Why ConsenSys is Suing the SEC | Joseph Lubin & Matt Corva

“The U. S. is trying to disconnect from Ethereum," that’s what Joe Lubin the CEO of Consensys said in today’s conversation. He was talking about those in power trying to unplug Ethereum from the citizens. The SEC is going after Kraken, Coinbase, Uniswap and Metamask. They’re trying to turn every non-custodial wallet into a broker-dealer. We brought on Joe Lubin, a crypto OG and CEO of Consensys the company behind a number of massive crypto projects including the popular Metamask wallet, and Matt Corva, the General Counsel at Consensys, leading the charge against the SEC Joe and Matt are producing evidence that the SEC is coming after Ethereum itself. Sending discovery requests to Ethereum core developers, threatening their employers - pushing a coordinated effort to claim Ether is a security so they can control it. So Consensys is taking them to court to settle the issue. If they’re successful it’ll be the first time we get a clear court ruling that Ether is a commodity and not a security. ------ 📣 TRANSPORTER - SECURED BY CHAINLINK CCIP | TRY IT OUT transporter.io http://transporter.io ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🌐 CARTESI | APPLY FOR A GRANT https://bankless.cc/CartesiGovernance 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo 🏠 CASA | SECURE YOUR GENERATIONAL WEALTH https://bankless.cc/Casa 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku 🏙️ CONSENSUS | SAVE 20% WITH CODE BANKLESS https://bankless.cc/4aykesD ------ TIMESTAMPS 0:00 Intro 6:35 SEC vs. Ethereum 9:45 The Uniqueness of This Case 11:15 88,000 Pages to the SEC 12:11 SEC Going After Devs? 14:47 The Wells Notice 16:27 ETH ETF 17:58 Outcome of Consensys Winning 21:29 U. S. Law Process & Timeline 25:55 Ether Isn’t a Security 34:50 Gary’s Confidence Conspiracy 41:17 MetaMask Isn’t a Broker Dealer 47:10 What is Prometheum? 51:10 How Can the SEC Win? What Happens to Crypto? 55:49 What the Crypto Community Can Do 59:50 What Happens Next? 1:03:15 Closing & Disclaimers ------ RESOURCES Consensys Complaint https://consensys.io/crypto-regulations/defend-ethereum https://assets.ctfassets.net/gjyjx7gst9lo/Bu1bK7DF3tSig9Atde0lM/2fcaadea2b111a8c3f3ebce4a6a2386c/Consensys_sues_the_SEC_in_defense_of_the_Ethereum_ecosystem.pdf Joe Lubin https://twitter.com/ethereumjoseph Matt Corva https://twitter.com/MattCorva ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

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

• 0:00Speaker 00

  This regulatory scrutiny is great because it gives us an opportunity to share how powerful and wonderful the technology is and can be. And it gives us a platform, effectively, to speak with politicians and regulators, help them understand that it's not just this action. We need many, many actions to reform the laws in the United States and on the planet so that the world can embrace this technology. And so if we want it, we're all going to have to fight for it.

• 0:31Ryan Sean Adams?

  The US is trying to disconnect from Ethereum. That's what Joe Lubin, the CEO of ConsenSys, said in our conversation today. And he was talking about those in power trying to unplug Ethereum from the citizens, from we, the people. And I gotta say, the evidence for that increasingly seems to back up that statement. The SEC is going after Kraken, Coinbase, Uniswap, MetaMask. We've done episodes on many of these. They're essentially trying to turn every non-custodial wallet into a broker-dealer. You already know some of that story, but here's what's new. Joe and Matt are producing evidence that the SEC is coming after Ethereum itself. The SEC is sending discovery requests to Ethereum core developers, threatening their employers. They're pushing a coordinated effort to

• 1:13Ryan Sean Adams?

  claim Ether is a security so that they can control it. But this time, we're going on the offensive. ConsenSys is taking them to court to settle this issue once and for all. And if they're successful, it'll be the first time in a US court we get a clear ruling that Ether is not a security, it's a commodity.

• 1:31David Hoffman?

  Before we get into the conversation with Joe and Matt, a message from our friends and sponsors over at Transporter. Transporter is a bridging app powered by Chainlink's CCIP in the background with some of the most intuitive UX in crypto. So if you want to try out the new bridging app, Transporter, try it out at transporter.io. You can bridge ETH, link USCC, and other assets. There's a link in the show notes to getting started with Transporter today. Both Matt and Joe are interesting characters that we had on the episode today. For Bankless listeners that aren't as familiar with Joe Lubin, he is the founder and CEO of ConsenSys. He has been building critical software that Ethereum has really needed in order to actually be a usable system. Many of the products That have been built out of consensus have made Ethereum usable.

• 2:14David Hoffman?

  MetaMask being the big one, Infura, but many other projects as well. Like Gitcoin was incubated out of consensus. And Joe, I think for people who aren't familiar with him, I appreciate Joe because he thinks in like cosmic scales.

• 2:27Ryan Sean Adams?

  Yeah.

• 2:28David Hoffman?

  He thinks, he's a very big thinker.

• 2:30Ryan Sean Adams?

  Yeah.

• 2:31David Hoffman?

  He's like, he understands the way of the universe, the way of the world, very like Ray Dalio-esque in the way that like things move forward across time. And then we also have Matt, the legal counsel of consensus, who is a lawyer, right? Very grounded, very pragmatic. But each of these two guests take turns putting on the conspiracy hat a little bit, which I thoroughly enjoyed. So these are the two guests on the show today, and they each bring their perspectives to the show, which I thought. We've done these shows before, like SEC suing company, company suing the SEC, but.

• 3:01Ryan Sean Adams?

  This is different.

• 3:02David Hoffman?

  It's different when it's Joe, it is different when it's consensus.

• 3:05Ryan Sean Adams?

  Yeah. And what I appreciate about them, both of them, is they came here on this episode and they're here to fight. They're here to push back, they're here for the resistance. So guys, we're going to get right to that conversation, but before we do, we want to thank the sponsors that made this episode possible, including our number one recommended crypto exchange, a place to join the resistance, that is Kraken. Go create an account.

• 3:26David Hoffman?

  If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Kraken, one of the longest-standing and most secure crypto platforms in the world. Kraken is on a journey to build a more accessible, inclusive, and fair financial system, making it simple and secure for everyone, everywhere, to trade crypto. Kraken's intuitive trading tools are designed to grow with you, empowering you to make your first or your 100th trade in just a few clicks. And there's an award-winning client support team available 24/7 to help you along the way, along with a whole range of educational guides, articles, and videos. With products and features like Kraken Pro and Kraken NFT Marketplace and a seamless app to bring it all together, it's really the perfect place to get your complete crypto experience.

• 4:07David Hoffman?

  So check out the simple, secure, and powerful way for everyone to trade crypto, whether you're a complete beginner or a seasoned pro. Go to kraken.com/banklist to see what crypto can be. Not investment advice, crypto trading involves risk of loss. Have you ever felt that the tools for Developing decentralized applications are too restrictive and fail to leverage advancements from traditional software programming. There's a wide range of expressive building blocks beyond conventional smart contracts and solidity development. Don't waste your time building the basics from scratch and don't limit the potential of your vision. Cartesi provides powerful and scalable solutions for developers that supercharge app development. With a Cartesi virtual machine, you can run a full Linux OS and access decades of rich code libraries and open source tooling for building in Web3.

• 4:48David Hoffman?

  And with Cartesi's unique rollup framework, you'll get real world scaling and computation. No more competing for block space. So if you're a developer looking to push the boundaries of what's possible in Web3, Cartesi is now offering up to $50,000 in grants. Head over to Cartesi's grant application page to apply today. And if you're not a developer, those with staked CTSI can take part in the governance process and vote on whether or not a proposal should be funded. Make sure you're vote ready by staking your CTSI before the votes open. Taking self custody of your crypto is one of the most important things you can do on your bankless journey. It's also one of the hardest things to get right with huge consequences if you don't. If you want help going bankless, talk to CASA. CASA helps you take custody of your crypto assets so you don't have to wonder whether you're doing it right.

• 5:31David Hoffman?

  CASA is a one stop shop for doing self custody the right way. With CASA Vaults, you can hold Ether, Bitcoin, stable coins, all with one simple app and multiple keys for the ultimate peace of mind with a support team to help you every step of the way. But it doesn't stop at self custody because even though crypto is forever, you are not. We all plan on making life changing wealth in crypto, but with CASA's inheritance product, life changing wealth can elevate to generational wealth for your kids and your loved ones who don't know anything about crypto. With CASA, you won't lose your private keys and you won't accidentally take them to the grave either. Click the link in the description to get started securing your generational wealth.

• 6:06Ryan Sean Adams?

  Bankless Nation, we have Joe Lubin. He is a crypto OG. He's the CEO of Consensus. He's been on the podcast a number of times. Consensus is the company behind a massive number of crypto projects, including many we know and love, such as the popular MetaMask wallet. Joe, welcome to Bankless.

• 6:22Speaker 00

  Thanks, Ryan. Thanks, David.

• 6:24Ryan Sean Adams?

  And Matt Corva is here for the first time. He's the general counsel at Consensus. He is leading the charge in this case against the SEC. Matt, welcome to Bankless. Thanks, David and Brian. All right, guys, give us a rundown. What is going on at this point in time? The high level, it sounds like the SEC is maybe coming after MetaMask, coming after Ethereum in general, and you guys are taking them to court instead? I know, that's my high-level TLDR. Can you tell us what's really going on? First, you, Joe.

• 6:55Speaker 00

  So, at a high level,

• 6:59Speaker 00

  we feel that the Ethereum ecosystem is under threat, that the United States effectively is trying to disconnect America from Ethereum. We've been tracking this issue for quite a while, and we believe that the stakes are now clear and much higher than, and more existential than we previously believed. And it seems that the SEC is intent on using

• 7:33Speaker 00

  surgical enforcement actions, granular enforcement actions, to try to cast Ether, recast Ether as a security, even though it's been very clear for quite a while, based on statements made by SEC officials and CFTC officials and the way our whole ecosystem in the world has been operating, that Ether's been classified as a commodity for a long time.

• 8:03Speaker 00

  And worse than that, we're seeing, and Matt can flesh this out a little bit, we're seeing scrutiny of the technology. We're seeing scrutiny of actions that software developers are taking in building out the protocol. And that's either a merit-based evaluation that the SEC is engaged in. And I think Chair Gensler was on video a short while ago saying something like that the technology is too volatile, too volatile or unstable, or something like that.

• 8:43Speaker 00

  And essentially by classifying...

• 8:47Speaker 00

  MetaMask as a broker dealer, which they've indicated that they're moving towards. It makes the entire industry without even making it clear that Ether is a security. It makes the whole platform unusable because, again, by gaslighting, by refusing to utter that Ether is a security, they're effectively treating it behind the scenes as a security and they're going after us and many others. And if MetaMask is a broker dealer in the eyes of regulators, then pretty much all software

• 9:26Speaker 00

  on the Ethereum platform, which engages with the Ether token, swapping, doing other things with it, might have to go in and register with the SEC. And that's obviously going to chill all software development in the US and usage.

• 9:45David Hoffman?

  Matt, this isn't the first case that we've seen either with the SEC versus crypto or crypto versus the SEC, but I think there's also just some new elements here. What about Consensus's case versus the SEC really stands out? What's the unique properties about this particular case?

• 10:02Speaker 03

  Yeah, so our case is really about three things. So the headline thing is MetaMask, right? That's sort of what Joe had talked about as well. It's the subject of our Wells notice, MetaMask wallet, the swapping feature and the staking feature. The real differentiator, we think, in our case is to some other actions which have been about challenging agency rules or about specific company operations is Ethereum itself. Ethereum itself is under attack. As Joe said, the narrative we sort of like to talk about internally is we think they're seeking to unplug Ethereum and we think that's just wrong. They have sort of...

• 10:39Speaker 03

  Deputize themselves sort of the police of open source technology in a way that we think is outside of their agency authority. And so we've gone in front of a court in the Fifth Circuit of Texas to say, look, Judge, they are wrong here. Ethereum is a commodity. Everybody knows it's a commodity. The SEC has said it's a commodity. The CFTC has said it's a commodity. The facts show it's a commodity. They are outside the scope of their authority. On Ethereum, our complaint details that they have sought testimony from our developers and our professionals and document production, over 88,000 pages that we've produced to them over the past few years.

• 11:16Ryan Sean Adams?

  Wait, wait, wait. Can we catch that?

• 11:18Speaker 03

  Yeah.

• 11:18Ryan Sean Adams?

  So you have produced 88,000 pages to the SEC?

• 11:22Speaker 03

  Right.

• 11:23Ryan Sean Adams?

  Like, what is that? Is that sort of like discovery? Have they asked for?

• 11:26Speaker 03

  Yeah, exactly. It's the document production. And I think perhaps most alarmingly, like, a lot of that document production is contributions to GitHub, right? Like, show me your work on GitHub and contributions to Ethereum or protocols or clients or things like that. And it's not just us. And that's sort of what led us to take action in a lot of ways. We think, believe this action against us is imminent. But we've heard this throughout the ecosystem. It's been reported on, that they've sent similar letters to the Ethereum Foundation and individual open source developers. And for me, that was a bridge too far in what we'd be willing to passively tolerate while they went through their process. That's why I thought we had to stand up as a leader in the space, protect the developers who contribute to open source code.

• 12:12Ryan Sean Adams?

  So Matt, I really want people to hear that because this was actually, I skimmed the complaint. It's 36 pages. We'll include a link in the show notes. This is the complaint for injunctive relief. I might be getting the legal terms wrong, Matt, but like, it's your case against the SEC, basically. And what was most startling to me as I skimmed through this is, of those 88,000 pages, the SEC is asking for a list of contributors from consensus from other organizations that have contributed to EIP, that is Ethereum Improvement Proposals, that went into the ETH 2.0 Merge, right? You can see them trying to make a case that this isn't decentralized, open source software with a permissionless open group of contributors,

• 12:58Ryan Sean Adams?

  but it's somehow like, I don't know, some cabal, some centralized group that's actually running the show. And the level of detail that they're going to hear, it does seem like it's,

• 13:10Ryan Sean Adams?

  like, they are going after directly open source developers in a way. And that, to me, was incredibly startling and shows the breadth of this. It's far beyond just the MetaMask wallet. It's actually looking at Ethereum from an open source developer perspective and who's contributing and like what codes go into EIPs. That was incredibly alarming to me.

• 13:31Speaker 00

  It's almost like the SEC believes they have a mandate to regulate technology. It's almost like they have a mandate to assess technology on its merits. This action is related to what they've told us they're gonna sue us for. But it goes further. It focuses on

• 13:54Speaker 00

  getting clarity from the courts regarding how the US should classify Ether. That's something that we would not get if we sat on our heels and let the SEC sue us. Chair Gensler has been really careful not to contradict what has been said before because that would be kind of ridiculous, but instead to sort of gaslight our industry and act as though a reclassification has been done without actually doing that. There is a theory that we can get into that

• 14:39Speaker 00

  that this is related to the shift to proof of stake. But it's a foolish theory.

• 14:48David Hoffman?

  Zooming out and kind of like identifying the pattern that I'm seeing here. First part of the details of this case, we've mentioned in passing, but just to make it explicit, is that the SEC sent consensus a Wells notice saying, hey, we intend to sue. And consensus is just replying to that with like, well, we're going to sue you guys first because we think we have a stronger case. That's kind of like how I'm reading this. And Matt, do you want to clarify something?

• 15:12Speaker 03

  Yeah, I wouldn't say that's actually accurate. So this is an action we've thought about taking for a long time. And so we've been thinking about this for a while. They just so happened to send the Wells notice in the process. The Wells notice was informative of the fact that we don't think we're dealing with a reasonable party who has allegiance to the law. You guys all saw the Coinbase wallet decision regarding their swapping feature. So to get a Wells notice alleging that Metamask swaps, which is, was the leader in the space and was doing that thing first. So the Coinbase wallet facts are very similar, is violating the same laws a judge just said did not apply to the wallet. That was perhaps another triggering factor in our decision to file. But, you know, we've thought their action was imminent for a while against us

• 15:57Speaker 03

  prior to the Wells notice. So this is something we've been preparing for and has been well thought out.

• 16:02Speaker 00

  Yeah, one thing we didn't want to do is harm the prospects of the approval of the EtherSpot ETF. And so while we could have started this action a while ago, we wanted to sit back and read the tea leaves and make sure that that if the SEC was going to open that floodgate, because it would probably change everything, that we did not get in the way of that.

• 16:27Ryan Sean Adams?

  So are you saying by filing this complaint, you're thinking that the ETF approval, like the SEC is just not going to approve an Ethereum ETF and that kind of like factored into?

• 16:40Speaker 00

  We thought it was over based on various communications that we have with people in the industry that they weren't going to approve in 2024.

• 16:49Speaker 03

  Yeah, the inverse is probably true, Ryan. So like, we thought that we wouldn't need to bring the Ethereum action if the SEC was going to approve the Ethereum ETF, because that's sort of your best evidence to say, look, Ethereum is obviously not a security. This is just another instance of the SEC saying it's not in approving the ETFs, which would be a commodity-based ETF product. And so that was really what we were thinking about in relation to the ETF.

• 17:13David Hoffman?

  You're kind of just waiting for them to do the right thing and hoping that they would. And they did.

• 17:18Speaker 03

  Yeah, that is a very good description.

• 17:20Speaker 00

  Yeah. And if they did the right thing, as I said, it would open the floodgates, similar to how the Bitcoin Spot ETF affected our industry quite positively. We would see the rush of lots of capital into an attention on our space. And that would be a game changer, I think, for the Ethereum ecosystem. It would be something that would be likely to grow the ecosystem bigger and faster than it's grown before. And effectively, there'd be no gaslighting at that point.

• 17:58David Hoffman?

  Right. And it's been pretty clear from the actions that we're observing of the SEC that they just don't want that to happen. And so there's like two elements to this case that I'm seeing. There's like the narrow things that the SEC is accusing consensus of, like your guys, like MetaMask is a broker dealer, is something that they are accusing or believing that that is the case. And of course, MetaMask disagrees. Most people disagree. There's evidence to say that that disagrees. But that's like the narrow case between consensus versus the SEC. But I think you guys are also kind of just like zooming out and seeing the pattern of the SEC as a whole, including the information that they are not disclosing, the cards that they are keeping close to their chest, which is the

• 18:40David Hoffman?

  pattern, which is that, like Joe, I think you said it very well, the SEC is trying to unplug the United States from Ethereum. That is not something that they have said that they are doing. It's not something that they are articulating that they're doing. But with all of the evidence of the other court cases and the behavior of the SEC, I think this is something that you guys have Believe that you guys have enough evidence for to present in case, in a court case. And so this is actually kind of like the bigger battle. It seems to be like consensus believes, and Matt, check me if I'm wrong, that there's enough evidence out there to show that the SEC has some unspoken mandate to unplug the United States from Ethereum.

• 19:19David Hoffman?

  And that we can actually like push this as an issue into court and get a judge to actually agree with your guys' position. And if that is the case, that you guys do prove this, what's the outcome of that, Matt? Like, how does that improve things?

• 19:34Speaker 03

  Yeah, so our case doesn't really rely on the overall narrative because we can just look at the isolated facts regarding their involvement in Ethereum. We can look at their multi-year investigation following the Hinman speech about Ether, following the CFTC position about Ether, following the fact that it's been around for so long. Why don't you just say, you know, this is sort of the point some congressmen have said in the past few days after learning about this. If you've changed your position on Ether, why don't you just communicate that to the market? Why are you doing this in secret? This is a $400 billion asset class. You know, this is no way to conduct business in the United States. But our case doesn't rely on sort of the overall narrative. So we'll take the position, and we believe the court will agree with us,

• 20:17Speaker 03

  that it's appropriate for the court to declare that Ether is a commodity and therefore all SEC investigations into the asset Ether, and as a result, things like their investigation into who contributes to the open source code would be outside agency authority because they don't have authority to regulate assets that are not securities. And so we think that will be very impactful. And similar to the Judge Phelan opinion regarding Coinbase Wallet explaining that broker-dealers' laws do not apply to software interfaces that do the types of things that MetaMask does and most popular DeFi apps do. Getting another judge on the record looking at that issue and saying, yes, I agree with what Judge Phelan said. This is correct will be another line of defense for the industry to the extent the SEC continues to try and file these cases

• 21:01Speaker 03

  that are outside the scope of the law. So we think. It will obviously be helpful for us, but will help set precedent for a lot of other companies in our industry.

• 21:10Ryan Sean Adams?

  But Matt, the outcome of winning the case is you would you would get a judge to say, get a court to say Ether is not a security, it's instead a commodity, and non custodial wallets like Madame Masque aren't broker dealers. That's the outcome you're trying to argue for.

• 21:27Speaker 03

  Yeah, that's correct.

• 21:28Ryan Sean Adams?

  Okay, and if that is achieved in a court case, it's like, how many, how does US law work? Is it done then? Like, are we kind of finished? Or does this get escalated? Can the SEC somehow appeal? And how long would, like, does this process typically take?

• 21:47Speaker 03

  Parties can always appeal, and we can always hope that it will be finished in the sense of, you know, just like we said when we saw the Fela opinion about Coinbase wallet feature, we said, hey, they've been investigating us about the very same thing that they just lost on. It's done. Obviously, they didn't think it was done. So, you know, judicial interpretation and precedent relative to agency action, I think if you are an agency and you have adherence to due process and you're acting in good faith, you're going to look at those decisions and say, hang on, let me, let us take a step back from our regulation by enforcement approach. Maybe this isn't working. We're not getting the results we want. We need to either do rulemaking, notice and comment rulemaking, good agency practice, or what probably needs to happen, as discussed in our complaint, we need to go to Congress

• 22:32Speaker 03

  and say, Congress, we don't have the authority to sort this out. The courts have said we don't have the authority. We think there needs to be some regulation. And let me be very clear, consensus is not anti-regulation. We think there's lots of room for good regulation to help improve the crypto space. But that's for Congress to sort out at this point, not for one agency to declare itself police of the open source internet and regulate the entire stack. So how does the process unfold? We hopefully win in Texas. That will be a win in the sort of win column for the crypto industry. To get to the higher courts in the US, you need something, most often what's called a split circuit on issues. So the court in Texas is resides in what's called the Fifth Circuit.

• 23:16Speaker 03

  The courts in New York reside in something that's called the Second Circuit. And so to the extent the Second Circuit and Fifth Circuit disagree on issues of law, that is how you get to higher courts in the United States most quickly, most often. And so you can deal with the Court of Appeals and potentially ultimately get an issue up to the Supreme Court if it's big enough. So for example, you know, Howey's application to crypto, is Howey the right test? Is Howey even the right law? Should it exist? People have sort of been theorizing, how does that happen with crypto? How does it get to the Supreme Court? It's a many-year process and we're hopeful that people will see reason before dragging it out all the way that far.

• 23:55Ryan Sean Adams?

  What would that mean? So you win, like, let's, a many-year process to get all the way to the Supreme Court if the SEC sort of digs its heels in? But like, what's a happier scenario? You win this case and the SEC just backs off? Could that happen?

• 24:10Speaker 03

  That could happen. They could certainly change their approach. Like, look, I think everybody has been pretty sober about the fact that this has been the approach from this SEC and this sort of chair's agenda regarding the crypto industry. As Joe said, he said lots of negative things about the crypto industry after being a professor teaching about it for a while, I guess, perhaps somewhat ironically.

• 24:31Ryan Sean Adams?

  That's in the complaint, by the way. There are clips, if you haven't seen this, Bankless Mr. Sir, there are clips from Gary Gensler, MIT professor Gary Gensler acknowledging, like, you can go watch the video, acknowledging that Ether is not a security, Ethereum is not a security, as well as like Litecoin. I think he lists Bitcoin Cash. He said, like, go watch the clips. This is, this is from recent history as well. Matt, was it like 2018 or something like this?

• 24:57Speaker 03

  It was sometime around that era when he was a professor at MIT. And these things just sort of point out like, why we had to take this action. For a while, we felt like we were living in a bit of, you know, like a Looney Tunes-type scenario, like, would, wait, you mean, you're gonna change your, you're gonna flip-flop? You're gonna flip-flop this way? What's going on? Court says this, now you're gonna say the opposite thing? We've seen alarming things like the debt box case where some SEC professionals were sanctioned. You know, it was all too much for us and that was sort of the, that paired with the imminent of their attack on us, which led us here to try and get the clarity. I use the phrase. To borrow a phrase from Chair Gensler, "Cop on the Beat."

• 25:40Speaker 03

  Chair Gensler, that's one of his phrases regarding crypto, that it needs a cop on the beat and he's there to be the cop on the beat. We view ourselves as the cop on the beat now in this scenario, the cop on the beat to regulate agency overreach and to help clean this up and try and bring a resolution.

• 25:55Ryan Sean Adams?

  All right, so Matt, let's do a scenario here. Imagine you're making the case in a courtroom and you've got like two arguments to make. And again, I'm sure your case would be much longer, so we're looking for like a faster bullet point abbreviated version. But you're making the case that Ether is not a security, okay? And then you're also trying to make the case that non-custodial wallets like MetaMask aren't broker-dealers. Let's start with the first. Ether is not a security. What are the bullet points of that case for a courtroom to hear?

• 26:28Speaker 03

  The Ethereum protocol and the Ether asset, which is needed to use the protocol, is just an open source piece of technology. It is decentralized, sufficiently decentralized, as Bill Hinbin said. No party exerts control over the protocol. Development is done in public. To the extent you think that development could impact asset prices, that's no different than other large commodity industries, gold, diamonds, et cetera. And so we think there are great similarities between oil is probably the best example as a consumptive commodity that people invest in but also use in daily life. Ethereum is just another version of that and a very important sort of iteration of open source internet protocols.

• 27:10Speaker 03

  And so that's the core legal argument, but I think it's even easier than that. It's not a security because the CFTC has already done the homework to say it's a commodity. The SEC has already done the homework to say it's a commodity. One chair sort of post hoc review of that process and his attempt to rewrite history will fail because for the factual reasons, it's not a security, but also because lots of people have done their homework and reached the same conclusion.

• 27:35Ryan Sean Adams?

  Well, Matt, here's what I don't understand. We have ETF futures for Ether, the asset, that have been CFTC blessed and the CFTC governs over commodities, right? Like, is that evidence that just says basically this is already recognized? Like Ethereum is already recognized as a commodity?

• 27:55Speaker 03

  That's certainly evidence, but there's even better evidence than that, Ryan, that's talked about in our complaint. In October of 2023, so just last fall, the SEC accelerated the effectiveness of a Ethereum futures ETF product. And so that was a big thing. That was the sort of, again, it didn't just go effective. The SEC accelerated the effectiveness. So that's them taking an affirmative step to, again, list Ethereum futures-based ETF product. They can't do that if they don't view it as not as a security, if they view it as a commodity. And they have a standard, and hopefully I'll get it right in this sort of brief, but to do that accelerated approval, they have to take in the public interest and investor protection. That's the legal standard they're held to.

• 28:40Speaker 03

  And so in October, in doing that, they're saying, hey, we're going to approve this, and we're taking in public interest and investor protection in doing this. And now, a few months later, they're going to say the asset that they just said was fit for approval as a commodity-based futures ETF product is actually an unregistered security. Please make it make sense. And that's why we're taking this action, right? You have the history of CFTC, and even the SEC, all along the way, telling you it's a commodity. And so, you know, it is very confusing.

• 29:12Ryan Sean Adams?

  It feels like a reasonable judge would just look at this and just be like, this is so odd. Well, like, what are the, like, why are they about facing here? Why are they hitting the handbrakes here? Joe, do you have anything to add to that first case? I mean, I get Matt to comment on the non-custodial wallet, like, part of the argument, but on the just Ether is not a security case?

• 29:32Speaker 00

  So the broader context is that our ecosystem is likely perceived as a threat by factions within the US and other parts of the world to how they have been doing business for millennia. Certainly, big banks in the US don't love the idea of disintermediation and decentralization. We've had millennia of authorities governing the world, and the US is top dog right now through intermediaries. And

• 30:07Speaker 00

  The decentralized protocol industry comes along and says disintermediate all the things. We can build better systems and reduce the need for trusted third parties. And there, there is a concerted effort, it appears, in the United States to make sure that they can conduct business as usual. There are certainly factions that, that believe that decentralization is consistent with free market capitalism and Western liberal democratic philosophies. And perhaps that's why we're, we're in this, this sort of quantum state

• 30:51Speaker 00

  where, where certain entities are seeing things clearly. The court's judicial system, the CFTC has been seeing things clearly, the previous SEC administrations saw things reasonably clearly. But the current ruling party seems to want to preserve their ability to, to run the world through different kinds of intermediaries, financial intermediaries in particular. And it does appear that the major banks in our industry who've worked really hard to get their hands on levers of control would prefer to continue winning

• 31:32Speaker 00

  in that context rather than playing a little more fairly in a more decentralized context.

• 31:38David Hoffman?

  Mantle, formerly known as BitDow, is the first DAO-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle Network, a brand new, high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle Network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle Treasury is one of the biggest DAO-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 onboarded, like Game7 for Web3 Gaming and Bybit for TVL. liquidity and on-ramps. So if you want to build on the Mantle network,

• 32:20David Hoffman?

  Mantle is offering a grants program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first DAO-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at @zeroxmantle. Launching a token? Worried about the IRS? Talk to Toku for five minutes to learn how to save hundreds of thousands of dollars for you, your team, and your investors. Now, if you do an initial consultation, Toku will cover the cost of your token valuation, which is what you need for your launch. So, don't wait. Reach out to the team right now at [email protected]. That's [email protected]. Cello is the mobile-first, EVM-compatible, carbon-negative blockchain built for the

• 33:02David Hoffman?

  real world, driving real-world use cases like mobile payments and mobile DeFi. And with Opera MiniPay as one of the fastest-growing Web3 wallets, Cello is seeing a meteoric rise with over 300 million transactions and 1.5 million monthly active addresses. And now, Cello is looking to come home to Ethereum as a Layer 2. Optimism, Polygon, Matter Labs, and Arbitrum have all thrown their hats in the ring for the Cello Layer 2 to build upon their stacks. Why the competition? The Cello Layer 2 will bring huge advantages like a decentralized sequencer, off-chain data availability secured by Ethereum validators, and one-block finality. What does that all mean for you? With Cello Layer 2, gas fees will stay low, and you can even pay for gas natively using ERC20 tokens, sending crypto to phone numbers across wallets using

• 33:44David Hoffman?

  social connect. But Cello is a community-governed protocol. This means that Cello needs you to weigh in and make your voice heard. Join the conversation in the Cello forums. Follow Cello on Twitter and visit cello.org to shape the future of Ethereum. Welcome to Consensus 2024. Consensus is one of the biggest hubs for all things crypto, blockchain, and Web3. This May, Consensus is celebrating 10 years of decentralizing the future. Going to Consensus means being in good company with over 15,000 attendees from over 100 countries. You have the opportunity to learn directly from the architects and advocates representing Bitcoin, Ethereum, Solana, along with the teams from popular Layer 2s like Mantle, Arbitrum, Optimism, Base, and others. Well, Consensus is more than just discussions and presentations. Badge holders get access to witness 10 professional

• 34:26David Hoffman?

  karate combat fights and one unprofessional one between myself and Nick Carter. For the visionaries, Pitch Fest is your spotlight, presenting a stage for the most promising early stage web three companies. And for the devs, the Hackathon offers a unique chance to build your next project or take your existing project to the next level. Immerse yourself in hundreds of side events and hacker houses scattered around Austin. Register for Consensus 2024 today and save 20% with code BANKLESS. Joe, one of the big mysteries I've always had about Gary Gensler and the SEC is where does he get his confidence from? So true. Go toe to toe with some of the biggest.

• 35:03Speaker 00

  I say that all the time. Who's, why does he feel like he has cover to do this? Who's giving him the authority or the mandate?

• 35:11David Hoffman?

  And like between me and Ryan, I'm the one who's very willing to put on the tinfoil hat and go out there. And so I'll do that here is like the, the big banks, the incumbents. Rather than just like, like looking at the narrow details, you can kind of zoom out and see just incentive structures in the old world that doesn't want things to change. This is a pattern throughout him in history is that the people that are in power don't like change because that's, that's disruptive to their status quo. And like, there could be some sort of pipeline between the incentives of those power structures into the current political party that put Gary Gensler in power in the first place.

• 35:53David Hoffman?

  And that is like the perceived blank check that Gary Gensler has to do some of the things, the harassment that he's done of this new power disrupting industry. And so like, is that kind of where you're saying like the way he gets, he has this like blank check from incumbent power structures?

• 36:08Speaker 00

  Yeah, with, with conspiracy caps on, one, one has to wonder.

• 36:17Speaker 00

  First of all, he's, he's a very smart individual. His brother, Robert, we understand is very, very smart and possibly libertarian.

• 36:25Speaker 00

  And Possibly own some crypto. I mean, Possibly, possibly own some crypto. And so Thanksgiving at that family's dinner table should be just fascinating. Little brother, why are you funding my bags? I would love to be invited to that. So very smart politically, been engaged at the top tiers of the financial industry at Goldman, at the CFTC for a very long time. Was he smart enough to position himself to be a an MIT professor, an expert of blockchain by himself?

• 37:10Speaker 00

  Or was that coordinated in some way to give him legitimacy to take the role? He's also done some research on AI and I think he's written written some things. So either way, we find ourselves in this position. And as you're aware, Elizabeth Warren has been placing people in positions of power in the current administration. John Deaton, who is now going up against Elizabeth Warren. He referenced on, I think it was Fox Business a few days ago, that there's an entity called the Bank Policy Institute

• 37:55Speaker 00

  that I don't really know much about, but apparently they're a banking industry think tank. So all he did was reference that. And so I started paying a little attention to them on the internet. And there is a coordinated effort involving Elizabeth Warren and those banks that she used to attack quite strongly to make sure, again, the banks can continue to operate business as usual and the US government can continue to operate business as usual.

• 38:27Ryan Sean Adams?

  I, you know, I'm not usually like on the tinfoil hat side at Bankless. You know, David has that territory covered for us. But I gotta say, just like observing sort of what's been happening with crypto, it's hard to not see this as part of a coordinated effort against crypto. It's almost as if Gary comes to Chairman of the SEC and he's sort of tapped by somebody, some group, basically says, hey, what can you do to just like slow this down? Right? I'll work with these other agencies and like we'll do other things to slow it down. But the SEC, like, how can you gum up the works? Right? You throw in the court system, like, what can you do here just to buy us more time

• 39:11Ryan Sean Adams?

  to figure out how we fully stop crypto? I mean, if that conversation happened either explicitly or implicitly, we would see the actions essentially that Gary Gensler is taking now. And it would be a rational explanation because apart from something like that, it is hard to find a rational explanation for not only the actions he's taking, but the degree of confidence that he is like taking, taking these actions with, as, as you and David were just saying, Joe.

• 39:39Speaker 00

  Yeah. So slowing it down is one thing, and maybe it's not even a terrible thing. So slow it down for the benefit of big financial institutions so that they can get involved. Or maybe slow it down because the discontinuity that we could face if Ethereum, the platform, and Ether, the token, just rocket from here as a result of the floodgate of the EtherSpot ETF being opened, that could be pretty jarring to a society. And so maybe, maybe these kind, wise souls who are running the government

• 40:20Speaker 00

  are just thinking about smoothing the transition to a rigorously decentralized future. I don't think that's true. I think more likely they're trying to maintain the structure of control in the US and across the planet and try to figure out how to, to co-opt the technology and dumb down the technology and make it sort of either an American-style decentralization, where you gotta register and...

• 40:55Speaker 00

  There's significant regulation and backdoors and things like that. And so we, it's basically a clash of civilizations at this point between those who want to maintain top-down command and control and those who believe in rigorous decentralization.

• 41:11Ryan Sean Adams?

  2023 and 2024 has certainly felt like that. I want to get back to Matt in the court case he was making. The conspiracy has off. So we got to take that off because these are things that may be going on and like are likely, are likely going on, but we can't prove them necessarily. We don't have the evidence of kind of the backroom conversations necessarily. So Matt's role is to bring evidence to the courts to prove that Ether is not a security. And also the second aspect that I want to get to, that non-custodial wallets aren't a broker dealer. So Matt, what would you say to a judge about like as evidence for why or your, what's your case for why MetaMask is not a broker dealer?

• 41:53Speaker 03

  So I think just very plain and clear, non-custodial wallets themselves can never be broker dealers. If you think about what they just do, they're self-hosted software that lets you manage your private keys and author transactions can't be a broker dealer under any sort of conception of the law or history of broker dealer laws. More specifically, even better for the industry, services that have developed around utilities like swaps or MetaMask staking, which allows you to connect to the Lido and Rocketpool protocols. So if you want to participate in those protocols as an individual user of MetaMask, you can use the MetaMask staking feature and connect with those protocols. The SEC says that mere connection to Lido and Rocketpool, two services they allege are

• 42:38Speaker 03

  offering unregistered staking products, is broker dealer activity. And so why is this all wrong? For the reasons that you all touched on it in the conspiracy segment, which is that the world has evolved around intermediaries and the government and our history of laws regulate intermediaries and for good reason, right? Intermediaries are historically where things have gone wrong. If you think about the number of transactions that happen through MetaMask, and then imagine that happening through a human, what would the propensity for fraud be? It would be very high, right? Because it's not autonomous, it's not software enforced, it's not transparent, it's not auditable, it's not verifiable. You would think that you'd get screwed in those transactions, probably a high number of times.

• 43:22Speaker 03

  But software is different. It's disintermediated, and all it's allowing is a technology service for a user to transmit instructions to their own instructions to where they want. I want my instructions to go to Uniswap, and I want to tell Uniswap, I want, you know, 5 USD for a corresponding amount of tokens I'm willing to sell. And verify that logic is actually happening and being enforced exactly how the user said on the blockchain. And so, why can these things not be broker-dealers? Because the broker-dealer laws regulate human intermediaries that perform human discretionary acts. They negotiate on behalf of customers. They seek prices on behalf of customers. They custody customer assets.

• 44:05Speaker 03

  And of course, our services and similar services offered around the industry don't do that, right? They're software-based, they're non-custodial, they rely on code. They are not exerting the authority that the broker-dealer rules for good reason seeks to regulate, because it is not needed in this context. And I think that's what Judge Phelan in the Quinbase wallet really sorted out. You know, she said like, hey, look, this thing doesn't... At a very preliminary stage in the case, this is software. This isn't regulated broker-dealer activity, AKA, human activity in some way. They're not doing broker-dealer things. They're doing technology things. And that's not what these laws are meant to regulate.

• 44:42Ryan Sean Adams?

  Matt, it's just software. And also, what I can't get my head wrapped around, and this is just like the layman's conclusion. So, I have, let's say, a hardware wallet, Ledger Wallet, and I use that with MetaMask. I have custody of my property the entire time. I'm not giving that custody to any third-party intermediary. There's no kind of like broker in that entire transaction, any more than like a vault I might have, somewhere in my house, is like... A broker dealer, that's just a place where I stole, I store my assets. And so like that part just doesn't pass the the common sense person on the street test in any way.

• 45:20Ryan Sean Adams?

  And back to Joe's comment, I want to get people, give people the sense of what it would mean if all unhosted wallets, if all non custodial wallets were labeled as as broker dealers, because it would be pretty severe. Joe, earlier in the conversation, said if MetaMask is a broker dealer, then all software on Ethereum has to come into the SEC and register. What's the alternative? So let's say the SEC wins in their world, all non custodial wallets are broker dealers. Like, what would that actually mean for all of the stuff that we have on top of Ethereum today?

• 45:56Speaker 03

  I think from a legal perspective, I'll just answer and say like, it doesn't have to mean anything bad per se, but it does because we haven't done the rulemaking and we haven't done the homework. If the SEC wanted to create a framework such as those previously sort of developed by Commissioner Purse, you know, a former guest of the podcast and I think crypto industry favorite. People have had ideas of how do you regulate these things in ways that don't block the technology? The problem with the SEC's approach is to say, hey, I want to classify this thing as a security or a broker dealer, and then not promulgate any rules for that technology to work. Because again, those rules, historical rules, require intermediaries.

• 46:36Speaker 03

  They require transfer agents and all these humans, and they require things that the SEC has not provided guidance or rulemaking on, including the guidance or rulemaking to even register. You couldn't register Ethereum today, even if you wanted to, you couldn't register a token. It's very confusing, despite what the administration has said, you can't just come in. It's not a forum on the website, you can't just come in and talk to us and register. Many, many legal hours have been poured over trying to figure that out. So. It's not catastrophic to the extent we develop a framework, but there's been a refusal to develop that framework. And I think that's a huge problem.

• 47:10Speaker 00

  Yeah, so if the SEC wins, apparently we could purchase Ether, or at least custody, maybe, or Ether at an organization called Promethium. Speaking of this simulation, interesting name, Promethium. Rimes with one of my favorite protocols.

• 47:31Ryan Sean Adams?

  Can we just tee that up for a second? Because I don't know if you have any takes on this, on what Promethium is. So it came on our radar. I was actually talking to David about like, should we do a podcast on this weird Promethium thing to try to explore and find out what it is? But it felt like a digestive journal, exercise in journalism. But Promethium, and the guy who runs it, it seems like it's this exchange that has been given SEC regulatory approval to list Ether, but list it as a security. And the CEO is making the rounds, basically saying, I have the only registered crypto exchange like in America.

• 48:12Ryan Sean Adams?

  And on my exchange, I'm calling Ethereum a security, and therefore it's a security. And look, everybody, I can, I can get a registered exchange in the US where everyone else in crypto says it's impossible. Aren't I a good boy? All of these things. Meanwhile, he has no liquidity, like no one's using it. No one's there. It's a really bizarre story. I don't know if you have any takes on like, what this thing actually is? Bankless folks can go like, find their own information about it. But like, do you have a take on this?

• 48:43Speaker 00

  I think it might be an attempt to create an American-style decentralization. A limited version of using these, these protocols to enable tokenization. Larry Fink likes the idea of tokenization. I hope Larry Fink and BlackRock really like the idea of radical decentralization. Matt, can you make any sense of how they could possibly have approved Promethium?

• 49:12Speaker 03

  So maybe it's my turn for the tinfoil hat.

• 49:15Ryan Sean Adams?

  Yes, we get the lawyer. Yes.

• 49:18Speaker 03

  So Chair Gensler is actually brilliant in a lot of ways. In many ways, he's a very smart guy. People who know him, nobody will dispute that he's extremely smart and well thought out. The Promethium approval, which is just approval of a narrow sort of purpose broker-dealer, the only one who's received such approval to deal in crypto, I think is factually correct. So many have applied, but only Promethium has received this approval. Dropped just a few days before Gary Gensler testified before Congress on the need for crypto regulation.

• 49:51Ryan Sean Adams?

  Right.

• 49:52Speaker 03

  As a convenient way to say, hey, we don't need regulation. We've approved these things. They just have to come in and register, just like my friends here at Promethium.

• 49:59Ryan Sean Adams?

  And he gave testimony, the CEO of Promethium gave testimony in front of Congress about this.

• 50:03Speaker 03

  Okay. Exactly. And tracing it back to our complaint, this is something Congress has picked up in the past few days. Chair Gensler went before Congress to testify about the need for crypto asset regulation again in 2022. If you look at the timeline in our complaint, as we talk about the Ethereum order, sort of this order deputizing the staff to go after sales and trades in Ethereum as a securities transaction, mere days before he appeared before the Congress and had that infamous exchange with McHenry, where he refused to answer whether Ether was a security. I will leave it to you to interpret whether all of these timing things are coincidences.

• 50:48Speaker 03

  Notably, right before Paul Graywall was set to testify, Coinbase gets hit with a lawsuit, right? So, you know, there's one instance coincidence, several instances, maybe part of a trend, part of a plan. And so Promethium could just be a pawn in this sort of, let's just try and slow things down. Let's try and convince people.

• 51:09Ryan Sean Adams?

  Here's the bizarre thing about all of this and why I'm convinced it'll never work, like they can't win, is because no one wants to use that product. No one wants to use Promethium. We already have a centralized financial like structure in the US. And it's like. It's working great. People want to use Metamask, they want to use Uniswap, they want to use the Coinbase exchange because it's like a 5 to 10x improvement. So like, how can they win when no one's going to use their products?

• 51:45Speaker 00

  They can win by chilling activity. Two decades ago, the BitTorrent protocol looked very promising.

• 51:55Speaker 00

  The Record Industry Association of America, the Motion Picture Association of America began sending, I guess, cease and desist letters or, or taking children and their mothers to court. And, and that really put a chill on that technology. It, it continued at a low level for, for quite a while, but that was a decentralized protocol technology. And it effectively was rendered relatively harmless in the American context.

• 52:27Ryan Sean Adams?

  For people don't remember this time, I remember like stories of, you know, like somebody's grandmother who would receive a notice from like their ISP that their grandson was like downloading illegal music and like a scary letter comes in the mail like with like fines.

• 52:44Speaker 00

  Someone you know, Ryan?

• 52:46Ryan Sean Adams?

  Yeah. We'll, we'll, you know, we'll cut that from the episode.

• 52:52David Hoffman?

  We've all had our LimeWire days.

• 52:54Ryan Sean Adams?

  I mean, so like that, that's kind of the chilling effect that they could have. But, you know, back to, I guess, the broader conversation here, Joe, where you feel like this is maybe in the context that these cases are part of a coordinated effort to unplug the US from Ethereum. That doesn't mean Ethereum gets unplugged. It just means the US is less tapped into Ethereum. Our, our developers have to be shadowy super coders and go underground. Our entrepreneurs have to move offshore to different jurisdictions, but other jurisdictions will like probably promote, will fill in the gap, will fill in the vacuum. Do you have any take on, let's say, things go bad, they get worse, maybe we lose these cases, maybe

• 53:36Ryan Sean Adams?

  something like bad happens. What happens to Ethereum and to the crypto movement?

• 53:41Speaker 00

  So, so currently, let's say the US is anti Ethereum. And in relation, other nation states are a little more pro Ethereum because Ethereum decentralization levels the playing field for those nation states against the US. Yet the US has a very long arm and can influence other nation states quite significantly. And it's a long game. This isn't about the next few years. This is about perpetuating the system for as long as possible.

• 54:17Speaker 00

  Certain people's minds. And so one could imagine, again, I said, it's a clash of civilizations. This is about whether decentralization, disintermediated systems are allowed to persist, allowed to continue to make life better, or whether they're stamped out in favor of the current system. We're in a world of so many threats, existential technological threats that are relatively inexpensive to acquire for small groups. And from that perspective,

• 54:59Speaker 00

  you could see that it might make sense to people who like top-down command and control, because they can use very rigorous versions, very controlling versions to stamp out existential threats to humanity. The problem with that is, even if they're well-intentioned, we end up moving into something that feels a little bit like a prison planet, or a planet of effectively slaves to the system, rather than building a world in which we all have much greater

• 55:37Speaker 00

  economic and political agency, and where we can all benefit from permissionless innovation and access to financial innovation.

• 55:49Ryan Sean Adams?

  So Joe, I know no one listening wants to live in that dystopia you just described.

• 55:54Speaker 00

  No prison planet.

• 55:55Ryan Sean Adams?

  Okay, so like, we are definitely not Team Prison Planet on Bankless.

• 56:01Speaker 00

  You are Team Bankless.

• 56:02Ryan Sean Adams?

  We are. But here's the insidious thing, is even I was scrolling the Bankless Discord this morning, and someone said, I'm really excited to hear about kind of the consensus versus the SEC thing. But like, I gotta be honest, like, you guys are having one show about regulatory issues per week, and it's hard for me to tune into like, more than one. And I feel like this is a, almost like a DDoS attack against our industry. Okay, so like, look at who the SEC is coming after right now. Just, just look at it. What's happened in the last few months? It's Kraken, it's Coinbase, it's Uniswap, it's MetaMask, right? Are these the bad guys that they should be pursuing? Are these the true crypto villains? It's absolutely bizarre, but because they attack on all angles, it feels like a DDoS attack.

• 56:47Ryan Sean Adams?

  And what people are feeling is almost powerless to kind of respond. So people are frustrated because, you know, they get geo-blocked. It's like Iran, North Korea, and America can't access a particular airdrop token. How bizarre is that? But they feel powerless. They don't exactly know what to do. So you could be like, I guess, you know, you could say something like, "Call your congressman." But like, everyone know, I mean, you call your congressman, we're supposed to do that weekly? Where does that, where does that message go? That's why we get behind cases like this, where it's so good to see consensus actually going on the offensive here, rather than being defensive. And we can rally around that. But we, I think a lot of listeners want to know, like, what can we do?

• 57:31Ryan Sean Adams?

  How do we, how do we support this? How do we keep our attention? Is there something we can do in this case? Do you have any advice for, just like the crypto native who's listening and feels very powerless, concerned, but also powerless?

• 57:45Speaker 00

  So, as one of our close colleagues, Pat Baraducci, likes to say, this is a special moment in time. When Ethereum started, I and other people realized that, that we were going to be causing a clash of civilizations. I'm sure Satoshi felt similarly. And we knew that we had to have heads down and build as much and as fast as we could. Because when the people who run the planet realize what's going on, that they would not be able to run the planet through the levers that are currently in place and that it would likely be a much better system for the 99%,

• 58:32Speaker 00

  they are certain to balk. And

• 58:36Speaker 00

  This is great, what's happening right now. All this regulatory scrutiny is great because it gives us an opportunity to share how powerful and wonderful the technology is and can be. And it gives us a platform effectively to speak with politicians and regulators, help them understand that it's not just this action. We need many, many actions to reform the laws in the United States and on the planet so that the world can embrace this technology. And so if we want it, we're all gonna have to fight for it.

• 59:15Ryan Sean Adams?

  This is the case that David makes to me when I'm feeling pessimistic about all of these things. He's always like, on the flip side, look at who they're suing. I'm like, look at who they're suing, David. And he's like, yeah, exactly. Look at who they're suing. It's some of our best companies.

• 59:28David Hoffman?

  It's the Avengers of crypto.

• 59:30Ryan Sean Adams?

  They just sued Kraken, Coinbase, Uniswap, and MetaMask, right? And now you guys are taking them to the offensive. And I guess that's the optimistic take. Maybe this goes to the Supreme Court. Well, that will cause a national discussion on what it means to own your own property, your own digital property. And I guess that's the positive way of looking at all of this.

• 59:50David Hoffman?

  Matt, as we progress into the future with this court case, maybe you can simulate what this might look like in terms of like timeframes, milestones. Is there like a default scenario that you can kind of articulate?

• 1:00:04Speaker 03

  It's gonna be a multi-year process, most likely. And frankly, it's largely up to the SEC as to where it goes from here. At this point, we are happy to be the plaintiff in the case. And we've stated our case, and now it's up to them to respond. So in Texas, they've got a couple of options. It'll unfold. It'll be clear probably over the next 60 days or so which approach they're gonna take. They may try and dismiss the case. They may say, hey, let's just argue the case here. We want to argue it about the merits. And we'll get into what you usually see. And you've seen in the Ripple cases and the Coinbase cases, an exchange of briefs. Here's why they're wrong. Here's where we're right. Here's why they're wrong. Here's why we're right. And then the judge hears the arguments and it progresses. And so We think the Texas case could play out over the next, let's call it one to two

• 1:00:47Speaker 03

  years, depending on timeline and how it goes. The SEC may also continue to file their own cases around the country. They seemingly have limited resources. Somebody joked to me, the only people they go after are crypto and Elon Musk these days. So they have lots of trial lawyers sitting around, it seems like, to deploy on these things and they can continue to bring their actions that they want. We'll see what Congress does. Does Congress get more active? We've heard a lot from Congress, "Hey, we're going to clean this up. We're going to sort this out for you." They haven't done that yet. Congress is the quickest path to resolution. The courts are a path to like a final, you know, clear picture, but they're slower. And so hopefully Congress runs this and we don't have to be so inefficient. We can focus on building.

• 1:01:31Speaker 03

  People can build confidently in this country. Joe talks about it all the time. It's a matter of national economic security. You know, US involvement in Ethereum, as you guys pointed out, these are all US companies that are leaders in this space and they're trying to throw them out of the country and put them out of business. Doesn't make a lot of sense when you think about the big picture. And so hopefully people come around to that sooner. But if not, the court case will play out.

• 1:01:53Speaker 00

  Yeah, so I think the best we can expect is probabilistic finality as some of these cases make their way up towards the Supreme Court and with Gridlock in DC as Congress fumbles and tries to understand the technology and hopefully weighs in. In the meantime, these two civilizations are proceeding in parallel. Our civilization, the decentralized civilization, is growing quite dramatically in value and in number of participants.

• 1:02:30Speaker 00

  And so if we can keep things going in the US and other places, then our world can grow and hopefully grow really fast. Hopefully in 2025, the SEC is forced to approve the EtherSpot ETFs. That'll be a game changer. And frankly, the legacy world needs to continue to operate and service the cohorts that are most comfortable in that world as more and more people spend their...

• 1:03:05Speaker 00

  Work and leisure time in the decentralized protocol ecosystem. So we can, we can just grow our way into real finality.

• 1:03:15David Hoffman?

  The grand irony of this whole relationship with the SEC is that, Matt, you talked about like the SEC is like seemingly infinite resources. Well, those come from our tax dollars ironically. And also the thing that the SEC is preventing is GDP growth inside of the United States. So it's really a double whammy bullet to the foot that we're kind of causing ourselves here.

• 1:03:36Speaker 00

  Another, another consideration is that there's so much debt in the system that the US and other nation states need to engage in financial repression, which means they, they need to pay off the debt via inflated currency, devalued dollars. And they don't want a whole bunch of us escaping to a sounder, an ultrasound currency that they want us all to shoulder the same pain that, that has been caused over decades.

• 1:04:09David Hoffman?

  Yeah. Well, Joe, Matt, thank you guys for coming on and illuminating some of the paths for us and also going toe to toe with the SEC on, I think, some of the biggest issues that we all know are bubbling behind the scenes. Now you guys are kind of bringing them to the forefront and making them explicit. So thank you for doing what you guys are doing.

• 1:04:25Ryan Sean Adams?

  Let's do this. Let's win. We gonna win?

• 1:04:28Speaker 03

  We're definitely gonna win. We wouldn't have done it if we didn't think we were.

• 1:04:31Ryan Sean Adams?

  There we go. Big win. We're right on track. Awesome. Well, thank, thank you, guys. This has been great. Gotta remind you, Bankless Nation, of course, none of this has been financial advice. I guess Matt would probably want me to say it's not legal advice either. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier, not for everybody, but we're glad you're with us on the Bankless journey. Thanks a lot.