This year, the SEC has ramped up its enforcement efforts against digital asset marketplaces for selling non-fungible tokens (“NFTs”) (and other digital assets) the agency alleges are securities. In response, some potential targets for SEC enforcement have proactively sued the SEC, challenging its jurisdiction to regulate digital assets and/or seeking a declaration that the digital assets are not securities. Escalating tensions further, several private plaintiffs have also filed civil lawsuits against NFT issuers and/or marketplaces. The SEC continues to decline to issue regulatory guidance or engage in rulemaking on whether NFTs qualify as securities, instead focusing on selective enforcement actions against specific NFT projects and marketplaces. These developments underscore the regulation-by-enforcement approach that has characterized the SEC’s treatment of the crypto industry under the Biden administration. However, as we discuss below, 2025 may mark a turning point in the NFT regulatory landscape.Continue Reading NFT Legal Issues

Until fall 2023, there were few SEC enforcements or litigations involving securities issues with non-fungible tokens (“NFTs”). This has changed dramatically. In rapid succession last fall, the SEC undertook two enforcements against NFT projects for alleged securities law violations. Yet, the SEC has declined to provide regulatory guidance or rules regarding the treatment of NFTs as securities. Instead, the agency has chosen to engage in selective enforcement against NFT projects. This year, the SEC has ramped up its enforcement efforts against digital asset marketplaces for selling NFTs (and other digital assets) the agency alleges are securities. In each of these actions, the SEC has cited the use of smart contracts to trigger resale royalty payments to the NFT issuer upon the resale of an NFT as evidence supporting the classification of the NFT as a security.Continue Reading NFTs and Securities Law Issues Are on the Rise – SEC Analysis Relies on Resale Royalties

The U.S. Securities and Exchange Commission (SEC) has taken a significant step in its regulatory scrutiny of blockchain gaming projects by issuing a Wells notice to CyberKongz, a prominent NFT gaming platform. This development underscores growing tensions between blockchain innovators and federal regulators over the intersection of NFTs, utility tokens, and securities laws. See here for our discussion on some previous SEC NFT enforcements.Continue Reading SEC Hits Blockchain Gaming Project with Wells Notice

Yet another “celebrity” token memecoin project seeking to leverage a “cultural movement” has become the subject of a lawsuit alleging that the tokens were unregistered securities. A group of plaintiffs recently sued over the promotion and sale of the Hawk Tuah cryptocurrency memecoin, known as the “$HAWK” token.Continue Reading Hawk Thua – Sue that Thing! When Will Celebrities Learn the Risks of Launching Crypto Tokens?

Introduced in response to certain digital media sellers (e.g., game publishers) revoking consumer access to purchases with little to no recourse, AB 2426 forces sellers of “digital goods,” such as movies, apps, games, books and music to clarify what a consumer is actually receiving in connection with their “purchase.” Often companies refer to the “purchase” or “sale” of digital goods, yet the associated terms of service make clear that the buyer only receives a revocable license to such goods. In some cases, if a buyer violates the terms of service, the license is revoked, and the user is denied further access to the digital goods. In other cases, a buyer may be denied access to digital goods it has “purchased” if the digital media platform shuts down.Continue Reading New California Law Targets Sellers of Digital Goods – Applicability to NFTs is Uncertain

The Consumer Financial Protection Bureau (“CFPB”) published a report on Banking in Video Games and Virtual Worlds (“Report”) that warns of greater scrutiny of and enforcements against the financial services offered in games and virtual worlds that increasingly resemble traditional financial products and services offered by regulated banking and payment systems. The Report is applicable to all types of games and virtual worlds, but creators and publishers of blockchain games and metaverses, in particular, should take note of this report.Continue Reading CFPB Report Targets Games and Virtual Worlds – What Blockchain Game and Metaverse Companies Need to Know

The United States Patent and Trademark Office (“USPTO”) and the United States Copyright Office (“USCO”) delivered a report to Congress entitled Non-Fungible Tokens and Intellectual Property on March 12, 2024 (“Report”). While the Report is comprehensive, it does not recommend any new action to address IP issues with NFTs.Continue Reading The USPTO and USCO Delivered a Report to Congress on IP Issues with NFTs – Maintains Existing IP Regime

On December 13, 2023, CoinList Markets LLC (“CoinList”) agreed to pay $1,207,830 pursuant to a settlement agreement with the Office of Foreign Assets Controls (“OFAC”) in connection with allegations that the San Francisco based virtual currency exchange violated OFAC’s Russia/Ukraine sanctions by allowing users in Crimea, an embargoed country, to open accounts on its platform.Continue Reading Sanctions Enforcement in the Cryptocurrency Industry Continues to be a Focus

The U.S. authorities are increasingly taking actions against big-name crypto mixers for potential violations of sanctions regulations. On November 29, 2023, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) sanctioned Sinbad.io (“Sinbad”), which is a virtual currency mixer. As a result, U.S. persons are generally prohibited from dealings involving Sinbad or its property interests. Virtual currency mixers are anonymized software tools that allow users to conceal the source or owner of digital assets.Continue Reading OFAC Sanctions Crypto Mixer Following Allegations of Laundering Funds to North Korea

The USPTO has prepared soon to be published supplemental guidance for design patent examination for computer-generated electronic images. This guidance relates to determining whether a design patent claim including a computer-generated electronic image per se or a computer-generated electronic image shown on a display panel (e.g., computer screen, monitor, computer display system, mobile phone screen, virtual reality/augmented reality goggles), or a portion thereof, satisfies the article of manufacture requirement in 35 U.S.C. 171. This guidance supplements the guidance provided in section 1504.01(a), subsection (I) of the Manual of Patent Examining Procedure (MPEP). According to the USPTO, this supplemental guidance does not change the current guidance but provides important clarifications.Continue Reading USPTO Guidance on Design Patents Including a Computer-Generated Electronic Image