TTP Report: How the Crypto Industry Is Writing Its Own State Laws
FOR IMMEDIATE RELEASE: April 11, 2022
Contact: Michael Clauw, firstname.lastname@example.org, 202.780.5750
WASHINGTON, D.C. – Today, Campaign for Accountability (CfA), a nonprofit watchdog group that runs the Tech Transparency Project (TTP), released a report detailing how cryptocurrency insiders are quietly hijacking state legislative processes around the country to write crypto-friendly laws that could help them circumvent a looming federal crackdown. The states highlighted in this report –Wyoming, Colorado and New Hampshire – have effectively delegated the task of regulating the crypto sector to those with the greatest financial stake in its success, with little regard for those who may stand to lose.
Campaign for Accountability Executive Director Michelle Kuppersmith said, “Aware that a federal crackdown may be on the way, crypto insiders are taking advantage of state lawmakers’ misguided desire to promote crypto by spurring a regulatory race to the bottom. Lawmakers are being counseled by insiders who have a financial interest in crypto’s unmitigated growth, so it’s unlikely they’re receiving unbiased information about the impact of rapid crypto adoption.”
The Wyoming State Legislature established the Wyoming Blockchain Task Force in March 2018, with an explicit mandate to draft legislation. Crypto advocates took quick advantage of the direct access to the policymaking process that the panel provided them. The task force introduced 15 industry-friendly bills, and 12 of them became law, all in just two years. This task force helped Wyoming take an early lead in the scramble for crypto business—while providing very real benefits for members of the group.
In May 2018, shortly after the Wyoming task force was formed, Colorado Gov. John Hickenlooper created the Council for the Advancement of Blockchain Technology Use, following the state legislature’s rejection of a slate of crypto-friendly bills. The council was heavily stacked with representatives of the crypto industry and drew input extensively from the Colorado’s blockchain community—and few others. In short order, the council was highly influential, using its privileged perch to draft, introduce and push for legislation that revised state securities law and shaped regulation in the industry’s favor.
New Hampshire’s cryptocurrency commission provides another model for how the crypto community has used state-sanctioned panels to amplify its influence. But unlike in Colorado or Wyoming, where crypto forces helped draft legislation, industry advocates in New Hampshire sought to keep the state free of new restrictions on cryptocurrency. They appear to have succeeded: By the end of the commission’s mandate in 2020, it had proposed no regulation.
The experiences of some who participated in the New Hampshire commission meetings provide an interesting window into the clash between federal and state cryptocurrency law. One participant, bitcoin activist Ian Freeman, was arrested in 2021 following a five-year investigation by the FBI into his unlicensed cryptocurrency exchange. Another, Jeremy Kauffman, is facing a lawsuit from the SEC over LBRY Credits, the digital tokens that his blockchain technology firm issues and that the SEC maintains are securities.
Ms. Kuppersmith continued, “Pro-crypto activists have successfully identified state legislatures as fertile ground for industry-friendly legislation that can gain approval without having to jockey with SEC old-guard security regulators. Nevertheless, these burgeoning digital currencies are not contained within state lines, and neither are the potential negative effects of their unrestrained proliferation.”
Campaign for Accountability is a nonpartisan, nonprofit watchdog organization that uses research, litigation, and aggressive communications to expose misconduct and malfeasance in public life and hold those who act at the expense of the public good accountable for their actions.