type offerings that are supposed to be decentralized. And we'll just make the assumption that they are decentralized. Is, is there things where you don't have a money transmitter license or a broker dealer license? Or, you know, KYC AML and you can be held liable for that stuff? Or is it something else that they should be worried about?

• 29:43Speaker 02

  So honestly, I actually think this is where we're going to see the most flurry of enforcement. And I think it's going to be much, much more serious than a breach of the 33 act or the 34 act. Both, you know, securities law focus. The Bank Secrecy Act is a big deal. It is a big deal. The Patriot Act gives the government a lot of power here. And so when you start, and you've already heard Janet Yellen, just, you know, Uh, in the last week or so, two weeks ago, saying that terrorist financing is is on their radar. I mean, whether it is or not, that's what they'll say. That is what will be stated as they go after these platforms.

• 30:26Speaker 02

  And there are really strict rules around AML and KYC for anything financial. Um, thank God, the the FinCEN stuff was averted. That was a nightmare. Um, and but but that's that's where we're headed. So bringing it back to the question about liability and control and uh this decentralized idea. If if um FinCEN decides that uh they want to go after one of these things because they aren't following proper disclosure for funds and and and people, they're going to do that in any way they can. And I think that we have yet to see what that will look like, but I think a lot of people are going to be caught flat footed in that.

• 31:10Anthony Pompliano?

  Yeah, it it's fascinating to me that uh the securities laws and kind of the ICOs and and uh unregistered securities like that caught everyone's attention from a legal perspective. That's what everyone wanted to talk about. What you've kind of done is you're accelerating or or fast forwarding. You're saying, no, no, no, no, like when somebody applies the Patriot Act, they can pretty much do anything. And therefore, not only do they have more kind of legal uh purview, but also the penalties are much higher as well, right? So is this something where you think that um kind of the the reach uh of the US government will be global? And it doesn't matter where you are because they'll use that Patriot Act? Or do you think that US citizens have a different risk profile on the legal side than, let's say, people who are not US citizens not living in the United States?

• 31:56Speaker 02

  Well, sure. So primarily, uh, uh, uh, on a first impression, US citizens are going to have a far larger risk file. US companies are going to have a far larger risk. But we actually have precedent here uh with the CRS, the Common Reporting Standards, which was kind of forced on the world by the US after the passing of the Patriot Act.

• 32:20Speaker 02

  Or around the same time. And you have a very clear example of the US government using its whole force and effectiveness to puke its way on sovereign nations. So I think that, you know, if you're, if you're a team that's all not US and you properly geo fence US residents, you have a good argument not subject to US law. But no one is actually geo fencing US residents, not really. And that is, that is like the opening in the armor. That is how the US government will attempt to assert itself. And they will use treaties and they will use relationships with other countries to get

• 33:04Speaker 02

  their way eventually if they want to. It's a question of want to. Now, I will say, there is an overton window. And if the overton window shifts enough, there is a chance that some of these doom and gloom things that I'm talking about kind of get papered over, get sort of the paradigm shifts. And the good example there is Uber. If you walked into a law firm in 2005 and said, I want to create an app that allows people to use other people's cars. Every lawyer is going to say, oh my God, you can't do that. Like there's, here are all the reasons why you can't do that. So it's what we're trained to do and it would have been good advice at the time.

• 33:45Speaker 02

  But that's an example of where things moved quickly enough and had enough of an impact where, you know, those concerns didn't materialize. You know, other, other things certainly have materialized out of it. But that is an example of, of the tech shifting the overton window more quickly than the regulations can catch up in a way that regulations will never catch up or could never catch up. But that, and there will be some of it. And I, I don't know how much of that there will be, but it is on the table. There will be, there'll be some sort of moment where certain, certain projects, think as big as you know, swap might, you know, just skate through. It absolutely could happen. But there will be a lot of collateral damage for some of the smaller projects.

• 34:29Anthony Pompliano?

  And is your thought process kind of, we haven't really seen the enforcement in the DeFi world, regardless of what blockchain is being built on or whatever, but like that's coming?

• 34:38Speaker 02

  Yes, yes. So it's definitely coming. They definitely understand, well.

• 34:44Speaker 02

  They have an idea of what's happening. I think, think there's very few people, including myself, who actually understands everything, but um yeah, it's, it's a, there are people who are paying attention at every level of government. Um, you know, finance related, uh, terrorism related, espionage related, just policy. People are paying attention. They know this is happening. And I brought up, you know, that, that one client earlier. You know, the investigation started in twenty fourteen, arrest happened in twenty nineteen. Um, these things take time and it's hard to hold that timeline against these projects that are, you know, worth billions of dollars over the course of a summer.

• 35:25Speaker 02

  Founding, foundings of billions of dollars, that's, that's probably never happened. Uh, in fact, I, I would feel confident in saying, you know, not going through the traditional financing route, that's never happened. Um, these are, these are startups that are more valuable than, you know, companies that have been around for decades. Um, so I lost my train of thought, sorry.

• 35:46Anthony Pompliano?

  No, no, I, I, I think that you're, you're nailing it in the sense of, um, the enforcement, one takes time, you said it a couple of times, I think that's dead on. I think two is, uh, people are paying attention. So the, it's like, they're going to start looking at things that are what they deem to be illegal, wrong, whatever, and they will come after it. But even on top of that, one of the things that I think I'm hearing you kind of talk through is like, uh, this constant cat and mouse game, right? It's like innovation leaps forward, the law catches up. Innovation leaps forward, the law catches up. And so this isn't so much like this is an irregular development in the market. This happens over and over and over again, whether it's cannabis, crypto, or name your other innovative industry.

• 36:28Anthony Pompliano?

  Uh, it's just like, we're literally just feeling the pain of going through that kind of evolution.

• 36:34Speaker 02

  Yeah, I, I would say it's a little different when you, when you realize that what we're talking about is money. Uh, this is, it is, uh, it is a fundamental new ingredient in this sort of innovation, uh, path, you know, it.

• 36:50Speaker 02

  Facebook and Google, you know, they weren't involved in at the beginning. They weren't involved in money. And money has some connotations around sovereignty and around power that I think is drawing more attention, probably correctly. I mean, that this is pretty standard when you start to mess with money supply. So yes, broadly, very similar pattern here. We've seen many of this. The one little change is like the fact that this is a money focused. Well, I don't want to say it's money focused because we've all known the technology is provable to a lot of things, but like the fact that it's a currency, sovereign currency, these are sovereign currencies.

• 37:34Speaker 02

  That does change things a little bit, but I do believe that it'll follow a similar sort of catch up pattern that you described.

• 37:43Anthony Pompliano?

  Yeah. Before we get into the rapid fire questions to wrap up, I just want to kind of give you the floor of like, what's the key pieces of like, almost like blanket advice, right? So not legal advice to anybody, but just as people want to build in this industry, what are the things that they should be considering? What should they be doing to make sure that they're at least positioning themselves to not do a really dumb, low hanging fruit stuff that they can easily avoid?

• 38:10Speaker 02

  So I don't want to sound like a shameless plug here, so I won't say talk to us, but talk to a lawyer. I cannot stress that enough. The, the amount of pain that I have seen happen where people get a certain point and then involve someone like me and then, you know, you point to a foundational part of their business model and it's like, that's illegal. You can't do that. And I say that with the caveat of everything I just said about the open window and Uber. There are some fundamental things that if they just, that are, I guess there's some aspects that if they talk to a lawyer first, they would be able to more efficiently and effectively address maybe the bigger issue, which does take more of a leap of faith.

• 38:55Speaker 02

  But I mean, so one of our clients, you know, they

• 39:00Speaker 02

  They didn't bother to check whether or not there was a trademark for the company they founded. They did an ICO. And I had to deal with an old school trademark attorney and explain to him that we couldn't change the token name at this point, like it's immutable. And we ended up coming to an agreement, but like, you know, they burned a ton of money just dealing with a silly little thing, whereas if they had come to a lawyer, you know, the first thing would have done meant to run a check to the name. You know, it's stuff like that, that I think that people, get your attorney, get someone legal involved at the product market fit stage.

• 39:42Speaker 02

  And, you know, with the caveat that, you know, maybe the whole overarching project is a little bit outside the lines, but if you can smooth some of the smaller obvious things, you can devote more time to the changing of that over to the window and a big part of it.

• 39:58Anthony Pompliano?

  Yeah, that's a great way to look at it, kind of the big picture and the small picture. I ask every person the same three questions that you'll get to ask me when to finish up. The first is, what is the most important book that you've ever read?

• 40:11Speaker 02

  Yeah, so a little bit of a bummer, I guess, but The Age of Surveillance Capitalism by Sojana Zuboff. You know, the way that she explains the data rendition economy and what it has actually done was mind blowing to me. And it was, you know, I've been telling everybody since I read it, you have to read this. It's super dry. It's very difficult to get through, it's one of the hardest ones you've ever read. But to me, it's almost like the equivalent of Das Kapital in Marx, like just coming up with an entirely different view on economics. I mean, that's how fundamentally different it is and how important it is. And I think everybody, everybody should be with it.

• 40:56Anthony Pompliano?

  Yeah, that's a great suggestion. Second one's more personal. This comes from the folks over at Eight Sleep. They've got this thermal regulation bed, which basically makes it super cold for you so that you can sleep better. I used to be like a five, six hour sleeper. Now I'm like an eight, nine, hopefully I can get 10 if I have time. What's your sleep schedule? Are you a? You know, five hour sleeper, 10 hour sleeper, somewhere in between?

• 41:24Speaker 02

  So I am a chronic insomnia. I have an insomnia since about third grade. So sleep has been one of my

• 41:34Speaker 02

  primary antagonists my entire life. There have been times like when I was describing getting into the crypto space, it's certainly been an advantage because I can just go, but it's not sustainable. I'm constantly trying to get better sleep, get more sleep, you know, change my sleep cocktail that I need to take. It has been a very, it's been a lifelong fight and it has not been a fun one.

• 42:00Anthony Pompliano?

  Do you sleep on like, in like a cold room or on a cold bed or anything?

• 42:06Speaker 02

  Yeah, so I have a Sleep Number bed that you can maneuver the

• 42:14Speaker 02

  its angle and its temperature and it has some other features that help. I've also experimented with binaural beats, which are playing different tones and different sides of your of your head to try to change your wave function and that I've actually seen that work a little bit. You name it, I've tried it when it comes to sleep.

• 42:37Anthony Pompliano?

  Look, I've heard a lot of people obviously asking this question, saying a lot of crazy shit. I've never heard anyone say binaural beats. So I know that you're an expert if that's a, if that's one of the things that you've tried. Third, third question is a little bit more fun. Aliens, are you a believer or a non-believer?

• 42:54Speaker 02

  I think statistically, mathematically, you gotta be a believer. I do not believe that we've been visited and I'm not convinced that we ever will make contact, given the the size of space and the time changes that are involved. Everything we see is billions of years old already, but yes, I do not believe we are alone in the universe. They certainly haven't visited us though.

• 43:18Anthony Pompliano?

  Yeah, I, I think that's kind of where I end up is like, I don't think little green men have showed up, but, but they gotta be out there somewhere. Or at least I'd like to think so it makes sense. What's the one question you have for me to, to finish up?

• 43:31Speaker 02

  So yeah, so the deeper that I've gone into blockchain and crypto and both personally and professionally, and the more adoption I see, the stronger my belief in all of this goes. And as those beliefs get more and more ingrained, it sort of has skewed my media and my news consumption. You know, I've basically stopped listening to music. I listened to like podcasts like yours, like Hidden Forces, the Alt-Ask, that allocation podcast. And for the most part, the hosts of the show and the guests all kind of just reinforce those beliefs. So much so that I get to these points where I'm, I go through like intense

• 44:13Speaker 02

  periods of like self doubt and wondering if I'm in an echo chamber. I think at one point I was asking friends on my Telegram chats if they had any like MMT, pro MMT podcasts or anti Bitcoin things I could read. Because I was just worried that I'm just deep in this echo chamber and it kind of plays into the surveillance capitalism, what you get fed and stuff. And I got to imagine that for you, that this has got to be an order of magnitude larger issue being with all of your evangelicalism and you know, Bitcoin, you know, bringing it to the masses and who you talk to. So that was a really

• 44:57Speaker 02

  long buildup. But my question is, how do you check to see if you're in an echo chamber? And as a corollary, is there anyone that you've had on the show that has challenged or changed your worldview from that echo chamber?

• 45:14Anthony Pompliano?

  Yeah, so I think that there's two things on kind of checking, right? So one is I've got some like very specific things that I think through. So like one, market adoption. Two, self inflicted wound in terms of code being introduced to the blockchain of Bitcoin. Three is price. Four is certain kind of milestones of future institutional adoption, corporate adoption, central bank adoption, like there's a Couple of things that I watch and if something was to happen, I would definitely like, oh, wait a second. That's a red flag. Kind of like if you had like a dashboard and an alert went off, it says something's wrong, right? And then you kind of go investigate it. So that's kind of just on a passive basis.

• 45:55Anthony Pompliano?

  Then I actually enjoy kind of going and talking to people. So I'm less of somebody who's like, let me go read the latest, you know, hit piece on Bitcoin or whatever. It's more so like if somebody disagrees, I want to go talk to them and I want to understand why they think. And then, you know, my wife would tell you that my absolute favorite thing to do, and I've got to be careful. I got to warn people more often than just inviting them for dinner. I like to bring them for dinner and then just go to like intellectual war with people, right? And it's just like, what do you believe? Here's what I believe and like, let's just have it out. And, you know, they can get pretty spirited, but also I learned an incredible amount during these. And hopefully the other person does as well.

• 46:37Anthony Pompliano?

  But what's fascinating to me is you very quickly understand not just what somebody believes, but how deep their conviction in what they believe, right? And I think that the, the level of conviction, especially when you're talking to, you know, very intelligent people, is almost just as important as what they're saying. So it's like, you know, believing something's great, believing something and then having deep conviction is even better. And so I think that that's kind of how I really look through it. In terms of people coming on the podcast, in the beginning, I had lots and lots of people. I think a lot of the people who kind of question Bitcoin now don't really come on. They all hide. What they'll say is something to the effect of like, oh, I don't know that much, right? But they

• 47:17Speaker 02

  Oh, that drives me nuts. Oh, I don't understand it. It's like, it's a five page, eight page wake paper. How do you not understand it? I know you're smart.

• 47:23Anthony Pompliano?

  Yeah. Well, what they'll do is they'll come on the podcast, but God, I don't really want to talk about this. Like, I don't really understand that much, but I'm like, I, I know that you're anti Bitcoin, which is, by the way, it's fine. It's a great position to have if that's what you believe, you know, I think you're wrong, but that's fine. But it's always funny, like, they don't want to actually have to debate, especially not in a recorded situation. And the last thing I would say is I, I try to get out of the like Bitcoin, anti Bitcoin. Like, that's too much of a macro thing. And I think that that's like a little bit misleading because actually I, I have yet to meet somebody who just like writes Off the entire system, right? Somebody may say, hey, look, I understand the technology and I think that the technology is real, but I don't think it's going to be successful because I think the government will crack down on it.

• 48:07Anthony Pompliano?

  And so like, that's what I want to debate is I want to debate the micro issue, right? It's like, okay, let's talk about government intervention and government regulation of this asset of the players in the industry, that type of stuff. And so to me, it's it's more so like, the more you understand, the more nuanced conversation you want to have. If you don't understand it, that well, you just want to debate at a high level, like, should I buy Bitcoin or should I not? Right? I'm much more interested in kind of the nuanced micro level. But, you know, as with all of these things and probably some level of confirmation bias, like, the more micro you want to talk about, the harder it is to find, you know, somebody who disagrees. Because in order to understand the micro, you've got to have gone pretty far down the rabbit hole, which means that you probably believe. So that's kind of how I think about it.

• 48:52Speaker 02

  Gotcha. Interesting. Um. Cool. I actually, I have to say, I'm a little disappointed. I was hoping you were going to ask at this point, um, the, you used to ask everybody on the show almost, like, what regulation would change? I assumed I would get a regulation question.

• 49:11Anthony Pompliano?

  Let's hear it. I would love to hear if you've got a regulation that you would change.

• 49:16Speaker 02

  So I have three.

• 49:17Anthony Pompliano?

  Oh, okay. Amazing.

• 49:19Speaker 02

  First and foremost, end Schedule One, designation of substances is the single most anti-science piece of legislation that has ever been put into effect. It has killed people, not the war on drugs, that's a separate analysis. All the good that can be done with hallucinogens and pathogens is completely unimproved. Study is a travesty. I actually wrote an article about, entitled, Schedule One is a crime against humanity. So that's, that's first and foremost, and that has been both mine and my firm's primary thesis for a while. But then. More into the spirit of the podcast, I would completely revamp the accreditation standards for accredited investors.

• 50:03Speaker 02

  It would no longer be a finance-based, a wealth-based criteria. You have to take some sort of, you know, simple test. And when people talk about democratizing finance, I think that is where you have to start. Because it's just not fair and just because you're rich doesn't mean you're smart. And then lastly, I mean, near and near to all of our, our hearts would be to normalize the tax treatment of crypto.

• 50:29Anthony Pompliano?

  It's like we're brothers. I like all three of those. I didn't, I didn't hear a single thing in there that I thought was crazy. I actually thought that was pretty common sense. So the fact that none of that's happened yet seems like maybe we need some more people with common sense and, and the regulatory and legislative bodies.

• 50:49Speaker 02

  Well, you know, it's going to happen. Time is inevitable and people who were crypto native are going to be in power and, you know, probably starting in, in real numbers in 10 years. Hopefully it doesn't take that long, but you'll see the, the change in the guard.

• 51:06Anthony Pompliano?

  I think you are, you are definitely right there, my friend. Where can we send people to find you on the internet or find more? If they want to kind of reach out to you guys for some legal services?

• 51:16Speaker 02

  Sure. So therodmanlawgroup.com is our website. Phone number is on there. [email protected] is the email. And then we're on Twitter at @rodmanlaw. And we're available.

• 51:33Anthony Pompliano?

  Awesome. You guys do fantastic work. I really appreciate you coming on here. I find it fascinating, a lot of the, the legal analysis and kind of this legal battle, frankly, that's going to play out in the decentralized world. So hopefully people, one, this pique their interest, but also two, they understand like, hey, look, if you're going to go play in this world, make sure you got a good lawyer. So I thank you so much and I'll have to scan in the future.

• 51:57Speaker 02

  Yeah, absolutely. I'd love to come back on and talk anytime. This was fantastic.