WEBVTT - Likely SCOTUS Religion Win & Crypto Free Ride 0:00:02.759 --> 0:00:07.000 This is Bloomberg Law with June Grossel from Bloomberg Radio. 0:00:08.600 --> 0:00:13.200 I thought it was pretty fundamental that we don't treat 0:00:13.240 --> 0:00:17.480 some religions better than other religions, and we certainly don't 0:00:17.520 --> 0:00:21.160 do it based on the content of the religious doctrine 0:00:21.440 --> 0:00:23.000 that those religions preach. 0:00:24.440 --> 0:00:27.840 Isn't it a fundamental premise of our First Amendment that 0:00:27.920 --> 0:00:31.960 the state shouldn't be picking and choosing between religions, between 0:00:32.240 --> 0:00:37.360 certain evangelical sects and Judaism and Catholicism on the other 0:00:37.479 --> 0:00:38.760 for example. 0:00:38.840 --> 0:00:43.240 Supreme Court justices on both ends of the ideological spectrum 0:00:43.440 --> 0:00:48.960 suggested that Wisconsin was discriminating against Catholic Charities by denying 0:00:49.000 --> 0:00:53.080 it a religious exemption from the state's unemployment tax program. 0:00:53.360 --> 0:00:57.320 The state says that Catholic Charities doesn't qualify for the 0:00:57.400 --> 0:01:00.600 tax exemption because the day to day servis as it 0:01:00.680 --> 0:01:05.400 provides don't involve religious teachings. Many of the justices seemed 0:01:05.560 --> 0:01:10.640 concerned about Wisconsin's contention that one way organizations can get 0:01:10.680 --> 0:01:16.240 the exemption is by actively proselytizing. Chief Justice John Roberts 0:01:16.319 --> 0:01:20.720 and Justices Amy Cony, Barrett and Neil Gorsich question just 0:01:20.800 --> 0:01:22.840 what that means in practice. 0:01:23.360 --> 0:01:28.200 What is the simplest thing that the Catholic Charities would 0:01:28.280 --> 0:01:32.440 have to do to qualify for the religious exemption in Wisconsin? 0:01:32.640 --> 0:01:35.000 I think, are they sure they have one sign in 0:01:35.000 --> 0:01:38.120 the dining hall saying this meal provided by Catholic Charities? 0:01:38.160 --> 0:01:40.679 If you want to find out about the church, here's 0:01:40.720 --> 0:01:41.240 a brochure. 0:01:42.600 --> 0:01:44.600 And I mean, are they playing like hymns on the 0:01:44.680 --> 0:01:48.559 radio or like Christian rock at the evangelical soup kitchen 0:01:48.680 --> 0:01:49.320 on the radio? 0:01:49.560 --> 0:01:51.720 You know, is that proselytization or not? 0:01:51.800 --> 0:01:53.320 Because you're forced to sit there and. 0:01:53.240 --> 0:01:53.840 Listen to it. 0:01:55.040 --> 0:01:59.760 And doesn't it entangle the state tremendously when it has 0:01:59.800 --> 0:02:02.920 to go into a soup kitchen. Send an inspector in 0:02:03.280 --> 0:02:04.800 to see how much prayer. 0:02:04.560 --> 0:02:05.120 Is going on. 0:02:05.360 --> 0:02:08.200 My guest is Richard Garnett, a professor at Notre Dame 0:02:08.280 --> 0:02:12.040 Law School and founding director of the school's Program on Church, 0:02:12.240 --> 0:02:15.000 State and Society. He was part of a group of 0:02:15.080 --> 0:02:18.120 law and religion professors who signed a brief in support 0:02:18.120 --> 0:02:21.320 of Catholic Charities in the case. Rick explained the issue 0:02:21.320 --> 0:02:22.359 before the justices. 0:02:22.720 --> 0:02:26.240 So the justices are being asked to evaluate a ruling 0:02:26.320 --> 0:02:28.960 by a Wisconsin court, and that ruling had to do 0:02:29.680 --> 0:02:33.680 with an exemption that was in place in Wisconsin law. 0:02:33.880 --> 0:02:39.679 It's an exemption from otherwise applicable requirement about providing unemployment insurance. 0:02:39.919 --> 0:02:43.960 So Wisconsin, like a lot of states, has a religious exemption. 0:02:44.080 --> 0:02:47.760 So some employers were exempt from this particular requirement if 0:02:47.840 --> 0:02:52.280 they were religious. And the precise terminology of the exemption 0:02:52.480 --> 0:02:57.760 was that organizations that are operated primarily for religious purposes 0:02:57.919 --> 0:03:02.799 are entitled to the Exemption's like charities, which is what 0:03:02.840 --> 0:03:06.440 it sounds like. A Catholic organization that provides a variety 0:03:06.520 --> 0:03:10.440 of social services was denied the exemption on the theory that, 0:03:10.600 --> 0:03:13.040 you know, although it's got the word Catholic in it, 0:03:13.240 --> 0:03:17.040 and although it's probably motivated by Catholic concerns, that a 0:03:17.080 --> 0:03:20.360 lot of the things it was doing they weren't really religious, 0:03:20.400 --> 0:03:22.880 they weren't primarily religious. They were the same kinds of 0:03:22.919 --> 0:03:26.080 things that secular organizations do. And so that you know, 0:03:26.120 --> 0:03:28.600 there was consonant court kind of empsize, Look, they hire 0:03:28.680 --> 0:03:31.600 some people who aren't Catholic, they serve people regardless of 0:03:31.639 --> 0:03:35.560 their faith. They don't engage in proselytism, they don't require 0:03:35.600 --> 0:03:38.680 people to attend church, so they're not really religious, and 0:03:38.800 --> 0:03:41.440 the Supreme Court took up the case to decide. I 0:03:41.520 --> 0:03:44.800 think whether there was constant. Court's definition of who gets 0:03:44.880 --> 0:03:49.120 this exemption was in a way discriminatory, that it distinguished 0:03:49.200 --> 0:03:54.840 between religions that engage in kind of overt evangelism when 0:03:54.840 --> 0:03:59.119 they provide services and those that live out their religious 0:03:59.160 --> 0:04:02.400 mission by riding social services to a broad range of people. 0:04:02.680 --> 0:04:05.240 So the Supreme Court took it up on that question, 0:04:05.360 --> 0:04:08.240 and from what I can gather, I've read some reports 0:04:08.240 --> 0:04:10.600 and I read the transcript of the oral argument, it 0:04:10.840 --> 0:04:15.920 seems like most, perhaps even all of the justices were 0:04:15.960 --> 0:04:19.240 pretty skeptical of what the Wisconsin Court had done. So 0:04:19.680 --> 0:04:22.880 it does seem pretty likely that the Catholic Charities position 0:04:23.080 --> 0:04:24.000 is going to win out here. 0:04:24.320 --> 0:04:26.440 I think just about everyone who listened to the oral 0:04:26.560 --> 0:04:30.480 arguments had the same reaction that the justices would side 0:04:30.480 --> 0:04:34.640 with Catholic Charities here. Both liberal Justice Elina Kagan and 0:04:34.839 --> 0:04:39.000 conservative Justice Neil Gorsuch seemed to be on the same page, 0:04:39.520 --> 0:04:42.799 saying that we don't treat some religions better than others. 0:04:43.320 --> 0:04:46.599 Yeah, so we have a well established principle in American 0:04:46.680 --> 0:04:53.280 law that legislatures are permitted to have exemptions for religious 0:04:53.279 --> 0:04:56.680 believers or religious institutions from their laws. These happen all 0:04:56.680 --> 0:04:59.880 the time, right, but one of the important qualifications is 0:05:00.040 --> 0:05:04.560 that legislators aren't allowed to discriminate among religions when they 0:05:04.600 --> 0:05:07.240 are granting these exemptions. So you know, you couldn't have 0:05:07.400 --> 0:05:12.800 an exemption for Baptist organizations but deny it to Presbyterian ones, 0:05:12.920 --> 0:05:15.760 or an exemption for Buddhist ones but deny it to 0:05:15.800 --> 0:05:18.120 Hindu ones. You're allowed to have religious exemptions, but the 0:05:18.160 --> 0:05:22.400 exemptions themselves can't discriminate among religions. And I think Justice 0:05:22.520 --> 0:05:26.279 Kagan's concern was that there Wisconson Court in effect had 0:05:26.360 --> 0:05:30.839 said to count as religious, you have to be religious 0:05:30.880 --> 0:05:33.200 in a certain way. You have to be religious in 0:05:33.240 --> 0:05:36.480 a way that's kind of evangelical, right where you're serving 0:05:36.560 --> 0:05:41.440 your own you're engaging in evangelization and proselytism. Maybe you 0:05:41.440 --> 0:05:43.480 know you're given out food at the end of a 0:05:43.560 --> 0:05:46.320 church service, but you're requiring people to attend church beforehand. 0:05:46.320 --> 0:05:48.400 There was Conson Court had a premise that I think 0:05:48.440 --> 0:05:51.680 all the justices were uneasy with, namely that it was 0:05:51.680 --> 0:05:55.680 appropriate for a secular court to say you know, if 0:05:55.720 --> 0:05:59.880 you're not engaging in proselytism, then you're just doing secular stuff. 0:06:00.000 --> 0:06:02.760 From the perspective of Catholic charities, you know, when it's 0:06:02.920 --> 0:06:06.720 feeding the hungry, or clothing the naked, or housing the unsheltered, 0:06:06.800 --> 0:06:09.800 it's still engaging in religious activity. And to be clear, 0:06:09.960 --> 0:06:13.560 the Catholic Charity's position is not that any time an 0:06:13.600 --> 0:06:17.760 institution claims it's religious, it should get an exemption. Everybody 0:06:17.839 --> 0:06:21.040 acknowledges that courts are allowed to ask whether the religious 0:06:21.040 --> 0:06:25.360 claims are sincere, and everyone agrees that it is permissible 0:06:25.480 --> 0:06:28.920 to distinguish between religious organizations on the one hand and 0:06:29.000 --> 0:06:32.400 secular ones on the other. But where the justices got 0:06:32.440 --> 0:06:35.720 nervous was the way the wisconstant courts seemed to almost 0:06:35.760 --> 0:06:38.640 engage in a little bit of armchair theology when it 0:06:38.960 --> 0:06:42.039 decided that in order to be i think the word 0:06:42.040 --> 0:06:45.360 to use was typically religious, you had to exercise your 0:06:45.360 --> 0:06:48.440 religion in a certain way. And so Justice Kagan, for example, says, well, 0:06:48.440 --> 0:06:51.680 you know, look, in Judaism, a lot of what we 0:06:51.760 --> 0:06:54.080 do when we're active in the world is not engage 0:06:54.120 --> 0:06:56.600 in proselytism. That's not one of the things that we do, 0:06:56.640 --> 0:06:59.080 but we still do exercise our religion when we're providing 0:06:59.120 --> 0:07:01.359 various social service. So that was clearly a theme that 0:07:01.400 --> 0:07:03.720 she was focusing on. And there was also a theme 0:07:03.760 --> 0:07:06.960 in the argument not quite as prominent as this discrimination theme, 0:07:07.000 --> 0:07:09.720 I think, but it was still there that Wisconsin's rule 0:07:10.160 --> 0:07:14.680 had kind of a coercive effect of basically pressuring religious 0:07:14.720 --> 0:07:18.360 institutions to organize themselves in a certain way. Because the 0:07:18.400 --> 0:07:20.880 Wisconsin rule was one that said, you know, if a 0:07:21.000 --> 0:07:25.320 charity is separately incorporated from the church itself, that it's 0:07:25.360 --> 0:07:27.440 going to be treated differently than if it's kind of 0:07:27.480 --> 0:07:30.720 integrated into the religious institution. And so the concern was 0:07:30.760 --> 0:07:34.080 that that regime would kind of pressure religious organizations to 0:07:34.200 --> 0:07:37.160 change their structures. But I think the most straightforward part 0:07:37.160 --> 0:07:38.400 of the case, and I think this is what the 0:07:38.480 --> 0:07:41.400 lawyer for Catholic Charity was really leaning on, is that 0:07:41.640 --> 0:07:44.400 it's a straight up black letter rule that governments can't 0:07:44.520 --> 0:07:49.200 discriminate among religions when they are crafting their accommodations. And 0:07:49.280 --> 0:07:52.880 the Wisconsin Supreme Court adopted an interpretation that appears to 0:07:53.400 --> 0:07:57.440 treat some religions as being more authentically religious than others. 0:07:57.480 --> 0:07:59.720 So I suspect the Supreme Court's going to reverse that. 0:08:00.160 --> 0:08:02.840 What was the best argument you think the state put 0:08:02.920 --> 0:08:04.760 forward to defend its claim? 0:08:05.160 --> 0:08:06.840 Maybe two things are worth emphasizing. 0:08:06.880 --> 0:08:07.000 That. 0:08:07.080 --> 0:08:09.080 One claim the state made, but I don't think the 0:08:09.160 --> 0:08:12.000 justices were moved by it, was that, look, the language 0:08:12.040 --> 0:08:15.120 in the Wisconsin statute is a lot like the language 0:08:15.120 --> 0:08:17.760 that appears in a whole bunch of other religious exemptions, 0:08:17.880 --> 0:08:21.160 and so the concern that the state was raising was like, 0:08:21.200 --> 0:08:23.520 if you interpret this language really broadly, that's going to 0:08:23.560 --> 0:08:26.720 have all kinds of sweeping effects. And the Justices didn't 0:08:26.760 --> 0:08:29.080 seem as moved by that. Another argument the state made, 0:08:29.080 --> 0:08:32.240 which is completely reasonable, is that you know, in order 0:08:32.280 --> 0:08:34.480 for the state to accommodate religion, it has to have 0:08:34.600 --> 0:08:38.600 some limits on that accommodation. Otherwise that reduces the incentive 0:08:38.640 --> 0:08:40.760 of the state to accommodate religion at all, which would 0:08:40.760 --> 0:08:42.719 be a perverse effect. But I think the justices were 0:08:42.720 --> 0:08:45.200 able to respond to that by saying, we agree with you. 0:08:45.240 --> 0:08:48.079 There can be limits on the exemptions. Again, you can 0:08:48.120 --> 0:08:50.719 make sure that the claimants are sincere, and you can 0:08:50.760 --> 0:08:54.400 make sure that they are religious as opposed to secular 0:08:54.559 --> 0:08:57.480 or philosophical or what have you. But what you can't 0:08:57.520 --> 0:09:01.480 do is adopt the definition of religion, which in effect 0:09:01.880 --> 0:09:05.880 picks and chooses among different religions, and I suspect will 0:09:05.920 --> 0:09:10.079 get a pretty consensus ruling from the justices on that point. 0:09:10.240 --> 0:09:14.240 Justice Barrett raised the question of how far the exemptions 0:09:14.280 --> 0:09:16.920 would go, saying, one of the problems here is figuring 0:09:16.960 --> 0:09:19.880 out what the line is. Some say there could be 0:09:19.920 --> 0:09:25.640 broad ramifications if the Justices side with Catholic Charities here. 0:09:26.120 --> 0:09:28.040 I mean, I think she was raising that issue and 0:09:28.360 --> 0:09:30.880 was right to, because anytime you have an exemption from 0:09:30.920 --> 0:09:32.839 a law, there's going to be questions about how far 0:09:32.920 --> 0:09:36.760 the exemption goes. And it is true that in American law, 0:09:36.880 --> 0:09:40.520 you know, we don't really have a clear definition of 0:09:40.520 --> 0:09:43.080 what is or is not religion. But I think that 0:09:43.120 --> 0:09:47.200 the lawyer for Catholic Charities was able to respond just 0:09:47.240 --> 0:09:51.200 by assuring Justice Barrett that in this particular case, in 0:09:51.360 --> 0:09:54.959 order to correct the error that there wisconstant court made, 0:09:55.160 --> 0:09:57.480 you don't actually have to issue a very broad ruling. 0:09:57.520 --> 0:10:00.439 You don't have to say again that this religious exemption, 0:10:01.160 --> 0:10:06.199 you know, covers any entity that conceivably claims to be religious. 0:10:06.280 --> 0:10:09.440 It's a more narrow and I think focused and precise 0:10:09.600 --> 0:10:12.800 argument than that. It's that when the state is engaging 0:10:13.000 --> 0:10:16.080 in crafting an exemption, it can't do so in a 0:10:16.080 --> 0:10:20.319 way that discriminates among religions. So that non discrimination rule, 0:10:20.520 --> 0:10:22.840 which is the key to this case, that would prevent 0:10:22.960 --> 0:10:25.760 this case from going off into some of the concerns 0:10:25.760 --> 0:10:28.120 that the state raised about how you know the exemption 0:10:28.160 --> 0:10:31.280 would swallow the rule itself. It is possible to accommodate 0:10:31.320 --> 0:10:34.560 religion and to draw boundaries around religion without doing so 0:10:34.640 --> 0:10:38.280 in a way that discriminates among different religions. I think 0:10:38.320 --> 0:10:41.000 that Justice Kagan and others kind of signal ways to 0:10:41.040 --> 0:10:41.360 do that. 0:10:41.520 --> 0:10:44.040 This is the first case involving religion that the Court 0:10:44.080 --> 0:10:46.880 has heard in about two years and this term there 0:10:46.880 --> 0:10:50.760 are three religion cases. Do you see a trend or 0:10:50.960 --> 0:10:54.199 any explanation for why those three in particular? 0:10:54.640 --> 0:10:56.480 It's hard to say. I mean, so much of the 0:10:56.559 --> 0:10:59.240 court stock, as you know, is a function of kind 0:10:59.240 --> 0:11:02.200 of accident, you know what happened in the courts below. 0:11:02.320 --> 0:11:05.120 But you're right that there's this case which involves a 0:11:05.200 --> 0:11:08.560 particular question that arises in the religious accommodation's context, is 0:11:08.600 --> 0:11:11.480 one coming out of Maryland, which involves some parents who 0:11:11.559 --> 0:11:13.320 wanted to be able to opt their kids out of 0:11:13.480 --> 0:11:16.520 some curricular matters that had to do with sexual orientation 0:11:16.600 --> 0:11:18.760 and gender identity and so on. So they're seeking an 0:11:18.760 --> 0:11:21.640 accommodation that was denied to them. And then of course 0:11:21.640 --> 0:11:25.480 there's the Oklahoma case about the virtual Catholic School and 0:11:25.559 --> 0:11:28.920 whether it can participate in that state's charter program. That 0:11:28.960 --> 0:11:31.560 one's not really an accommodation case. It's more of what 0:11:31.600 --> 0:11:35.000 I call a cooperation case. So certainly, you know, an 0:11:35.000 --> 0:11:37.560 interesting year for law and religion at the court. But 0:11:37.720 --> 0:11:40.720 whether the fact that there are three tells us anything deeper, 0:11:40.960 --> 0:11:41.760 I'm not sure. 0:11:42.200 --> 0:11:45.200 Thanks so much, Rick. That's Professor Richard Garnett of Notre 0:11:45.280 --> 0:11:49.200 Dame Law School. Coming up next. The Trump administration is 0:11:49.360 --> 0:11:53.839 dropping enforcement actions around cryptocurrency. This is bloomberg. 0:11:55.240 --> 0:11:59.360 The federal government is already among the largest holders a bitcoin, as. 0:11:59.240 --> 0:12:02.920 You know, and Trump used to call bitcoin a scam, 0:12:02.960 --> 0:12:05.520 but now he wants to make the United States the 0:12:05.520 --> 0:12:08.720 bitcoin capital of the world. And last month, at the 0:12:08.760 --> 0:12:12.199 first Crypto Summit at the White House, Trump was pushing 0:12:12.200 --> 0:12:15.360 the creation of a bitcoin reserve. With most of the 0:12:15.480 --> 0:12:19.240 assets seized by forfeitures in law enforcement actions. 0:12:19.679 --> 0:12:23.720 The Treasury and Commerce departments will also explore new pathways 0:12:23.720 --> 0:12:28.400 to accumulate additional bitcoin holdings for the reserve, provided it's 0:12:28.440 --> 0:12:30.479 done at no cost to the taxpayers. 0:12:30.720 --> 0:12:34.319 Of course, the President launched his own Trump Mean coin 0:12:34.800 --> 0:12:37.760 just a couple of days before the inauguration, so it 0:12:37.800 --> 0:12:41.160 should come as no surprise that the Securities and Exchange 0:12:41.160 --> 0:12:47.360 Commission has been dropping Biden administration enforcement actions around cryptocurrency. 0:12:47.559 --> 0:12:50.800 Joining me is securities law expert James Park, a professor 0:12:50.800 --> 0:12:54.960 at UCLA Law School, Jim to put this into perspective, 0:12:55.640 --> 0:12:58.240 tell us sort of what the state of play was 0:12:58.400 --> 0:13:02.920 with crypto in enforcement before Trump came into office. 0:13:03.160 --> 0:13:08.760 Yeah, before the administration changed, the SEC was involved in 0:13:09.400 --> 0:13:17.320 vigorous litigation against various parties such as crypto exchanges, developers 0:13:17.400 --> 0:13:21.640 of crypto projects, and the issue in many of those 0:13:21.640 --> 0:13:25.679 cases was whether or not the crypto asset that had 0:13:25.679 --> 0:13:30.040 been sold without registration with the SEC, whether those crypto 0:13:30.080 --> 0:13:34.640 assets were securities or not. And there'd been a good 0:13:34.760 --> 0:13:39.559 number of decisions, maybe five, maybe ten by federal district 0:13:39.559 --> 0:13:45.000 court judges that have uniformly held that in certain circumstances, 0:13:45.040 --> 0:13:49.960 crypto assets can be security. There were a few exceptions 0:13:50.000 --> 0:13:54.000 with respect to secondary market trading, but even those judges 0:13:54.080 --> 0:13:57.440 said that when they're being sold by a developer, the 0:13:57.480 --> 0:14:00.840 crypto asset is a security. And so pretty much every 0:14:00.920 --> 0:14:03.720 judge that has looked at the issue has said that 0:14:03.840 --> 0:14:08.480 some crypto assets are security. Now, these cases have not 0:14:08.880 --> 0:14:11.760 really gone up on appeal yet to my knowledge, they've 0:14:11.760 --> 0:14:15.040 only been on the district court level, and so appellate 0:14:15.040 --> 0:14:17.240 courts have not really weighed in at the time of 0:14:17.280 --> 0:14:21.320 the administration changed, but there are a lot of district 0:14:21.320 --> 0:14:25.280 court opinions that say that crypto assets can be securities. 0:14:25.320 --> 0:14:27.360 And that's that's sort of where we left off. 0:14:27.960 --> 0:14:32.400 So do we know how the Trump administration views crypto assets. 0:14:32.800 --> 0:14:37.400 I think they view crypto assets much more favorably, at 0:14:37.440 --> 0:14:40.120 least when we're talking about the folks who may not 0:14:40.280 --> 0:14:44.440 be security law expert. But I suspect though that the 0:14:44.880 --> 0:14:48.400 security law officials who are going to be manning the 0:14:48.480 --> 0:14:53.160 sec even though you know they're Trump appointees and they're Republicans, 0:14:53.480 --> 0:14:56.600 I think they have some gpticism about crypto and are 0:14:56.600 --> 0:14:59.320 a little bit wary about some of the dangers of 0:14:59.600 --> 0:15:04.479 permitted crypto assets to be sold without any disclosure or registration. 0:15:04.720 --> 0:15:08.000 But certainly the administration has a very favorable view, a 0:15:08.120 --> 0:15:11.960 very lave a fair view, a buyer beware view of 0:15:12.360 --> 0:15:13.560 crypto assets. 0:15:13.920 --> 0:15:18.600 So Paul Atkins, who has been tapped to run the SEC, 0:15:18.760 --> 0:15:22.480 at his public Senate committee hearing, said that providing a 0:15:22.520 --> 0:15:26.280 firm regulatory foundation for crypto assets would be a top priority. 0:15:26.280 --> 0:15:29.880 He apparently has like six million dollars in crypto himself. 0:15:30.240 --> 0:15:30.840 It's a lot. 0:15:31.200 --> 0:15:34.960 It's a lot. So what does that mean, firm regulatory foundation. 0:15:35.760 --> 0:15:40.040 It's a good question. I think one way of interpreting 0:15:40.080 --> 0:15:43.720 this is that, you know, we're going to provide some clarity. 0:15:43.760 --> 0:15:46.280 We're going to pass a statute. We're going to pass 0:15:46.360 --> 0:15:51.760 comprehensive regulations that define what is regulated and what is not, 0:15:51.960 --> 0:15:55.920 and what type of regulation is appropriate. And you know, 0:15:56.000 --> 0:15:59.800 I think Democrats and Republicans, I think, are you know, 0:15:59.840 --> 0:16:08.720 open into developing reasonable, comprehensive cryptoregulation that protects investors and 0:16:09.480 --> 0:16:13.200 helps prevent frauds. And I don't think there's any any 0:16:13.240 --> 0:16:17.440 problem with that sort of comprehensive crypto regulation. I think 0:16:17.440 --> 0:16:21.120 what the industry wants, though, is more of a safe harbor, 0:16:21.360 --> 0:16:25.280 just a set of rules or statutes that permit them 0:16:25.320 --> 0:16:29.760 to operate without you know, fear of litigation, without fear 0:16:29.840 --> 0:16:34.560 of enforcement, and quite frankly in some cases, without fear 0:16:34.600 --> 0:16:37.800 of accountability to investors. And you know, one of the 0:16:37.800 --> 0:16:41.920 things the crypto industry has maintained in its litigation is 0:16:41.920 --> 0:16:46.440 that it owes no obligations to crypto investors, which I 0:16:46.440 --> 0:16:50.000 think is, you know, an extraordinary position to take. And 0:16:50.520 --> 0:16:53.520 you know, that is something that they may want to 0:16:53.600 --> 0:16:58.160 try to get enshrined in some regulation, but I just 0:16:58.200 --> 0:16:59.480 don't think that's a good idea. 0:17:00.160 --> 0:17:05.320 The Trump sec is ending suits against coinbased global binance 0:17:05.400 --> 0:17:09.000 holdings and Ripple Labs. I mean, what does that say 0:17:09.240 --> 0:17:10.280 or what does that do? 0:17:10.920 --> 0:17:14.879 Well? It means on one level, it's a very powerful 0:17:14.920 --> 0:17:18.920 symbolic move to say that, you know, we're not going 0:17:18.960 --> 0:17:24.359 to enforce the security laws, even though these exchanges are 0:17:24.480 --> 0:17:28.520 probably listing securities, even though some of these developers have 0:17:28.760 --> 0:17:33.639 created securities. And by not enforcing the law, we are 0:17:33.680 --> 0:17:37.280 sending the message that we don't think that crypto acids 0:17:37.320 --> 0:17:40.440 should be regulated as securities. I think that's you know, 0:17:40.520 --> 0:17:44.080 that's a powerful symbolic statement that is being made by 0:17:44.119 --> 0:17:47.480 withdrawing from these suits, and you know, withdrawing from such 0:17:47.560 --> 0:17:51.399 high profile suits that were vigorously litigated by the SEC, 0:17:52.080 --> 0:17:54.919 so many of them, is I think unprecedented. I don't really, 0:17:55.080 --> 0:17:58.040 you know, recall any other time period when the SEC 0:17:58.119 --> 0:18:02.280 has completely dropped so many many major enforcement lawsuits and 0:18:02.440 --> 0:18:05.840 just withdrawn. Now. You know, on the other hand, the 0:18:05.880 --> 0:18:10.040 district court opinions that were issued in these cases, they 0:18:10.040 --> 0:18:13.960 still stand and there's still law, and so those precedents 0:18:14.000 --> 0:18:17.200 are not affected by the fact that the SEC has 0:18:17.240 --> 0:18:22.040 decided not to pursue these various cases. And so there 0:18:22.119 --> 0:18:26.439 still is a foundation of precedent which indicates that crypto 0:18:26.480 --> 0:18:29.360 assets can be securities in certain circumstances. 0:18:29.920 --> 0:18:34.040 Has the test for whether crypto is a security changed 0:18:34.080 --> 0:18:36.440 in any way? Is it still the Howie test? 0:18:37.080 --> 0:18:39.600 It's still the Howie test. It is still the Howie system. 0:18:39.600 --> 0:18:42.640 That's what the courts have consistently applied that in some 0:18:42.720 --> 0:18:48.880 circumstances crypto assets satisfy the Howie tests because the crypto 0:18:49.000 --> 0:18:53.159 asset purchasers are relying upon the efforts of the developers, 0:18:53.200 --> 0:18:58.520 the promoters, who are promising to create some great crypto 0:18:58.560 --> 0:19:02.040 ecosystem that will cause the value of the crypto assets 0:19:02.080 --> 0:19:05.359 to rise, and that's you know, that's what the Howie 0:19:05.359 --> 0:19:09.400 test says is as a security, and courts have consistently 0:19:10.000 --> 0:19:12.760 said that they can be securities under the Howie test. 0:19:13.640 --> 0:19:18.320 Are private plaintiffs able to bring the same kind of 0:19:18.440 --> 0:19:21.640 lawsuits that the sec has been bringing? 0:19:22.320 --> 0:19:22.760 They can. 0:19:23.119 --> 0:19:23.439 Yes. 0:19:23.560 --> 0:19:28.560 Private plaintiffs who are typically going to be purchasers of 0:19:28.600 --> 0:19:33.600 crypto assets who have suffered losses. There are various positive 0:19:33.680 --> 0:19:37.840 action that they can assert under federal securities laws that 0:19:38.160 --> 0:19:42.520 would permit them to recover some of their lawses. So 0:19:42.720 --> 0:19:48.240 one major category of cases is triggered when somebody sells 0:19:48.240 --> 0:19:52.920 the security without registering it with the sec than any 0:19:52.960 --> 0:19:57.040 private investor who purchased that security has the right to recision, 0:19:57.560 --> 0:19:59.720 which basically means they have the right to get their 0:19:59.720 --> 0:20:03.520 money back, and that's a valuable remedy. If you've lost 0:20:03.880 --> 0:20:06.159 a lot of money, you then have the right to 0:20:06.240 --> 0:20:09.679 riskind that transaction and get the money you invested back, 0:20:09.840 --> 0:20:13.400 and that would cover your losses. Another major private cause 0:20:13.440 --> 0:20:17.520 of action is available when some parties, such as the 0:20:17.600 --> 0:20:23.359 developer of the crypto project, the promoter issues material misrepresentation 0:20:24.160 --> 0:20:29.080 with fraudulent intent. Then crypto asset purchasers have a cause 0:20:29.119 --> 0:20:32.080 of action for security fraud if they argue that we 0:20:32.200 --> 0:20:38.080 relied upon these misrepresentations and that caused us to buy 0:20:38.119 --> 0:20:41.480 a security that was inflated in price, then they can 0:20:41.520 --> 0:20:45.320 recover their losses. So there are very strong, well established, 0:20:45.359 --> 0:20:50.880 several private causes of action that investors can can use 0:20:51.000 --> 0:20:54.680 if they feel like they have been cheated or defrauded 0:20:54.720 --> 0:20:57.440 by the developers of a crypto project. 0:20:57.960 --> 0:21:02.960 What are the disadvantages of litigating these issues through private 0:21:03.040 --> 0:21:06.159 lawsuits rather than having the SEC do it? 0:21:06.920 --> 0:21:10.080 You know, having the SEC bring a lawsuit sends a 0:21:10.240 --> 0:21:14.480 powerful message. It's a government enforcer that is passed with 0:21:15.520 --> 0:21:19.200 acting in the public interest, and when the SEC acts, 0:21:19.240 --> 0:21:23.000 that just sends a strong message that you know, this 0:21:23.200 --> 0:21:27.639 conduct violates Fedtle securities law and we're enforcing those laws 0:21:27.880 --> 0:21:34.040 with private actions. There's often the criticism that these investors they, 0:21:34.600 --> 0:21:36.840 you know, they should have known better, they invested in 0:21:36.920 --> 0:21:40.919 a risky crypto asset, and they're just suing because they 0:21:40.960 --> 0:21:45.639 lost money. And there's a criticism that, well, the plaintiff's 0:21:45.640 --> 0:21:48.440 attorneys are you know, they go and look for people 0:21:48.480 --> 0:21:51.960 who lost money so that they can bring lawsuits against 0:21:52.160 --> 0:21:56.720 various promoters and developers, and the attorneys get a significant fee. 0:21:56.920 --> 0:22:01.120 So private litigation sometimes is not looked at as favorably 0:22:01.280 --> 0:22:05.919 as sec enforcement actions. But you know, you still have 0:22:06.000 --> 0:22:08.840 the same types of remedies that are available. You have 0:22:08.920 --> 0:22:12.399 the opportunity to argue that crypto assets are securities, and 0:22:12.440 --> 0:22:16.119 so there are you know, very similar benefits that crypto 0:22:16.240 --> 0:22:19.920 investors have when they assert these private causes of action. 0:22:20.680 --> 0:22:25.240 Have any state ags litigated in this area of crypto. 0:22:25.280 --> 0:22:29.800 They are, They are litigating in a good number of cases, 0:22:30.000 --> 0:22:34.400 particularly for you know, cryptoprojects that are really complete frauds, 0:22:34.480 --> 0:22:38.000 where you know, somebody is you know, saying, you know, 0:22:38.320 --> 0:22:40.919 we're selling this crypto asset that's going to do something. 0:22:40.960 --> 0:22:43.800 They just take the money and run. State attorney generals 0:22:43.800 --> 0:22:47.720 have been very active in those clear fraud types of cases. 0:22:47.920 --> 0:22:50.200 They have been active, and I suspect that they will 0:22:50.240 --> 0:22:54.320 become more active as the federal government pulls back. And 0:22:54.640 --> 0:22:58.840 there are state securities frauds statutes that can be invoked 0:22:58.880 --> 0:23:04.000 and sometimes even criminal state prosecutors are getting involved in 0:23:04.000 --> 0:23:07.280 some of the more egregious cases of fast and so 0:23:07.400 --> 0:23:10.240 I suspect that the California Attorney General and the New 0:23:10.320 --> 0:23:14.040 York Attorney General and attorney generals from across the nation 0:23:14.359 --> 0:23:17.760 are going to see this as an opportunity and even 0:23:17.760 --> 0:23:21.760 a necessity to protect the citizens of their state from 0:23:22.200 --> 0:23:23.880 a fraudulent crypto project. 0:23:24.000 --> 0:23:26.560 Coming up next on the Bloomberg Law Show, I'll continue 0:23:26.560 --> 0:23:31.240 this conversation with UCLA law professor James Park. We'll talk 0:23:31.280 --> 0:23:34.760 about Trump's pardon of Ross Olbrick, founder of the drug 0:23:34.800 --> 0:23:38.920 trafficking site known as Silk Road, where virtual currency was 0:23:38.960 --> 0:23:41.960 the coin of the realm. He'd been serving a life 0:23:42.000 --> 0:23:46.879 sentence following his twenty fifteen conviction for trafficking and other crimes. 0:23:47.480 --> 0:23:50.840 Is a Sam Bankman freed pardon in the future. I'm 0:23:50.920 --> 0:23:54.560 June Grosso. When you're listening to Bloomberg, the Securities and 0:23:54.640 --> 0:24:01.879 Exchange Commission has been dropping Biden administration enforcement action around cryptocurrency. 0:24:02.240 --> 0:24:08.320 Trump's sec ended suits against coinbase, Global, Binance Holdings, Ripple Labs, 0:24:09.040 --> 0:24:14.080 but privately filed lawsuits have continued. Private plaintiffs and state 0:24:14.119 --> 0:24:18.760 attorneys general can and likely will still pursue claims, perhaps 0:24:18.800 --> 0:24:22.920 even more so if the sec backs off enforcement entirely 0:24:23.359 --> 0:24:27.800