Legal News & Articles

Uniswap Labs revealed it received a Wells notice from the SEC, indicating potential legal action ahead. 

The Deets

• Wells Notice Received: Notification from the SEC's Enforcement Division.
• Operations Continue: Current and new products remain available.
• Legal Position: Confident in the legality and transformative nature of their offerings.
• Community Impact: Emphasizes the role of Uniswap in enabling global economic participation.

The Bulk

Uniswap Labs is the latest to join the ranks of blockchain-based firms under the SEC’s microscope after it received a Wells notice yesterday. Despite this, Uniswap Labs stands firm in its mission, emphasizing the continuity of its services and its commitment to innovation in the blockchain space. 

❗Why It Matters

The SEC's notice to Uniswap Labs could signal a pivotal moment for the DeFi sector, potentially shaping the future of blockchain technology's integration with global finance. It highlights the ongoing struggle between cryptocurrency and regulation, particularly here in the United States.

🎤 Protocol Prose

For more web3 and NFT news, visit the Lucky Trader newsfeed.

For more web3 and NFT news, visit the Lucky Trader newsfeed.

The SEC is charging Stoner Cats 2 LLC with conducting an unregistered crypto asset securities offering through NFTs. 

The Deets

• Over 10,000 NFTs sold at $800 each in just 35 minutes in 2021
• Marketing alleged to emphasize potential for resale value and team expertise
• Violated the Securities Act of 1933 by selling unregistered public offerings
• Stoner Cats agreed to cease and desist and to pay $1 million civil fine, plus set up Fair Fund 

The Bulk

Stoner Cats 2 LLC, also known as SC2, has been charged from the Securities and Exchange Commission (SEC) for conducting an unregistered offering of crypto asset securities in the form of NFTs. The venture aimed to raise funding for an animated web series called "Stoner Cats."

SC2 managed to sell more than 10,000 NFTs at approximately $800 apiece, selling out within 35 minutes. According to the SEC, the SC2 marketing campaign overtly highlighted the potential for resale value on the secondary market and emphasized the team's experience in Hollywood production - which included Mila Kunis and Ashton Kutcher. 

In addition, it's noted that the company encouraged individuals to buy and sell these NFTs, driving more than $20 million in at least 10,000 transactions. By doing so, they violated the Securities Act of 1933, as they were not registered or exempt from registration.

❗️Why It Matters

This is now the second major 2021 NFT project to be charged by the SEC for an unregistered offering securities via NFTs. Might it be a matter of time before more dominos fall? 

📊 By the Numbers

Stoner Cats 2 LLC raised approximately $8 million from their NFT sale and encouraged secondary transactions that exceeded $20 million.

🎤 Founder Feedback

🎬 Take Action

If you own a Stoner Cats NFT, keep an eye out for announcements regarding the Fair Fund established to return monies to injured investors.

🧠 Learn More 

• SEC Charges Impact Theory 

For more web3 and NFT news, visit the Lucky Trader newsfeed.

Sotheby's was added as a defendant to a lawsuit brought by Bored Ape Yacht Club collectors, alleging that the auction house participated in a "misleading promotion" of the NFTs to deceive investors, according to a first report from The Art Newspaper. 

The Deets

• A class-action lawsuit was filed in California against Yuga Labs, Sotheby's added in the amendment.
• The lawsuit claims the auction house endorsed the BAYC NFTs, leading to an artificial value inflation.
• Sotheby's previously auctioned 101 Bored Ape NFTs for $24 million in 2021. 
• The complaint indicates that the cryptocurrency exchange FTX, is not a traditional collector as suggested by Sotheby's representative.

The Bulk

Sotheby’s has been added as a defendant in a lawsuit regarding the deceptive promotion of Bored Ape Yacht Club NFTs. This comes in light of the auction where Sotheby’s sold 101 of these NFTs at $24 million, surpassing the pre-sale estimation of $12 to $18 million in 2021. The lawsuit suggests that this sale was instrumental in unjustly elevating the value perception of the NFTs.

The core contention is that Sotheby’s, through this sale and subsequent statements, gave Yuga Labs - the creators of the BAYC NFTs, an undue sense of authenticity among traditional collectors. Max Moore from Sotheby’s, after the sale, hinted that a traditional collector had acquired the NFTs.

However, the lawsuit contradicts this, stating that FTX, a cryptocurrency exchange, was the actual buyer. This alleged misrepresentation, as per the plaintiffs, erroneously signaled that BAYC NFTs had garnered mainstream traction.

🎤 Community Quotes

Sotheby's representatives have called the allegations "baseless." 

🧐 Wait, What? 

The Sotheby's inclusion comes as an amendment to a class action suit that first spotlighted Yuga Labs and celebrities and their promotion of Bored Ape Yacht Club. 

For more web3 and NFT news, visit the Lucky Trader newsfeed.

Melania Trump's newly released Apollo 11 NFT collection, which utilizes iconic NASA imagery, is facing opposition from NASA for non-compliance with their merchandising regulations.

The Deets

• The Apollo 11 NFT, termed "Man on the Moon," features an iconic image from NASA's lunar mission.
• NASA has expressed opposition to the use of its imagery in NFTs.
• The agency's regulations state it will not approve merchandising applications for NFTs.
• Despite NASA's disapproval, it is unclear if any actions will be taken given that the imagery is in the public domain.

The Bulk

On the eve of the 54th anniversary of the Apollo 11 mission, Melania Trump released a collection of NFTs termed "Man on the Moon." This collection uniquely incorporates one of NASA's most iconic images, the photograph taken by Neil Armstrong depicting Buzz Aldrin standing on the lunar surface.

Although NASA's images are generally not copyrighted and are available for educational or informational use, the agency has drawn a line when it comes to NFTs.

According to NASA's merchandising regulations, applications involving NFTs will not be approved as they're inconsistent with the product categories that the agency is approved to merchandise.

These regulations, however, might not prevent the use of NASA's images for NFT creation since they are in the public domain and not protected by copyright law.

Therefore, despite NASA's displeasure with the situation, it's unclear if any definitive action can be taken against the usage of these images.

❗Why It Matters

This situation underscores the complexities and legal ambiguities around the use of public domain images in NFTs, which could set precedent for future NFT creation and usage disputes.

💰 Money Talks

The "Man on the Moon" NFT is priced at $75, and in a past instance, Anicorn Watches managed to sell a NASA-branded NFT for over $41,000, indicating potential financial implications and revenue streams surrounding this controversy.

🎤 Founder Feedback

🔜 What's Next?

It remains to be seen whether NASA will choose to ignore this situation, as it did with Anicorn Watches' NFT, or utilize this as an opportunity to further protect its content from what it deems as unwanted usage.

Today, the SEC released a press release stating that it had charged Coinbase with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency.

🔙 Back It Up

In March, the SEC issued a Wells notice to Coinbase, centered around the crypto exchange's staking service and asset listings. At the time, CEO Brian Armstrong noted that a Wells notice typically precedes an enforcement action. Now, the SEC is back to finish what it started, and the government agency's ongoing gripes with Coinbase have devolved into the lawsuit that was filed today.

The Deets

• The news comes a day after the SEC charged Binance with multiple securities law violations.
• The SEC alleges that Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the Commission as required by law.
• The SEC also charged Coinbase for failing to register the offer and sale of its crypto asset staking-as-a-service program.
• Coinbase, Inc. and Coinbase Global, Inc. were both named as defendants, but founder and CEO Brian Armstrong was not (in contrast to the Binance suit, as in this case the SEC did not assert that Coinbase had commingled customer funds).
• Ten U.S. states also took legal action against Coinbase for violating securities laws: Alabama, California, Kentucky, Illinois, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin.
• The SEC is classifying Solana (SOL), Cardano (ADA), Polygon (MATIC), Sandbox (SAND), Filecoin (FIL), Axie Infinity (AXS), Chiliz (CHZ), Flow (FLOW), Internet Computer (ICP), Near (NEAR), Voyager (VGX), Dash (DASH), and Nexo (NEXO) as securities in the lawsuit.

❗ Why It Matters

Another day, another charge against a major crypto exchange. This time the target is Coinbase, the largest crypto asset trading platform in the United States. SEC Chair Gary Gensler is hell-bent on asserting control over crypto markets, so unfortunately, this lawsuit isn't surprising.

Coinbase has tried reasoning with the SEC to no avail, and in March, when the SEC issued the Wells Notice, Coinbase's Chief Legal Officer Paul Grewal said, "Tell us the rules and we will follow them." The reality is that it's hard to really assign sound logic to the situation, and certainly some of the confusion stems from the fact that Coinbase was able to IPO in April 2021, which now in retrospect seems odd when in the second page of the suit, the SEC wrote, "Coinbase has for years defied the regulatory structures and evaded the disclosure requirements that Congress and the SEC have constructed for the protection of the national securities markets and investors." Which implies that Coinbase was able to operate as an unregistered broker for years but was also able to IPO two years ago?

🎤 Founder Feedback

Regarding the SEC complaint against us today, we're proud to represent the industry in court to finally get some clarity around crypto rules.

Remember:
1. The SEC reviewed our business and allowed us to become a public company in 2021.
2. There is no path to "come in and…

— Brian Armstrong 🛡️ (@brian_armstrong) June 6, 2023

📊 By the Numbers

The stock price of Coinbase (NasdaqGS: COIN) is down -13% on the day at the time of writing, and it was down as much as -20% when the market opened.

🧠 Learn More

• SEC Complaint filed 06/06/23 (SEC v. Coinbase)
• Morning Minute | Coinbase Sues The SEC (April 25, 2023)
• SEC Issues Wells Notice to Coinbase (March 22, 2023)

Today, the SEC released a press release stating that it had charged Binance and Binance founder CZ with a variety of securities law violations.

The Deets

• The SEC charged Binance and CZ with 13 counts of securities law violations.
• Binance allegedly operated an unlicensed stock exchange, among other issues.
• This adds to a suit already filed by the CFTC back in March.
• The SEC is also classifying SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI as "Crypto Asset Securities".

The Bulk

The Securities and Exchange Commission charged Binance Holdings Ltd. (“Binance”), Binance.com; U.S.-based affiliate, BAM Trading Services Inc. (“BAM Trading”), which, together with Binance, operates the crypto asset trading platform Binance.US; and their founder, Changpeng Zhao ("CZ"), with 13 counts of securities law violations.

The accusations included misleading investors regarding the adequacy of its procedures for detecting and controlling manipulative trading, as well as deceiving investors about its efforts to prevent US investors from trading on its unregulated platform.

Further, the Complaint alleges that the defendants concealed the fact that Binance was commingling billions of dollars of investor assets and sending them to a third party, Merit Peak Limited, that is also owned by Zhao.

Beyond BNB and BUSD, the SEC has also classified Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS), and COTI as securities.

🎤 Founder Feedback

CZ tweeted that Binance hadn't received or seen the complaint yet...

4.

Our team is all standing by, ensuring systems are stable, including withdrawals, and deposits.

We will issue a response once we see the complaint. Haven't seen it yet. Media gets the info before we do.

🙏

— CZ 🔶 Binance (@cz_binance) June 5, 2023

❗ Why It Matters

Binance is the largest crypto asset trading platform in the world, and it's been under increasing regulatory pressure in the past few months, along with competitor Coinbase. It's yet another dark day for the crypto space, which has been under a consistent storm cloud since the FTX/SBF debacle back in November.

And while BTC and ETH were conspicuously absent from being labeled as securities (although they are both down about -5% each on the day in the wake of the news), several others like SOL and MATIC, metaverse coins like SAND and MANA, and gaming-related tokens like AXS were put in the crosshairs.

🧠 Learn More

• SEC Complaint filed 06/05/23 (SEC v. Binance)

A U.S. district court in the central district of California found in the case of Yuga Labs, Inc. -v- Ripps et al. that Ryder Ripps' RR/BAYC collection infringed on Yuga Labs' copyrights and trademarks in a 22-page ruling issued on April 21.

Yuga Labs was granted (in part) a Motion for Summary Judgment in false designation of origin and cybersquatting claims, as reported by Jessica Neer McDonald, trademark and copyright attorney and founder of the IP law firm NeerMcD PLLC (@NeerMcD).

What It Means

False designation of origin means Ripps falsely claimed that his product was associated with the Yuga Labs brand, and cybersquatting means Ripps registered a domain name similar to the BAYC brand to profit from it or damage Yuga Labs' reputation, both of which are against the law.

The Deets

• Yuga Labs was granted summary judgment in false designation of origin and cybersquatting claims.
• Yuga Labs owns the unregistered BAYC Marks, which are valid and enforceable.
• NFTs are goods for the purposes of the Lanham Act (trademarks).
• Ryder Ripps' various defenses ('I'm a conceptual artist; this is free speech criticism via art') were thrown out.
• None of the defenses as to celebrity endorsements or securities violations are related to the trademark dispute.
• Yuga Labs is entitled to monetary damages and injunctive relief, with the determination of damages to be made at trial.

The Details

The court found that the BAYC marks are used in commerce, as required under trademark law. The court also rejected the claim that Yuga Labs had transferred or abandoned its trademark rights through naked licensing and failure to report. And the naked licensing argument (naked licensing occurs when a trademark owner lets others use a trademark without maintaining control over how the trademark is used) is invalid because under its Terms and Conditions, Yuga Labs grants each Bored Ape Yacht Club NFT holder a copyright license for both personal use and commercial use with respect to their respective BAYC ape image, but not a trademark license to use the BAYC marks.

Although Yuga does not have a copyright registration for the ape skull logo, a registration is not required to own a copyright. So the defendants' defense that their RR/BAYC project was "art" as commentary on Yuga' Labs' alleged racist messages and imagery in reality took advantage of the brand recognition and goodwill from using Yuga Labs' BAYC marks. And there was no expression of an idea or point of view, so the use of the BAYC marks was not artistically relevant to their art, and even if it was, the use was still misleading.

In addition, the Court concludes that although NFTs are virtual goods, they are, in fact, goods for purposes of the Lanham Act. The court ruling was based on the precedent set in Hermes International v. Rothschild, which concluded that the Lanham Act does not require goods to be tangible for liability to apply. “While virtual goods are intangible items that exist in a digital space, they are also items that have specific uses and values that are dependent on the consumer” [page 7 of 22]. So treating the NFTs as mere ownership receipts treats the NFTs as only written instructions while ignoring their documented commercial value, association, or creative content.

❗ Why It Matters

The significance of the ruling is far-reaching, with Yuga Labs' Bored Ape Yacht Club existing as one of the premier collections in the NFT space. This court decision provides clarity on trademarks and sets a precedent for legal protections in the context of digital ownership.

📚 Further Reading and References

• Yuga Labs, Inc. v. Ripps Summary Judgment — Document #225
• NeerMcD.eth Mirror post - Yuga Labs Wins Key Victory in NFT Trademark Lawsuit (April 21, 2023)
• Twitter thread 🧵 from @eliana_esq
• Twitter thread 🧵 from @AshKernen

🕳️ Go Deeper

• RR/BAYC Delisted from OpenSea (June 21, 2022)
• X2Y2 Removing Ryder Ripps BAYC (June 28, 2022)
• Jimmy Fallon Seeks Removal From Ryder Ripps Case (March 7, 2023)

Renga has filed a trademark for a suite of software and services designed to enable users to view, trade, and manage digital collectibles and tokens, according to a USPTO filing and first report from Elina_Esq.

The Deets

• Renga trademark filing covers downloadable software for managing NFTs and digital assets.
• Includes an online marketplace for NFTs and digital collectibles.
• Encompasses non-downloadable software and a website for electronic storage of NFTs.

The Details

The Renga trademark filing suggests that their upcoming software will allow users to view, analyze, record, store, monitor, manage, trade, and exchange digital assets like cryptocurrencies, digital tokens, and NFTs. 

Additionally, the filing indicates plans for online retail services that offer a marketplace for buying and selling NFTs and digital collectibles. In an ongoing marketplace war, many projects have teased the potential unveiling of their own marketplaces for a variety of reasons. It appears Renga may have similar plans. 

❗Why It Matters

If Renga's trademark filing comes to fruition, their software and services could bolster the Renga community, providing comprehensive suite of tools for managing their Renga NFTs. Many projects have opted to deploy something similar, most recently with Kanpai Pandas and its PPDEX reveal and Azuki's vast Collector's Profile.

Last week, popular clothing brand Aeropostale filed three trademark applications covering downloadable virtual goods and other web3 initiatives, as reported by @eliana_esq.

🔎 The Deets

Mentioned in the applications are the following items:

Serial Number 97856264:

• Downloadable virtual goods, namely computer programs featuring footwear, clothing, eyewear, etc.
• Downloadable media authenticated by NFTs

Serial Number 97856255:

• Same as 97856264, but filed on the behalf of Aeropax -- a "virtual community created by Aeropostale -- rather than Aeropostale itself. Of note, it appears that this project has since been abandoned, as the website reads, "Due to unforeseen circumstances, we have made the difficult decision to end the AeroPax NFT project." The collection was to consist of 30,000 Aeropax avatars and provide IRL perks.

Serial Number 97856261:

• Same as previous, but this time focused on "Aeroworld." Aeroworld was to serve as Aeropostale's metaverse, and it was related to the Aeropax project. 

It is currently unclear what the company's future plans for Aeropax and Aeroworld are, if any.

🕳️Go Deeper

• View the Trademark Applications Here