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Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.

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Speaker 2: I thought it was pretty fundamental that we don't treat

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Speaker 2: some religions better than other religions, and we certainly don't

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Speaker 2: do it based on the content of the religious doctrine

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Speaker 2: that those religions preach.

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Speaker 3: Isn't it a fundamental premise of our First Amendment that

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Speaker 3: the state shouldn't be picking and choosing between religions, between

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Speaker 3: certain evangelical sects and Judaism and Catholicism on the other

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Speaker 3: for example.

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Speaker 4: Supreme Court justices on both ends of the ideological spectrum

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Speaker 4: suggested that Wisconsin was discriminating against Catholic Charities by denying

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Speaker 4: it a religious exemption from the state's unemployment tax program.

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Speaker 4: The state says that Catholic Charities doesn't qualify for the

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Speaker 4: tax exemption because the day to day servis as it

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Speaker 4: provides don't involve religious teachings. Many of the justices seemed

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Speaker 4: concerned about Wisconsin's contention that one way organizations can get

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Speaker 4: the exemption is by actively proselytizing. Chief Justice John Roberts

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Speaker 4: and Justices Amy Cony, Barrett and Neil Gorsich question just

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Speaker 4: what that means in practice.

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Speaker 5: What is the simplest thing that the Catholic Charities would

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Speaker 5: have to do to qualify for the religious exemption in Wisconsin?

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Speaker 5: I think, are they sure they have one sign in

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Speaker 5: the dining hall saying this meal provided by Catholic Charities?

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Speaker 5: If you want to find out about the church, here's

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Speaker 5: a brochure.

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Speaker 4: And I mean, are they playing like hymns on the

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Speaker 4: radio or like Christian rock at the evangelical soup kitchen

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Speaker 4: on the radio?

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Speaker 3: You know, is that proselytization or not?

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Speaker 1: Because you're forced to sit there and.

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Speaker 5: Listen to it.

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Speaker 3: And doesn't it entangle the state tremendously when it has

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Speaker 3: to go into a soup kitchen. Send an inspector in

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Speaker 3: to see how much prayer.

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Speaker 1: Is going on.

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Speaker 4: My guest is Richard Garnett, a professor at Notre Dame

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Speaker 4: Law School and founding director of the school's Program on Church,

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Speaker 4: State and Society. He was part of a group of

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Speaker 4: law and religion professors who signed a brief in support

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Speaker 4: of Catholic Charities in the case. Rick explained the issue

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Speaker 4: before the justices.

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Speaker 1: So the justices are being asked to evaluate a ruling

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Speaker 1: by a Wisconsin court, and that ruling had to do

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Speaker 1: with an exemption that was in place in Wisconsin law.

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Speaker 1: It's an exemption from otherwise applicable requirement about providing unemployment insurance.

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Speaker 1: So Wisconsin, like a lot of states, has a religious exemption.

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Speaker 1: So some employers were exempt from this particular requirement if

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Speaker 1: they were religious. And the precise terminology of the exemption

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Speaker 1: was that organizations that are operated primarily for religious purposes

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Speaker 1: are entitled to the Exemption's like charities, which is what

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Speaker 1: it sounds like. A Catholic organization that provides a variety

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Speaker 1: of social services was denied the exemption on the theory that,

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Speaker 1: you know, although it's got the word Catholic in it,

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Speaker 1: and although it's probably motivated by Catholic concerns, that a

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Speaker 1: lot of the things it was doing they weren't really religious,

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Speaker 1: they weren't primarily religious. They were the same kinds of

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Speaker 1: things that secular organizations do. And so that you know,

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Speaker 1: there was consonant court kind of empsize, Look, they hire

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Speaker 1: some people who aren't Catholic, they serve people regardless of

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Speaker 1: their faith. They don't engage in proselytism, they don't require

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Speaker 1: people to attend church, so they're not really religious, and

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Speaker 1: the Supreme Court took up the case to decide. I

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Speaker 1: think whether there was constant. Court's definition of who gets

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Speaker 1: this exemption was in a way discriminatory, that it distinguished

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Speaker 1: between religions that engage in kind of overt evangelism when

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Speaker 1: they provide services and those that live out their religious

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Speaker 1: mission by riding social services to a broad range of people.

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Speaker 1: So the Supreme Court took it up on that question,

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Speaker 1: and from what I can gather, I've read some reports

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Speaker 1: and I read the transcript of the oral argument, it

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Speaker 1: seems like most, perhaps even all of the justices were

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Speaker 1: pretty skeptical of what the Wisconsin Court had done. So

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Speaker 1: it does seem pretty likely that the Catholic Charities position

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Speaker 1: is going to win out here.

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Speaker 4: I think just about everyone who listened to the oral

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Speaker 4: arguments had the same reaction that the justices would side

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Speaker 4: with Catholic Charities here. Both liberal Justice Elina Kagan and

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Speaker 4: conservative Justice Neil Gorsuch seemed to be on the same page,

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Speaker 4: saying that we don't treat some religions better than others.

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Speaker 1: Yeah, so we have a well established principle in American

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Speaker 1: law that legislatures are permitted to have exemptions for religious

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Speaker 1: believers or religious institutions from their laws. These happen all

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Speaker 1: the time, right, but one of the important qualifications is

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Speaker 1: that legislators aren't allowed to discriminate among religions when they

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Speaker 1: are granting these exemptions. So you know, you couldn't have

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Speaker 1: an exemption for Baptist organizations but deny it to Presbyterian ones,

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Speaker 1: or an exemption for Buddhist ones but deny it to

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Speaker 1: Hindu ones. You're allowed to have religious exemptions, but the

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Speaker 1: exemptions themselves can't discriminate among religions. And I think Justice

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Speaker 1: Kagan's concern was that there Wisconson Court in effect had

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Speaker 1: said to count as religious, you have to be religious

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Speaker 1: in a certain way. You have to be religious in

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Speaker 1: a way that's kind of evangelical, right where you're serving

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Speaker 1: your own you're engaging in evangelization and proselytism. Maybe you

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Speaker 1: know you're given out food at the end of a

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Speaker 1: church service, but you're requiring people to attend church beforehand.

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Speaker 1: There was Conson Court had a premise that I think

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Speaker 1: all the justices were uneasy with, namely that it was

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Speaker 1: appropriate for a secular court to say you know, if

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Speaker 1: you're not engaging in proselytism, then you're just doing secular stuff.

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Speaker 1: From the perspective of Catholic charities, you know, when it's

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Speaker 1: feeding the hungry, or clothing the naked, or housing the unsheltered,

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Speaker 1: it's still engaging in religious activity. And to be clear,

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Speaker 1: the Catholic Charity's position is not that any time an

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Speaker 1: institution claims it's religious, it should get an exemption. Everybody

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Speaker 1: acknowledges that courts are allowed to ask whether the religious

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Speaker 1: claims are sincere, and everyone agrees that it is permissible

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Speaker 1: to distinguish between religious organizations on the one hand and

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Speaker 1: secular ones on the other. But where the justices got

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Speaker 1: nervous was the way the wisconstant courts seemed to almost

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Speaker 1: engage in a little bit of armchair theology when it

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Speaker 1: decided that in order to be i think the word

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Speaker 1: to use was typically religious, you had to exercise your

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Speaker 1: religion in a certain way. And so Justice Kagan, for example, says, well,

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Speaker 1: you know, look, in Judaism, a lot of what we

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Speaker 1: do when we're active in the world is not engage

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Speaker 1: in proselytism. That's not one of the things that we do,

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Speaker 1: but we still do exercise our religion when we're providing

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Speaker 1: various social service. So that was clearly a theme that

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Speaker 1: she was focusing on. And there was also a theme

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Speaker 1: in the argument not quite as prominent as this discrimination theme,

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Speaker 1: I think, but it was still there that Wisconsin's rule

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Speaker 1: had kind of a coercive effect of basically pressuring religious

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Speaker 1: institutions to organize themselves in a certain way. Because the

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Speaker 1: Wisconsin rule was one that said, you know, if a

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Speaker 1: charity is separately incorporated from the church itself, that it's

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Speaker 1: going to be treated differently than if it's kind of

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Speaker 1: integrated into the religious institution. And so the concern was

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Speaker 1: that that regime would kind of pressure religious organizations to

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Speaker 1: change their structures. But I think the most straightforward part

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Speaker 1: of the case, and I think this is what the

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Speaker 1: lawyer for Catholic Charity was really leaning on, is that

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Speaker 1: it's a straight up black letter rule that governments can't

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Speaker 1: discriminate among religions when they are crafting their accommodations. And

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Speaker 1: the Wisconsin Supreme Court adopted an interpretation that appears to

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Speaker 1: treat some religions as being more authentically religious than others.

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Speaker 1: So I suspect the Supreme Court's going to reverse that.

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Speaker 4: What was the best argument you think the state put

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Speaker 4: forward to defend its claim?

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Speaker 1: Maybe two things are worth emphasizing.

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Speaker 6: That.

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Speaker 1: One claim the state made, but I don't think the

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Speaker 1: justices were moved by it, was that, look, the language

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Speaker 1: in the Wisconsin statute is a lot like the language

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Speaker 1: that appears in a whole bunch of other religious exemptions,

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Speaker 1: and so the concern that the state was raising was like,

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Speaker 1: if you interpret this language really broadly, that's going to

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Speaker 1: have all kinds of sweeping effects. And the Justices didn't

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Speaker 1: seem as moved by that. Another argument the state made,

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Speaker 1: which is completely reasonable, is that you know, in order

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Speaker 1: for the state to accommodate religion, it has to have

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Speaker 1: some limits on that accommodation. Otherwise that reduces the incentive

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Speaker 1: of the state to accommodate religion at all, which would

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Speaker 1: be a perverse effect. But I think the justices were

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Speaker 1: able to respond to that by saying, we agree with you.

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Speaker 1: There can be limits on the exemptions. Again, you can

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Speaker 1: make sure that the claimants are sincere, and you can

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Speaker 1: make sure that they are religious as opposed to secular

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Speaker 1: or philosophical or what have you. But what you can't

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Speaker 1: do is adopt the definition of religion, which in effect

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Speaker 1: picks and chooses among different religions, and I suspect will

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Speaker 1: get a pretty consensus ruling from the justices on that point.

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Speaker 4: Justice Barrett raised the question of how far the exemptions

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Speaker 4: would go, saying, one of the problems here is figuring

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Speaker 4: out what the line is. Some say there could be

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Speaker 4: broad ramifications if the Justices side with Catholic Charities here.

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Speaker 1: I mean, I think she was raising that issue and

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Speaker 1: was right to, because anytime you have an exemption from

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Speaker 1: a law, there's going to be questions about how far

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Speaker 1: the exemption goes. And it is true that in American law,

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Speaker 1: you know, we don't really have a clear definition of

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Speaker 1: what is or is not religion. But I think that

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Speaker 1: the lawyer for Catholic Charities was able to respond just

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Speaker 1: by assuring Justice Barrett that in this particular case, in

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Speaker 1: order to correct the error that there wisconstant court made,

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Speaker 1: you don't actually have to issue a very broad ruling.

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Speaker 1: You don't have to say again that this religious exemption,

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Speaker 1: you know, covers any entity that conceivably claims to be religious.

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Speaker 1: It's a more narrow and I think focused and precise

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Speaker 1: argument than that. It's that when the state is engaging

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Speaker 1: in crafting an exemption, it can't do so in a

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Speaker 1: way that discriminates among religions. So that non discrimination rule,

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Speaker 1: which is the key to this case, that would prevent

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Speaker 1: this case from going off into some of the concerns

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Speaker 1: that the state raised about how you know the exemption

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Speaker 1: would swallow the rule itself. It is possible to accommodate

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Speaker 1: religion and to draw boundaries around religion without doing so

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Speaker 1: in a way that discriminates among different religions. I think

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Speaker 1: that Justice Kagan and others kind of signal ways to

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Speaker 1: do that.

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Speaker 4: This is the first case involving religion that the Court

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Speaker 4: has heard in about two years and this term there

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Speaker 4: are three religion cases. Do you see a trend or

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Speaker 4: any explanation for why those three in particular?

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Speaker 1: It's hard to say. I mean, so much of the

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Speaker 1: court stock, as you know, is a function of kind

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Speaker 1: of accident, you know what happened in the courts below.

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Speaker 1: But you're right that there's this case which involves a

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Speaker 1: particular question that arises in the religious accommodation's context, is

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Speaker 1: one coming out of Maryland, which involves some parents who

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Speaker 1: wanted to be able to opt their kids out of

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Speaker 1: some curricular matters that had to do with sexual orientation

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Speaker 1: and gender identity and so on. So they're seeking an

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Speaker 1: accommodation that was denied to them. And then of course

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Speaker 1: there's the Oklahoma case about the virtual Catholic School and

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Speaker 1: whether it can participate in that state's charter program. That

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Speaker 1: one's not really an accommodation case. It's more of what

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Speaker 1: I call a cooperation case. So certainly, you know, an

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Speaker 1: interesting year for law and religion at the court. But

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Speaker 1: whether the fact that there are three tells us anything deeper,

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Speaker 1: I'm not sure.

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Speaker 4: Thanks so much, Rick. That's Professor Richard Garnett of Notre

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Speaker 4: Dame Law School. Coming up next. The Trump administration is

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Speaker 4: dropping enforcement actions around cryptocurrency. This is bloomberg.

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Speaker 7: The federal government is already among the largest holders a bitcoin, as.

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Speaker 4: You know, and Trump used to call bitcoin a scam,

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Speaker 4: but now he wants to make the United States the

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Speaker 4: bitcoin capital of the world. And last month, at the

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Speaker 4: first Crypto Summit at the White House, Trump was pushing

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Speaker 4: the creation of a bitcoin reserve. With most of the

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Speaker 4: assets seized by forfeitures in law enforcement actions.

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Speaker 7: The Treasury and Commerce departments will also explore new pathways

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Speaker 7: to accumulate additional bitcoin holdings for the reserve, provided it's

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Speaker 7: done at no cost to the taxpayers.

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Speaker 4: Of course, the President launched his own Trump Mean coin

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Speaker 4: just a couple of days before the inauguration, so it

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Speaker 4: should come as no surprise that the Securities and Exchange

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Speaker 4: Commission has been dropping Biden administration enforcement actions around cryptocurrency.

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Speaker 4: Joining me is securities law expert James Park, a professor

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Speaker 4: at UCLA Law School, Jim to put this into perspective,

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Speaker 4: tell us sort of what the state of play was

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Speaker 4: with crypto in enforcement before Trump came into office.

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Speaker 6: Yeah, before the administration changed, the SEC was involved in

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Speaker 6: vigorous litigation against various parties such as crypto exchanges, developers

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Speaker 6: of crypto projects, and the issue in many of those

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Speaker 6: cases was whether or not the crypto asset that had

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Speaker 6: been sold without registration with the SEC, whether those crypto

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Speaker 6: assets were securities or not. And there'd been a good

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Speaker 6: number of decisions, maybe five, maybe ten by federal district

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Speaker 6: court judges that have uniformly held that in certain circumstances,

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Speaker 6: crypto assets can be security. There were a few exceptions

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Speaker 6: with respect to secondary market trading, but even those judges

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Speaker 6: said that when they're being sold by a developer, the

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Speaker 6: crypto asset is a security. And so pretty much every

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Speaker 6: judge that has looked at the issue has said that

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Speaker 6: some crypto assets are security. Now, these cases have not

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Speaker 6: really gone up on appeal yet to my knowledge, they've

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Speaker 6: only been on the district court level, and so appellate

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Speaker 6: courts have not really weighed in at the time of

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Speaker 6: the administration changed, but there are a lot of district

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Speaker 6: court opinions that say that crypto assets can be securities.

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Speaker 6: And that's that's sort of where we left off.

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Speaker 4: So do we know how the Trump administration views crypto assets.

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Speaker 6: I think they view crypto assets much more favorably, at

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Speaker 6: least when we're talking about the folks who may not

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Speaker 6: be security law expert. But I suspect though that the

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Speaker 6: security law officials who are going to be manning the

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Speaker 6: sec even though you know they're Trump appointees and they're Republicans,

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Speaker 6: I think they have some gpticism about crypto and are

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Speaker 6: a little bit wary about some of the dangers of

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Speaker 6: permitted crypto assets to be sold without any disclosure or registration.

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Speaker 6: But certainly the administration has a very favorable view, a

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Speaker 6: very lave a fair view, a buyer beware view of

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Speaker 6: crypto assets.

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Speaker 4: So Paul Atkins, who has been tapped to run the SEC,

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Speaker 4: at his public Senate committee hearing, said that providing a

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Speaker 4: firm regulatory foundation for crypto assets would be a top priority.

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Speaker 4: He apparently has like six million dollars in crypto himself.

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Speaker 6: It's a lot.

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Speaker 4: It's a lot. So what does that mean, firm regulatory foundation.

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Speaker 6: It's a good question. I think one way of interpreting

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Speaker 6: this is that, you know, we're going to provide some clarity.

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Speaker 6: We're going to pass a statute. We're going to pass

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Speaker 6: comprehensive regulations that define what is regulated and what is not,

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Speaker 6: and what type of regulation is appropriate. And you know,

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Speaker 6: I think Democrats and Republicans, I think, are you know,

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Speaker 6: open into developing reasonable, comprehensive cryptoregulation that protects investors and

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Speaker 6: helps prevent frauds. And I don't think there's any any

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Speaker 6: problem with that sort of comprehensive crypto regulation. I think

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Speaker 6: what the industry wants, though, is more of a safe harbor,

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Speaker 6: just a set of rules or statutes that permit them

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Speaker 6: to operate without you know, fear of litigation, without fear

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Speaker 6: of enforcement, and quite frankly in some cases, without fear

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Speaker 6: of accountability to investors. And you know, one of the

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Speaker 6: things the crypto industry has maintained in its litigation is

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Speaker 6: that it owes no obligations to crypto investors, which I

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Speaker 6: think is, you know, an extraordinary position to take. And

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Speaker 6: you know, that is something that they may want to

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Speaker 6: try to get enshrined in some regulation, but I just

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Speaker 6: don't think that's a good idea.

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Speaker 4: The Trump sec is ending suits against coinbased global binance

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Speaker 4: holdings and Ripple Labs. I mean, what does that say

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Speaker 4: or what does that do?

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Speaker 6: Well? It means on one level, it's a very powerful

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Speaker 6: symbolic move to say that, you know, we're not going

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Speaker 6: to enforce the security laws, even though these exchanges are

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Speaker 6: probably listing securities, even though some of these developers have

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Speaker 6: created securities. And by not enforcing the law, we are

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Speaker 6: sending the message that we don't think that crypto acids

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Speaker 6: should be regulated as securities. I think that's you know,

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Speaker 6: that's a powerful symbolic statement that is being made by

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Speaker 6: withdrawing from these suits, and you know, withdrawing from such

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Speaker 6: high profile suits that were vigorously litigated by the SEC,

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Speaker 6: so many of them, is I think unprecedented. I don't really,

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Speaker 6: you know, recall any other time period when the SEC

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Speaker 6: has completely dropped so many many major enforcement lawsuits and

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Speaker 6: just withdrawn. Now. You know, on the other hand, the

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Speaker 6: district court opinions that were issued in these cases, they

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Speaker 6: still stand and there's still law, and so those precedents

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Speaker 6: are not affected by the fact that the SEC has

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Speaker 6: decided not to pursue these various cases. And so there

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Speaker 6: still is a foundation of precedent which indicates that crypto

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Speaker 6: assets can be securities in certain circumstances.

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Speaker 4: Has the test for whether crypto is a security changed

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Speaker 4: in any way? Is it still the Howie test?

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Speaker 6: It's still the Howie test. It is still the Howie system.

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Speaker 6: That's what the courts have consistently applied that in some

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Speaker 6: circumstances crypto assets satisfy the Howie tests because the crypto

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Speaker 6: asset purchasers are relying upon the efforts of the developers,

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Speaker 6: the promoters, who are promising to create some great crypto

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Speaker 6: ecosystem that will cause the value of the crypto assets

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Speaker 6: to rise, and that's you know, that's what the Howie

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Speaker 6: test says is as a security, and courts have consistently

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Speaker 6: said that they can be securities under the Howie test.

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Speaker 4: Are private plaintiffs able to bring the same kind of

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Speaker 4: lawsuits that the sec has been bringing?

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Speaker 7: They can.

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Speaker 4: Yes.

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Speaker 6: Private plaintiffs who are typically going to be purchasers of

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Speaker 6: crypto assets who have suffered losses. There are various positive

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Speaker 6: action that they can assert under federal securities laws that

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Speaker 6: would permit them to recover some of their lawses. So

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Speaker 6: one major category of cases is triggered when somebody sells

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Speaker 6: the security without registering it with the sec than any

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Speaker 6: private investor who purchased that security has the right to recision,

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Speaker 6: which basically means they have the right to get their

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Speaker 6: money back, and that's a valuable remedy. If you've lost

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Speaker 6: a lot of money, you then have the right to

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Speaker 6: riskind that transaction and get the money you invested back,

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Speaker 6: and that would cover your losses. Another major private cause

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Speaker 6: of action is available when some parties, such as the

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Speaker 6: developer of the crypto project, the promoter issues material misrepresentation

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Speaker 6: with fraudulent intent. Then crypto asset purchasers have a cause

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Speaker 6: of action for security fraud if they argue that we

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Speaker 6: relied upon these misrepresentations and that caused us to buy

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Speaker 6: a security that was inflated in price, then they can

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Speaker 6: recover their losses. So there are very strong, well established,

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Speaker 6: several private causes of action that investors can can use

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Speaker 6: if they feel like they have been cheated or defrauded

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Speaker 6: by the developers of a crypto project.

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Speaker 4: What are the disadvantages of litigating these issues through private

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Speaker 4: lawsuits rather than having the SEC do it?

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Speaker 6: You know, having the SEC bring a lawsuit sends a

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Speaker 6: powerful message. It's a government enforcer that is passed with

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Speaker 6: acting in the public interest, and when the SEC acts,

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Speaker 6: that just sends a strong message that you know, this

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Speaker 6: conduct violates Fedtle securities law and we're enforcing those laws

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Speaker 6: with private actions. There's often the criticism that these investors they,

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Speaker 6: you know, they should have known better, they invested in

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Speaker 6: a risky crypto asset, and they're just suing because they

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Speaker 6: lost money. And there's a criticism that, well, the plaintiff's

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Speaker 6: attorneys are you know, they go and look for people

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Speaker 6: who lost money so that they can bring lawsuits against

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Speaker 6: various promoters and developers, and the attorneys get a significant fee.

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Speaker 6: So private litigation sometimes is not looked at as favorably

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Speaker 6: as sec enforcement actions. But you know, you still have

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Speaker 6: the same types of remedies that are available. You have

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Speaker 6: the opportunity to argue that crypto assets are securities, and

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Speaker 6: so there are you know, very similar benefits that crypto

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Speaker 6: investors have when they assert these private causes of action.

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Speaker 4: Have any state ags litigated in this area of crypto.

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Speaker 6: They are, They are litigating in a good number of cases,

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Speaker 6: particularly for you know, cryptoprojects that are really complete frauds,

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Speaker 6: where you know, somebody is you know, saying, you know,

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Speaker 6: we're selling this crypto asset that's going to do something.

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Speaker 6: They just take the money and run. State attorney generals

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Speaker 6: have been very active in those clear fraud types of cases.

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Speaker 6: They have been active, and I suspect that they will

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Speaker 6: become more active as the federal government pulls back. And

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Speaker 6: there are state securities frauds statutes that can be invoked

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Speaker 6: and sometimes even criminal state prosecutors are getting involved in

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Speaker 6: some of the more egregious cases of fast and so

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Speaker 6: I suspect that the California Attorney General and the New

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Speaker 6: York Attorney General and attorney generals from across the nation

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Speaker 6: are going to see this as an opportunity and even

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Speaker 6: a necessity to protect the citizens of their state from

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Speaker 6: a fraudulent crypto project.

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Speaker 4: Coming up next on the Bloomberg Law Show, I'll continue

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Speaker 4: this conversation with UCLA law professor James Park. We'll talk

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Speaker 4: about Trump's pardon of Ross Olbrick, founder of the drug

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Speaker 4: trafficking site known as Silk Road, where virtual currency was

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Speaker 4: the coin of the realm. He'd been serving a life

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Speaker 4: sentence following his twenty fifteen conviction for trafficking and other crimes.

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Speaker 4: Is a Sam Bankman freed pardon in the future. I'm

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Speaker 4: June Grosso. When you're listening to Bloomberg, the Securities and

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Speaker 4: Exchange Commission has been dropping Biden administration enforcement action around cryptocurrency.

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Speaker 4: Trump's sec ended suits against coinbase, Global, Binance Holdings, Ripple Labs,

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Speaker 4: but privately filed lawsuits have continued. Private plaintiffs and state

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Speaker 4: attorneys general can and likely will still pursue claims, perhaps

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Speaker 4: even more so if the sec backs off enforcement entirely

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Speaker 4: and bad actors emerge and suits against promoters of other

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Speaker 4: digital assets such as the Hawk, Tua and Peanut the Squirrel.

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Speaker 4: Meme coins are ongoing despite a signal that the SEC

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Speaker 4: won't consider most securities. I've been talking to securities law

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Speaker 4: expert James Park, a professor at UCLA Law School. Jim,

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Speaker 4: what about these suits over meme coins.

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Speaker 6: Meme coins have often been, you know, just brok and

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Speaker 6: really you can argue that well, investors to know they're

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Speaker 6: buying something that's not worth anything. But again, I think

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Speaker 6: that you know, given the amount of money, that the

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Speaker 6: stake enforcement is really necessary in situations where you know,

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Speaker 6: millions of dollars of it better funds have been taken

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Speaker 6: without anything in return.

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Speaker 4: So Trump also pardoned ross Aulbrick, the founder of the

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Speaker 4: drug trafficking site Silk Road, who's been serving a life

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Speaker 4: sentence since twenty fifteen, so hasn't been in there that

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Speaker 4: long for a life sentence. What message does that send?

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Speaker 6: I think that sends a message. I think about the

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Speaker 6: use of bitcoin as a way of facilitating illictit activity,

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Speaker 6: and in some ways that may legitimize just sort of

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Speaker 6: the idea that we have this cryptocurrency and one of

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Speaker 6: the main uses of that currency is to facilitate illegal transactions.

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Speaker 6: And that's where a lot of the value of cryptocurrencies

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Speaker 6: like bitcoin lies is that, you know, this is the

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Speaker 6: way of transferring funds that evade the banking system, and

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Speaker 6: so it facilitates illegal activity. And I think by by

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Speaker 6: pardoning somebody who you know, used bitcoin and use various

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Speaker 6: technologies to blatantly violate federal law, that it in some

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Speaker 6: ways indirectly legitimizes such such activity. But I'm you know,

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Speaker 6: I'm not completely familiar with all the details of the case.

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Speaker 6: Maybe the argument is that maybe his feeling was that

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Speaker 6: the time he served was sufficient for the wrongdoing that

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Speaker 6: he committed. But you know, given that it was a

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Speaker 6: life sentence, it does seem like a drastic reduction in

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Speaker 6: that that sentence.

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Speaker 4: I wonder if Sam Bankman freed is next I hear

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Speaker 4: that he's angling for a pardon, that would be a

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Speaker 4: huge statement.

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Speaker 6: It would It would be a huge statement. And I

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00:26:52,760 --> 00:26:57,480
Speaker 6: think the question is, you know, to what extent is

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00:26:57,520 --> 00:27:01,040
Speaker 6: he in his administration really looking careful at the facts

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00:27:01,040 --> 00:27:04,800
Speaker 6: of various cases and you know, trying to say, well,

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00:27:04,840 --> 00:27:10,239
Speaker 6: here are the cases we think are clearly overreaching, and

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00:27:10,359 --> 00:27:13,280
Speaker 6: these are the cases where you get pardons versus we're

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00:27:13,320 --> 00:27:15,960
Speaker 6: just giving everyone a pardon. And you know, in Sam

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00:27:16,000 --> 00:27:19,800
Speaker 6: Bankman freed case, you know, it was not just simply

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00:27:20,520 --> 00:27:25,520
Speaker 6: an issue of you know, making optimistic statements about crypto

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00:27:25,600 --> 00:27:30,639
Speaker 6: that didn't really you know, come to fruition, but misappropriation

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00:27:30,720 --> 00:27:34,439
Speaker 6: of customer funds, which I think everyone would agree is

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00:27:34,480 --> 00:27:38,040
Speaker 6: that a bad thing. And so you know, if you

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00:27:38,080 --> 00:27:41,240
Speaker 6: can trast his case to that of Trevor Milton, who

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00:27:41,480 --> 00:27:45,560
Speaker 6: was pardoned I believe last week. You know, Trevor Milton

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00:27:45,680 --> 00:27:49,760
Speaker 6: was the founder of the Nicola company that was developing

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00:27:49,960 --> 00:27:55,320
Speaker 6: technology for clean energy trucks, and the theory against him

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00:27:55,400 --> 00:27:58,520
Speaker 6: is that on social media and other platforms he made

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00:27:58,680 --> 00:28:04,320
Speaker 6: very very optimistic, some would say misleading statements about that

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00:28:04,440 --> 00:28:09,800
Speaker 6: technology and pump them the stock price by those tactics.

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Speaker 6: And you know, he was steadily convicted, sadly of a

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00:28:13,560 --> 00:28:17,320
Speaker 6: security fraud. And so you know, in that case, you know,

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00:28:17,359 --> 00:28:21,560
Speaker 6: perhaps the ideas that well, you know, maybe he violated

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00:28:21,600 --> 00:28:24,480
Speaker 6: some law, but maybe it's not, you know, it's not

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00:28:24,560 --> 00:28:26,760
Speaker 6: a criminal violation. Maybe it should just have been a

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00:28:26,800 --> 00:28:31,600
Speaker 6: civil violation. There's some argument that the parting could have

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00:28:31,640 --> 00:28:35,560
Speaker 6: been motivated by the the feeling that, you know, entrepreneurs

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00:28:35,600 --> 00:28:39,520
Speaker 6: should be able to, you know, issue optimistic statements about

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00:28:40,160 --> 00:28:43,360
Speaker 6: their products and not fear going to prison. So so

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00:28:43,440 --> 00:28:46,760
Speaker 6: I think you could distinguish that case from Fan Bateman seed,

468
00:28:46,880 --> 00:28:50,640
Speaker 6: where you know, you're misappropriating customer funds, which is something

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00:28:50,680 --> 00:28:55,160
Speaker 6: that's you know, arguably different and probably different than making

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00:28:55,280 --> 00:28:59,280
Speaker 6: very optimistic statements about your your technology that could be

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00:28:59,320 --> 00:29:02,120
Speaker 6: misleading and could mislead investors.

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00:29:02,400 --> 00:29:06,000
Speaker 4: Trump pledged on the campaign trail to make the US

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00:29:06,120 --> 00:29:09,320
Speaker 4: the crypto capital of the world. Then the executive order

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00:29:09,400 --> 00:29:13,520
Speaker 4: part of it would be to create a strategic Bitcoin reserve.

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00:29:14,520 --> 00:29:15,160
Speaker 4: What is that?

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Speaker 6: I think there are a lot of interpretations of what

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00:29:18,040 --> 00:29:22,600
Speaker 6: that means. And you know, one interpretation is that, you know,

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00:29:22,680 --> 00:29:25,640
Speaker 6: we have bitcoin that is owned by the federal government

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00:29:25,920 --> 00:29:29,760
Speaker 6: that maybe it sees from criminals or if it comes

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00:29:29,760 --> 00:29:32,280
Speaker 6: to the federal government, and so, you know, rather than

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00:29:32,360 --> 00:29:34,880
Speaker 6: selling that bitcoin, we just keep it. It's just something

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00:29:34,920 --> 00:29:37,720
Speaker 6: that is owned by the federal government, and that could

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00:29:37,720 --> 00:29:39,000
Speaker 6: be seen as the reserve.

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Speaker 1: You know.

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Speaker 6: Another more radical way of creating a reserve is that

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00:29:42,960 --> 00:29:47,040
Speaker 6: the federal government would actively buy bitcoin and hold it

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00:29:47,080 --> 00:29:51,480
Speaker 6: as an investment or hold it as some something of value.

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00:29:52,080 --> 00:29:53,400
Speaker 6: You know, I think that would be a much more

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00:29:53,480 --> 00:29:57,320
Speaker 6: radical step, and you know, a sort of intermediate version

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00:29:57,360 --> 00:30:00,520
Speaker 6: of this, where you have a sovereign wealth fund would

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00:30:00,600 --> 00:30:04,440
Speaker 6: invest in bitcoin and support its price, which is something

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00:30:04,480 --> 00:30:07,360
Speaker 6: that the solving wealth fund, I know, has been floated.

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00:30:07,560 --> 00:30:10,000
Speaker 6: So it's unclear, and I think, you know, some of

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00:30:10,000 --> 00:30:12,800
Speaker 6: this I think is politics. Of course, there were there

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00:30:12,800 --> 00:30:16,640
Speaker 6: significant campaign contributions by the crypto industry and support of

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00:30:16,800 --> 00:30:19,480
Speaker 6: the Trump campaign, and you know, he's paying them back

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00:30:19,520 --> 00:30:21,880
Speaker 6: in a sense. This is something that you know. The

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00:30:21,920 --> 00:30:26,080
Speaker 6: other kind of problem here, I think is that you

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Speaker 6: know the problem of the influence of money on politics,

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00:30:28,640 --> 00:30:34,240
Speaker 6: and at least initially, crypto has generated significant amounts of wealth,

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00:30:34,280 --> 00:30:38,560
Speaker 6: and that wealth has been deployed to influence the political system.

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Speaker 4: We'll see if litigation by investors and attorneys general can

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Speaker 4: fill in some of the gaps from the lack of

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Speaker 4: SEC enforcement. Thanks so much, Jim Best, Professor James Park

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00:30:50,880 --> 00:30:53,760
Speaker 4: of UCLA Law School, And that's it for this edition

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Speaker 4: of the Bloomberg Law Show. Remember you can always get

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00:30:56,480 --> 00:30:59,600
Speaker 4: the latest legal news on our Bloomberg Law Podcast. You

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00:30:59,600 --> 00:31:03,720
Speaker 4: can find them on Apple Podcasts, Spotify, and at www

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00:31:03,880 --> 00:31:08,160
Speaker 4: Dot Bloomberg dot com, slash podcast Slash Law, and remember

510
00:31:08,200 --> 00:31:11,120
Speaker 4: to tune into The Bloomberg Law Show every weeknight at

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00:31:11,160 --> 00:31:14,640
Speaker 4: ten pm Wall Street Time. I'm June Grosso and you're

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00:31:14,720 --> 00:31:15,920
Speaker 4: listening to Bloomberg