Richmond Journal of Law and Technology

The first exclusively online law review.

Month: October 2018 (Page 1 of 2)

Initial Coin Offerings and the Need for Their Regulation

By: Florian Uffer

In an Initial Public Offering (“IPO”), a private company or corporation offers its stock to the public for the first time.[1] The main goal behind going public usually consists of raising capital for different purposes, such as expansion.[2]

The drastic rise of cryptocurrency over the past five years, showcasing an increase in market capitalization of 190.27%,[3] has brought a similar animal into existence: the Initial Coin Offering (“ICO”).

Because ICOs are set in the world of cryptocurrency, a brief introduction to it is needed. Cryptocurrency is an electronic cash system which does not rely on banks or third parties to verify transactions.[4] Rather, transactions are recorded on a blockchain, a digital ledger.[5] This blockchain is used to confirm upcoming transactions, thus enabling direct peer-to-peer payments.[6] As of today, there are three main types of cryptocurrency.[7] First, Bitcoin is a digital currency which can be exchanged among people.[8] The second type, Altcoins, usually are alternatives of Bitcoins with minor changes.[9] Third, tokens reside in their own blockchains and represent an asset or utility.[10]

Just like IPOs, ICOs act as fundraisers of sorts.[11] Interested investors buy in to the offering, and receive a new token specific to the ICO as consideration.[12] The company holding the ICO then uses the raised funds to pursue the respective investment it had in mind.[13] ICOs come with unique advantages and risk of which the investor should be aware.

One of the more obvious advantages of an ICO lies in the volatility of cryptocurrency: in this high-risk/high-reward setting, an investor may be able to realize stellar profits. Additionally, ICOs do not require much paperwork,[14] which reduces the administrative costs. All that is needed is a “white paper,” which describes the project and thus is the primary tool used by investors to decide whether they wish to invest or not.[15]
In considering the dark side, it becomes apparent that ICOs are based on pure speculation.[16] The volatile nature of cryptocurrency combined with the extremely low amount of financial information[17] that is available to investors give rise to an unpredictable financial environment.

The major issue arising out of the lack of paperwork inherent in ICO are scams: a 2018 study reported that about 80% of ICOs were fraudulent.[18] The Securities and Exchange Commission (“SEC”) manifests these concerns on its website: “While [cryptocurrencies] and the technology behind them may present a new and efficient means for carrying out financial transactions, they also bring increased risk of fraud and manipulation because the markets for these assets are less regulated than traditional capital markets.”[19]

Regulating the ICO market offers numerous advantages. First, increased investor protection would ensue. Requiring more disclosure from ICO offerors and thus ensuring a more consistent financial environment would drastically reduce the rate of scams and thus promote the market for ICOs.[20] Heightened disclosure requirements would also minimize the use of ICOs to raise money for illegitimate purposes, such as money laundering or terrorism funding.[21] Finally, regulation would increase the certainty of investment in the space, and consequently attract more investors.[22]

The market for ICOs however, remains yet to be thoroughly regulated. Due to the revolutionary concept behind cryptocurrency and its technologically advanced nature, relevant U.S. regulatory agencies have found it difficult to rightfully assert jurisdiction over it. In a hearing before the House Committee on Appropriations however, SEC Chairman Jay Clayton addressed the SEC’s view on ICOs. The SEC views tokens as generally falling within the realm of securities.[23] Because tokens are the financial assets involved in ICOs, it seems that the SEC is in pole position to regulate this market in the future.

 

[1] See Initial Public Offering – IPO, Investopedia, https://www.investopedia.com/terms/i/ipo.asp (last visited Oct. 25, 2018).

[2] See id.

[3] See Visualizing The Meteoric Rise Of Cryptocurrency in the Past 5 Years, HowMuch.net, https://howmuch.net/articles/top-10-cryptos-past-5-years (last visited Oct. 24, 2018).

[4] Adam Levy, What is Cryptocurrency?, The Motley Fool (Mar. 11, 2018, 7:15 AM), https://www.fool.com/investing/2018/03/11/what-is-cryptocurrency.aspx.

[5] See id.

[6] See id.

[7] See Ray King, Understanding the Different Types of Cryptocurrency, Bitdegree (Sept. 17, 2018), https://www.bitdegree.org/tutorials/types-of-cryptocurrency/#The_Three_Main_Types_of_Cryptocurrency.

[8] See id.

[9] See id.

[10] See id.; Definition of Crypto Token, Investopedia, https://www.investopedia.com/terms/c/crypto-token.asp (last visited Oct. 25, 2018).

[11] See Initial Coin Offering (ICO), Investopedia, https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp (last visited Oct. 25, 2018).

[12] See id.

[13] See id.

[14] See Ameer Rosic, ICOs Pros & Cons. Cutting Through the Noise, Huffpost (July 4, 2017, 8:02 AM), https://www.huffingtonpost.com/entry/ico-pros-cons-cutting-through-the-noise_us_595b7f22e4b0c85b96c6646e.

[15] See id.

[16] See id.

[17] Investors usually are only able to consider the ICOs’ “white papers” in making an investment decision, as it is the only paperwork arising out of the ICO. See id.

[18] See 80% of ICOs are Scams : Report, Investopedia, https://www.investopedia.com/news/80-icos-are-scams-report/ (last visited Oct. 25, 2018).

[19] SEC, Initial Coin Offerings (ICOs) (2018), https://www.sec.gov/ICO.

[20] See Thijs Maas, Why ICOs Need to Be Regulated, Hackernoon (Oct. 17, 2017), https://hackernoon.com/why-cryptocurrencies-and-tokens-should-be-regulated-349b920b62c8.

[21] See id.

[22] See id.

[23] See FY 2019 U.S. Securities and Exchange Commission: Hearing Before the Comm. on Appropriations (2018) (statement of Jay Clayton, Chairman, Securities and Exchange Commission).  

Image Source: https://www.sec.gov/ICO

Practice What You Preach

By Cam Kollar

The first time I heard about a massive data breach was when OPM sent me a letter in the mail informing me that my personal data may have been compromised. Soon after I realized that these data breaches that are seemingly dismissed were happening more frequently-happening in more industries. Then it was Sony, Target, Equifax, Mossack Fonseca, Facebook….the lists goes on and on.[1] The constant barrage of how our data has been compromised and the fact that you are not as anonymous as you think you are, has been desensitizing individuals across industries.

It isn’t a surprise that most data security specialists state that it isn’t a matter of “if” you will be hacked, but “when”.[2] Regardless, attorneys have a special role-we have to protect clients’ confidences where law firms end up acting as bank vaults for the secrets that people keep from even their closest family members. Law firms saw an increase of data breaches to 22% of respondents according to the ABA 2017 Legal Technology Survey Report.[3] That is an estimate that more than one in five law firms were hacked last year.[4] Firms of every size are affected and unfortunately according to some reports approximately 40% of law firms do not even realize that they were breached![5]

Despite these numbers many law firms are lagging in their cybersecurity procedures. Of note, in Shore v. Johnson & Bell, a former client is holding the law firm responsible for their cybersecurity practices (or then lack thereof) alleging that the large law firm, Johnson & Bell, “left its clients’ confidential information unsecured and unprotected.”[6] Johnson & Bell have since corrected the specified vulnerabilities, which were originally spelt out in the temporarily sealed complaint.[7]

The highlights of the cybersecurity practices that triggered the legal malpractice suit are as follows: Johnson & Bell used a “webtime time tracking system” that was built on a “JBoss Application Server.”[8] The particular software was introduced in 2005, and had an “end of life” recommendation.[9] JBoss terminated full support for the software in September 2007, and maintenance support ended in September 2009.[10] Johnson & Bell was still running the software when the complaint was filed in April 2016.[11] Technology updates quickly and those pesky updates your computer and phones do every so often protect the devices from vulnerabilities and are considered to be maintenance support. Johnson & Bell was possibly running unsupported product for over six years.[12] Adding insult to injury, a partner at Johnson & Bell was aware of reasonable cybersecurity practices as he wrote a paper titled “Don’t Let Cybersecurity Breaches Lead to Legal Malpractice: The Fax is Back.[13] I believe Joseph Beckman said it clearly when he said, “You can bet Johnson Bell wishes it had invested the money to patch its time-keeping program sometime between 2009 and 2016.” [14]

The costs of data breaches get shared between the clients, attorneys, and law firms. These costs include significant business downtime, loss of billable hours, hefty fees to correct the problems, and effects on lawyer and law firm reputations.[15] According to Lucian T. Pera, legal ethics partner at Adam and Reese LLP in Memphis, Tennessee, and former treasurer of the American Bar Association, lawyers that fail to protect data from hackers due to lax cybersecurity practices risk their licenses.[16]

[1] See Nate Lord, The History of Data Breaches, Digital Guardian, (Apr. 6, 2018), https://digitalguardian.com/blog/history-data-breaches.

[2] See David Ries, ABA Security TechReport 2017, A.B.A., https://www.americanbar.org/groups/law_practice/publications/techreport/2017/security.html.

[3] See id.

[4] Jay Reeves, One in 5 Law Firms Hacked Last Year, Lawyers Mutual (Feb. 22, 2018), https://www.lawyersmutualnc.com/blog/one-in-5-law-firms-hacked-in-2017.

[5] Law Firm Cyber Security Scorecard, Logicforce, https://www.logicforce.com/2018/03/28/law-firm-cyber-security-scorecard/ (last visited Oct. 25, 2018).

[6] Joseph P. Beckman, Law Firm Cybersecurity Breach Opens Door to Lawsuit, Litigation News, A.B.A. (July 31, 2017), https://www.americanbar.org/publications/litigation-news/featured-articles/2017/law-firm-cybersecurity-breach-opens-door-to-lawsuit/.

[7] See id.

[8] See id.

[9] See id.

[10] See id.

[11] Joseph P. Beckman, Law Firm Cybersecurity Breach Opens Door to Lawsuit, Litigation News, A.B.A. (July 31, 2017), https://www.americanbar.org/publications/litigation-news/featured-articles/2017/law-firm-cybersecurity-breach-opens-door-to-lawsuit/.

[12] See id.

[13] See id.

[14] See id.

[15] See id.

[16] Daniel R. Stoller, Memo to Law Firms: Raise Cybersecurity Bar or Risk Client Losses, Bloomberg Law (Feb. 23, 2018), https://biglawbusiness.com/memo-to-law-firms-raise-cybersecurity-bar-or-risk-client-losses/.

Image Source: https://selinc.com/solutions/sfci/cybersecurity-posters/

New Online Software Improving Access to Justice for Domestic Violence Survivors

By: Kara Powell

“More than 1 in 3 women . . . and more than 1 in 4 men . . . in the United States have experienced rape, physical violence, and/or stalking by an intimate partner in their lifetime[s].”[1] Domestic violence protective orders forbid a perpetrator from performing specific actions that are threating, injuring, or harassing to victims.[2] Protective orders can also include, but are not limited to: financial support orders, court guidance regarding child visitation and custody, and physical distance orders.[3] However, the legal system can be difficult for domestic violence victims to access and navigate.[4]

HelpSelf Legal,[5] which was released in December 2017,[6] is an AI-assisted online platform that provides software services to legal aid associations.[7] Specifically, HelpSelf Legal currently assists individuals prepare and file domestic violence protective orders in California.[8] HelpSelf Legal is improving access to justice for domestic violence survivors, particularly those lacking financial resources. For just fifteen dollars, “[t]he program walks users through a series of questions designed to gather information about which court the document will be filed in, the person against whom the restraining order is sought, the nature of the abuse and whether the user wants to request support.”[9] The questions are lay-person friendly so every individual can use and understand the system.[10]

After the user completes the questions, all the necessary documents are automatically generated.[11] The user reviews and double-checks the information on each document, and then either files the documents on their own or submits the documents to the courts electronically through HelpSelf Legal.[12] The system is similar to the tax preparation software TurboTax.[13] Because the user does not have to physically bring the forms to the appropriate court, this may allow more domestic violence victims to file for protective orders.

HelpSelf Legal was created by Dorna Moini, who had pro bono experience during her time with big law.[14] She created HelpSelf Legal to assist low-income domestic violence survivors access legal assistance.[15] She noticed the disparity between the technology available to pro bono clients and the technology available to law firm clients, and wanted to decrease the gap.[16] Currently, the platform only serves California, “but Moini hopes later to expand into other states.”[17] Wyoming may be the next state to use the HelpSelf Legal software to create domestic violence tools.[18]

HelpSelf Legal works with shelters and legal aid organizations who assist the clients after they have completed the online protective order process.[19] The fifteen dollars domestic violence survivors pay on the front-end goes along way with all the resources HelpSelf Legal is providing and coordinating.

 

[1] Michele C. Black et al., The National Intimate Partner and Sexual Violence Survey: 2010 Summary Report, Centers for Disease Control and Prevention, National Center for Injury Prevention and Control (2011), https://www.cdc.gov/violenceprevention/pdf/nisvs_report2010-a.pdf.

[2] See How to Get a Personal Protection Order, domesticshelters.org (July 1, 2014), https://www.domesticshelters.org/domestic-violence-articles-information/faq/how-to-get-a-personal-protection-order.

[3] See Robert Ambrogi, Startup Launching Today Provides Automated Legal Help to Those with Low and Moderate Incomes, Starting with Domestic Violence, LawSites (Dec. 13, 2017), https://www.lawsitesblog.com/2017/12/startup-launching-today-provides-automated-legal-help-low-moderate-incomes-starting-domestic-violence.html.

[4] See id.

[5] HelpSelf Legal, https://www.helpselflegal.com/domestic-violence (last visited Oct. 22, 2018).

[6] See Ambrogi, supra note 3.

[7] See e-mail from Dorna Moini (Sept. 25, 2018, 12:05 PM) (on file with author).

[8] John Biggs, HelpSelf Uses Simple AI to Help Those in Legal Trouble, TechCrunch (Apr. 12, 2018), https://techcrunch.com/2018/04/12/helpself-uses-simple-ai-to-help-those-in-legal-trouble/.

[9] Tyler Roberts, Statesman of the Month: Dorna Moini, National Jurist (Jan. 8, 2018), http://nationaljurist.com/smartlawyer/statesman-month-dorna-moini.

[10] See Mary E. Juetten, Access to Justice Through Technology for 2018, Above the Law (Dec. 19, 2017, 3:59 PM), https://abovethelaw.com/2017/12/access-to-justice-through-technology-for-2018/.

[11] See id.

[12] Id.

[13] See Biggs, supra note 6.

[14] See id.

[15] See Ambrogi, supra note 3.

[16] See Biggs, supra note 6.

[17] Id.

[18] See e-mail from Dorna Moini (Sept. 25, 2018, 12:05 PM) (on file with author).

[19] See id.

Image Source:  https://www.shouselaw.com/colorado/domestic_violence/CO_permanent_protective_order.html

Privacy on Cell Phones with a New Supreme Court

By: Catherine Schroeder

With society’s increasing dependency on ever-changing technology, particularly cell phones, the need to protect individuals’ privacy in criminal investigations is paramount.[1] Cell phone users  no longer share personal information with their cell phone carriers but with apps and search engines.[2] Furthermore, cell phone carriers are adding smaller cell sites, in addition to macro cell towers, which allows cell phone carriers to determine a cell phone’s location within smaller and more targeted boundaries.[3] While this cell phone technology is evolving at a fast pace, the law is slow to adapt.[4] The judiciary and legislatures, both state and federal, must anticipate emerging technology in order to fully protect individuals’ privacy.[5]

The Supreme Court’s recent decision in Carpenter v. United States may give insight into how the Court will handle digital privacy in the near future.[6] In a narrow ruling, the majority held that law enforcement’s acquisition of over 127 days of cell-site location information (CSLI) constituted a search under the Fourth Amendment and required a warrant.[7] The majority reasoned that tracking a cell phone’s location for that length of time gives a complete record of an individual’s whereabouts.[8] Similar to tracking GPS information from a car, tracking a cell phone’s location reveals a person’s “familial, political, professional, religious, and sexual associations.”[9] The intimate and exhaustive nature of the information led the Court to conclude that the warrantless search was unconstitutional.[10]

Proponents of increased protection of privacy in the digital era hailed this decision as a win.[11] They argue because the third-party was developed in the 1960s and ‘70s, the doctrine does not take into account the precision and invasiveness of information available today.[12] The majority in Carpenter addressed these concerns and declined to extend the third-party doctrine, citing the nature of the data collection and recognizing that the necessity of cell phones in modern life renders the voluntary exposure rationale of the third-party doctrine mute in the particular circumstance.[13] Despite its narrow ruling, proponents of digital privacy have been hopeful the rationale may be applied to other information held by third parties, such as search history, emails, and more.[14] Nathan Wessler, ACLU attorney who argued before the Court on Carpenter, stated this decision “provides a path forward for safeguarding other sensitive digital information in future cases–from…smart-home appliances…[to] technology that is yet to be invented.”[15]

However, after the recent confirmation of Justice Brett Kavanaugh, the dissent’s approach, which considered the majority’s ruling an “undue restriction” on law enforcement, may be the Court’s future approach to digital privacy with cellphones.[16] During Justice Kavanaugh’s confirmation process, proponents of increased digital privacy criticized several of his previous rulings .[17] In Klayman v. Obama, Justice Kavanaugh wrote a concurrence that upheld the constitutionality of the National Security Agency’s (NSA) bulk telephone metadata program from the Bush Administration.[18] The NSA would collect information about numbers dialed and the length of phone calls without a warrant and store this information.[19] The FBI could look through this data with permission from the Foreign Intelligence Surveillance Act court.[20] In an unprompted concurrence, where the majority did not even write a full opinion, Justice Kavanaugh wrote that this constituted a “special need” that outweighs the intrusion on individual liberty.[21]

For proponents of increased digital privacy, the more concerning decision by Justice Kavanaugh is his joining of the dissent for the D.C. Circuit Court of Appeals in United States v. Jones.[22] Justice Kavanaugh and the dissent found that Jones’s reasonable expectation of privacy in his movements on public highways was nonexistent, despite the month long GPS tracking.[23] This is in stark contrast to the majority ruling in Carpenter that relied on the Supreme Court’s concurrence in Jones, which opposed Justice Kavanaugh’s reasoning.[24] The Jones majority used a property-based rationale to determine the tracking was an unconstitutional search, but the concurrence in Jones foresaw longer term GPS monitoring, possibly using cell phone data, as “impinging on expectations of privacy.”[25] In Justice Kavanaugh’s Senate Judiciary Committee questionnaire, he stated he was only applying a property-based rationale as later implemented by the Supreme Court majority;[26] however, the dissent he joined did clearly state that Jones had no expectation of privacy.[27] Justice Kavanaugh’s opinion  is not likely to change if the facts in front of him included a month-long surveillance in Jones to a little over two months in Carpenter.[28]

It is unclear how Justice Kavanaugh will rule on issues of digital privacy. As an appellate judge, he was bound by precedent in interpreting the third-party doctrine.[29] However, since the Carpenter decision was a narrow ruling to its specific facts, it is more likely that Justice Kavanaugh will move the Court to the direction of the dissent in Carpenter. Proponents of increased digital privacy may have been too hasty with their celebrations.

 

[1] See Anne Pfeifle, Alexa, What Should We Do About Privacy? Protecting Privacy for Users of Voice-activated devices?, 93 Wash. L. Rev. 421, 424 (2018).

[2] See Craig Silliman, Technology and Shifting Privacy Expectations (Perspective), Bloomberg Law: Big Law Business (Oct. 7, 2016), https://biglawbusiness.com/technology-and-shifting-privacy-expectations-perspective/.

[3] See id.

[4] See Pfeifle, supra note 1, at 458.

[5] See Pfeifle, supra note 1, at 457.

[6] See Carpenter v. United States, 138 S. Ct. 2206, 2213 (2018).

[7] See id. at 2217.

[8] See id.

[9] See id. (quoting United States v. Jones, 565 U.S. 400, 415 (2012)).

[10] See id. at 2223.

[11] See Louise Matsakis, The Supreme Court Just Greatly Strengthened Digital Privacy, Wired (June 22, 2018, 12:26 PM), https://www.wired.com/story/carpenter-v-united-states-supreme-court-digital-privacy/.

[12] Editorial Board, The Supreme Court’s Privacy Case Shows Congress Needs to Draw New Lines, Washington Post (Dec. 10, 2017), https://www.washingtonpost.com/opinions/the-supreme-courts-privacy-case-shows-congress-needs-to-draw-new-lines/2017/12/10/c4d85c12-d940-11e7-b1a8-62589434a581_story.html?utm_term=.0de888bbcb05.

[13] See Carpenter, 138 S. Ct. at 2220.

[14] See Matsakis, supra note 11.

[15] Id.  

[16] See Carpenter, 138 S. Ct. at 2221; See Michael Macleod Ball, Kavanaugh’s Views on Privacy, Fourth Amendment Should Make Republicans Think Twice, The Hill (Sept. 3, 2018, 4:00 PM EDT), https://thehill.com/opinion/judiciary/404751-brett-kavanaughs-views-in-privacy-and-the-fourth-amendment-should-make (“Kavanaugh’s nomination…raises troubling concerns about our right to be free of unwarranted government oversight in an age of expanding capacity to engage in surveillance without our knowledge.”).

[17] Ball, supra note 16.

[18] Matthew Feeney, Kavanaugh, Klayman, and the Fourth Amendment, Cato Institute (July 13, 2018, 1:19 PM), https://www.cato.org/blog/kavanaugh-klayman-fourth-amendment.

[19] See id.

[20] Ball, supra note 16.

[21] Klayman v. Obama, 805 F.3d 1148, 1149 (D.C. Cir. 2015).

[22] United States v. Jones, 625 F.3d 766, 767–68 (D.C. Cir. 2010).

[23] See Jones, 625 F.3d at 769.

[24] See Carpenter, 138 S. Ct. at 2215.

[25] United States v. Jones, 565 U.S. 400, 415, 430 (2012).

[26] Ball, supra note 16.

[27] See Jones, 625 F.3d at 769.

[28] See Carpenter, 138 S. Ct. at 2213; See Jones, 565 U.S. at 768.

[29] See Feeney, supra note 18.

Image Source: http://www.houseofbakchodi.com/digital-privacy-case-supreme-court-over-cell-phone-record/

Don’t Judge a Dog By Its Cover

By: Paxton Rizzo

DNA testing has seen a rise in popularity after becoming more available to the general public. Not surprisingly, the popularity for DNA testing of man’s best friend was quick to follow. The technology that allows us to understand where we come from, now also allows us to understand where our dogs come from. Knowing what breeds make up our dogs may not just be some fun gift idea but may prove helpful in moving some dogs that have been falsely labeled as “Pit Type” out from under breed targeted legislation.

Canine DNA testing is done using the same process as human DNA testing. A cheek swab is taken from the dog and mailed to whatever company is providing the testing.[1] Company choice is especially important for accuracy when testing dogs. Owners should look for a company with a bigger database if they want the test to be as accurate as possible.[2] The bigger the database, the more DNA repeating sequences it has to in or to and compare them to sequences from dogs known to belong to a specific breed.[3] These repeating DNA sequences are known as single-nucleotide polymorphisms or SNPs; different breeds have different signature SNPs.[4] Larger databases have more SNPs aggregated and matched to specific breeds, thus resulting in more accurate tests.[5]

Many mixed breed dog’s appearances do not portray what their genetics are. In the legal field, this has proven detrimental to some mixed breed dogs. Currently, Breed Specific Legislation (BSL) targets one dog type in particular that almost every American has heard of, the Pit Bull.[6]  In legislation the term “Pit Bull” is often broken down to mean Bull Terrier, American Staffordshire Terriers, and Staffordshire Bull Terriers.[7] Defining what breeds they mean is necessary because the American Kennel Club (AKC), the largest dog breed registry in the country, does not recognize the “Pit Bull” as a breed. To put it all together at this point, the “breed” Pit Bull has no breed standard that breeders would breed their dogs to meet because it is not a real breed. Thus, there is no standard repeating code or SNPs that could determine a dog as a “Pit Bull”.

The lack of a breed standard creates the confusion that causes misidentification of mixbreed dogs.[8] BSL bans the breeds of dogs that traditionally make up the baseline DNA of what the public would call “Pit Bulls”.[9] Those breeds are AKC recognized, thus DNA testing can reveal whether a particular dog has those breeds in its make up, but to be certain, DNA testing would be necessary.[10] There are many breeds of dogs that legislation does not target that when mixed with other breeds resembles what some would call a “Pit Bull”.[11] Veterinarians and Shelter workers, with and without breed identification training, have mixed success rates when attempting to identify breed based on phenotype.[12] Many iterations of BSL relies on individuals who have no breed identification training to try and distinguish what is and is not a “Pit Bull,” a type of dog we have already established has no standard of what it will look like.[13]  This has led to many dogs being seized that were not among the breeds defined as “Pit Bulls,” such as Niko, a boxer mix in Kansas City.[14] DNA testing was able to prove that this boxer mix seized by animal control in Kansas City was not a Pit Bull.[15] That ordeal that lasted 8 months prompted a near by town in Kansas to repeal its breed specific legislation,[16] possibly realizing it was unenforceable on appearance alone.

Virginia is not a state that has any breed specific legislation, but there are apartment complexes and other living situations that do not allow owners to have a “Pit Bull.” The Richmond SPCA was curious to see if breed identification available through DNA testing would increase the adoption of dogs that resembled what would be considered a Pit Type dog.[17] What they found was that the breed identification in this legal environment did not make perspective owners any more or less likely to adopt a dog and what most owners really cared about was temperament.[18]

Canine DNA testing is revealing that dogs that look like a “Pit Bull” may not have any Pit Type dog in them; they may just be a Great Dane mixed with Chow Chow.[19] Alternatively, they may have 50% American Bull Dog in them, a breed that some legislation considers a pit type dog, but the other 50% of that same dog may be Lassie.[20] The ability to test their dog may provide with modern DNA technology may provide owners with the ability to protect their dog from breed specific legislation or know if the breed specific legislation applies to them. The more DNA testing that is done on dogs the more we will see that any dog can be a “Pit Bull,” and every dog is a “Pit Bull”, which could make legislation that has been challenged on fairness impossible to enforce.

 

[1] Kathryn Socie-Dunning, Dog DNA Tests: Mixed Results, Whole Dog Journal (July 2018), https://www.whole-dog-journal.com/issues/21_7/features/Dog-DNA-Tests-Mixed-Results_21872-1.html.

[2] See id.

[3] Id.

[4] Id.

[5] Id.

[6] See Kate Horowitz, DNA Tests Show Many Shelter Dogs Are Mislabeled as Pit Bulls, Mental Floss (Feb. 20, 2016), http://mentalfloss.com/article/75759/dna-tests-show-many-shelter-dogs-are-mislabeled-pit-bulls.

[7] See Dana M. Campbell, Pit Bull Bans: The State of Breed-Specific Legislation, GPSolo, July/Aug. 2009, at 38.

[8] See Id. See also Horowitz, supra note 7.

[9] Campbell, supra note 8, at 38.

[10] See Horowitz, supra note 7. See also Emily Weiss, Bully This – The Results Are In…, ASPCApro, (Sept. 26, 2013), https://www.aspcapro.org/blog/2013/09/25/bully-—-results-are-….

[11] See Weiss, supra note 11.

[12] See id. See also Horowitz, supra note 7.

[13] Campbell, supra note 8, at 39.

[14] Id. at 38.

[15] Id.

[16] Id.

[17] See Weiss, supra note 11.

[18] Id.

[19] Id.

[20] Id.

A Brave New World Wide Web

By: Kirk Kaczmarek

Analysts have repeatedly claimed that blockchain technology would upend the way we transact.[1] However, Bitcoin’s precipitous downward spiral has seemingly stopped the blockchain revolution in its tracks.[2] But blockchain enthusiasts may soon have cause to rejoice. Brave, an emerging privacy-focused web browser integrated with cryptocurrency may lay the groundwork for the heralded blockchain takeover of transactions.

Google is a paradox – a tech giant that brought in 32.5 billion dollars in Q2 2018 while providing most of its services for free; [3] a user base that conducts 3.5 billion Google searches a day while distrusting the company itself.[4] How does Google manage to turn these opposing forces into massive profits, and is its reign over the internet kingdom unassailable?

Google monetizes its services by treating its users as a product. Google collects data each time you use one of its services – everything from your name, birthday, gender, location, e-mail content, YouTube comments, the websites you visit, photographs and videos you save or view, contacts you add, calendar events, and more[5] – and then stores it all in data centers.[6] Next, Google uses this data to target advertisements to certain people.[7] This targeting process involves contracting with an almost innumerable number of middlemen, driving up the cost of advertisements.[8]

Monetizing free services in this way has become the norm; social media is one visible example.[9] Last March, Apple CEO Tim Cook scathingly rebuked this user-as-the-product business model.[10] In response, Facebook CEO Mark Zuckerberg defended this practice as “the only rational model that can support building this service to reach people.”[11]

However, another tech industry heavyweight is challenging the status quo.

Enter Brendan Eich, the inventor of JavaScript and a cofounder of Mozilla – the organization responsible for the popular Firefox web browser and Thunderbird e-mail client.[12] In 2015, Eich founded and became CEO of Brave Software.[13]

Brave Software is developing an integrated two-pronged platform that Eich hopes will upend the current internet advertisement system by protecting user data, effectively targeting advertisements, and creating an entirely new marketplace for web-based advertising. The platform consists of the Brave web browser, and the Basic Attention Token (BAT), an Ethereum-based cryptocurrency associated with the value of web surfers’ attention.

Ironically, the Brave browser is based Chromium and should support all the same functionality that Google Chrome provides upon its full release. However, Brave differentiates itself in three key ways: it (1) blocks all advertisements by default, giving users the choice to opt into advertisements, (2) blocks all trackers by default, again allowing users to opt in, and (3) is integrated with BAT.

Via browser extensions, popular web browsers today are already capable of blocking advertisements and trackers.[14] However, this practice is unsustainable – without advertisement revenue, free internet services could not exist.[15] BAT integration is Brave’s solution to this problem.[16]

Consider watching a video on YouTube. Four entities are involved in this marketplace: (I) YouTube is the website publisher, (II) the person who made the video is the content creator, (III) the company who paid for the pre-video advertisement is the advertiser, and (IV) the viewer is the user. Brave offers a way for all four entities to benefit from the user’s attention.

Publishers, content creators, and users obtain BAT wallets – a cryptocurrency key that acts like an online bank account specifically for transacting in BAT.[17] Advertisers pay Brave in BAT to include advertisements in a catalogue.[18] This catalogue periodically updates directly to the Brave browser.[19] Rather than having the user send data to data centers, Brave keeps all the data stored locally on the user’s device; no third parties ever gain access to user data.[20] Should the user opt into advertisements, this data matches with the catalogue, and displays advertisements on the publisher’s website.[21]

Brave takes a small cut of the BAT from the transaction.[22] The content creators and publishers also take a cut. And finally, the user takes a cut as well.[23] By sharing the value of the user’s attention between the content creators, publishers, and users themselves, Brave creates a system that allows users to protect their data without obstructing the advertisement marketplace that keeps the internet free.[24]

If successful, Brave’s impact on internet-based services and advertisements could be enormous. However, the effects rippling from a successful large-scale implementation of an Ethereum-based cryptocurrency is perhaps even more intriguing. By cutting out middlemen and contracting entirely on the users’ devices, BAT highlights Ethereum’s potential as a means to form contracts automatically on a massive scale. If BAT can accrue value based on the platform itself, not merely its speculative value as a cryptocurrency, then the long-awaited blockchain revolution may arrive at last.

 

[1] See Andrew Rossow, How Blockchain Technology Can Help Power a New 21st Century Metropolis, Forbes (Sep. 19, 2018, 10:37 am), https://www.forbes.com/sites/andrewrossow/2018/09/19/how-blockchain-technology-can-help-power-a-new-21st-century-metropolis/#560242167d65, Joichi Ito, Neha Narula, Robleh Ali, The Blockchain Will Do to the Financial System What the Internet Did to Media, Harvard Business Rev. (March 8, 2017) https://hbr.org/2017/03/the-blockchain-will-do-to-banks-and-law-firms-what-the-internet-did-to-media.

[2] See Nathaniel Popper, Su-Hyun Lee, After the Boom: Hard Lessons for Cryptocurrency Investors, The New York Times (Aug. 20, 2018) https://www.nytimes.com/2018/08/20/technology/cryptocurrency-investor-losses.html.

[3] Alphabet Announces Second Quarter 2018 Results, Alphabet Inc. (June 30, 2018)

https://abc.xyz/investor/pdf/2018Q2_alphabet_earnings_release.pdf.

[4] See Google Search Statistics, Internet Live Stats http://www.internetlivestats.com/google-search-statistics/, Anuck Jesdanun, Ryan Nakashima, Don’t Trust the Tech Giants? You Likely Rely On Them Anyway, (June 11, 2018) https://phys.org/news/2018-06-dont-tech-giants.html; Robert Klara, How Bad Is It for Google and Facebook that Consumers Don’t Trust Them?, (Jan. 21, 2016) https://www.adweek.com/brand-marketing/how-big-problem-it-google-and-facebook-consumers-don-t-trust-them-169108/.

[5] See Making It Easy to Understand What Data We Collect and Why, Google https://safety.google/privacy/data/, Ben Popken, Google Sells the Future Powered By Your Personal Data, (May 10, 2018) https://www.nbcnews.com/tech/tech-news/google-sells-future-powered-your-personal-data-n870501.

[6] See Google Data Center FAQ, (Mar. 16, 2017) https://www.datacenterknowledge.com/archives/2017/03/16/google-data-center-faq.

[7] See We Do Not Sell Your Personal Information to Anyone, Google https://safety.google/privacy/ads-and-data/.

[8] See Brave Software,  Basic Attention Token (BAT): Blockchain Digital Based Advertising, 5 (2018) https://basicattentiontoken.org/BasicAttentionTokenWhitePaper-4.pdf.

[9] See Steve Campbell, How Do Social Networks Make Money, MSNBC (April 30, 2010) https://www.makeuseof.com/tag/how-do-social-networks-make-money-case-wondering/.

[10] See Interview by Chris Hayes and Kara Swisher with Tim Cook, CEO, Apple, in New York, N.Y. (Mar. 27, 2018) https://www.recode.net/2018/4/6/17206532/transcript-interview-apple-tim-cook-msnbc-kara-swisher.

[11] Alyssa Newcomb, Mark Zuckerberg Fires Back at Apple CEO’s ‘Extremely Glib’ Comment, NBC (Apr. 2, 2018) https://www.nbcnews.com/tech/tech-news/mark-zuckerberg-fires-back-apple-ceo-s-extremely-glib-comment-n862056.

[12] See Sebastian Anthony, Mozilla co-Founder Unveils Brave, a Browser that Blocks Ads by Default, Ars Technica (Jan. 21, 2016. 9:07 am) https://arstechnica.com/information-technology/2016/01/mozilla-co-founder-unveils-brave-a-web-browser-that-blocks-ads-by-default/.

[13] See Brave Software Raises $2.5 Million and Expands Technical Team, The Business Journals (Nov. 17, 2015) https://www.bizjournals.com/prnewswire/press_releases/2015/11/17/SF59778.

[14] See John Corpuz, Best Ad Blockers and Privacy Extensions, Tom’s Guide (Jan. 12, 2018) https://www.tomsguide.com/us/pictures-story/565-best-adblockers-privacy-extensions.html.

[15] See Brave Software, supra note 8, at 1.

[16] See id.

[17] See Jennie, Understanding Basic Attention Token (BAT): An Easy Introduction, Medium (December 4, 2017) https://medium.com/@CryptoJennie/understanding-basic-attention-token-bat-an-easy-introduction-42633b3a1ba.

[18] See id.

[19] See id.

[20] See id.

[21] See id.

[22] See id.

[23] See id.

[24] See id.

Image Source: https://commons.wikimedia.org/wiki/File:Basic_Attention_Token_Icon.svg

Ballot Selfies – The Next Generation’s Version of the “I Voted” Sticker

By: Alexis George

As yet another election cycle approaches one seemingly harmless practice is still widely debated in the United States – should voters be able to take photos of themselves, or selfies, while carrying out their civic duty? In the age of widespread social media use it’s not difficult to see how this question has become more widespread over recent years. Nevertheless, unbeknownst to many voters, taking a selfie while in a voting booth or with your completed ballot is actually illegal in many states.

One of the best examples of this little known fact playing out in real life is the case of Justin Timberlake. Timberlake took a photo of himself with his filled out ballot for the 2016 Presidential election and posted it on social media but did not find out until afterwards that in his home state of Tennessee, it is actually a misdemeanor offense to take ballot selfies.[1] In fact, in Tennessee the misdemeanor offense of taking photos at polling places carries the potential punishment of thirty days in jail and a fifty dollar fine.[2] The issue of taking photos at polling places has come up in other states as well as at least five courts have ruled on the issue resulting in a circuit split between the First and Sixth Circuits over whether the practice should or should not be legal.[3]

Further, it was determined in November 2016 that as many at least 17 states had laws against ballot selfies while in only 19 states was taking a ballot selfie legal or not banned.[4] In the remaining states laws are unclear as to whether taking photos at polling places is or is not legal.[5] In Oklahoma for example, an official told the Associated Press that the law “appeared to ban” ballot selfies but that the penalties for breaking the law by posting a photo taken at a polling place “aren’t clear.”[6]

One of the main reasons for the disagreement among states over the legality of ballot selfies is the issue of balancing freedom of speech against the integrity of the voting process.[7] Jeffrey Hermes, deputy director of the Media Law Resource Center described the problem as “a very unusual case” as it is usually considered a violation of the First Amendment to ban political speech, which essentially is what taking a ballot selfie is.[8]

Many proponents of laws banning taking photos inside polling places or with completed ballots argue that these laws need to be upheld because they protect voter privacy.[9] Proponents on this side argue that the laws not only protect voters’ integrity, but also protect voters from being intimidated or induced.[10] The idea here is that if ballot selfies are allowed it could encourage “vote buying,” or the practice of voters being rewarded for providing proof that they voted for a certain candidate.[11] This argument makes it difficult for many states to come to a consensus about whether to make ballot selfies legal or not as voter privacy has long been a central concern of state legislatures—especially those which have enacted laws banning ballot selfies.

On the other side of the issue there is also a very well-founded concern. Proponents of making ballot selfies legal often argue that the selfies are protected by the First Amendment’s freedom of speech provision because they represent political speech.[12] Further, protecting political speech has consistently been an important theme throughout Supreme Court precedent.[13] Another argument to legalize ballot selfies has been that it encourages more civic engagement among younger generations and essentially makes the whole process of voting more fun. In fact, in an amicus brief urging the legalization of ballot selfies in New Hampshire, Snapchat, a popular communications app, argued that selfies are how young voters engage in the political process.[14]

Even today it is not clear whether an overall move towards the legalization of ballot selfies will take place. Given the popularity of technology and social media in general, the issue has garnered more support over the years. Nevertheless, even leading up to the approaching midterm elections a number of state legislatures have still decided against making ballot selfies legal.

 

[1] Roy S. Gutterman, Ballot Selfies: New Political Speech in Search of First Amendment Protection in Social Media, 8 Wake Forest J. of L. & Pol’y 211 (2018).

[2] See id.

[3] See id.

[4] Jefferson Graham, Want to take a ‘ballot selfie’? Here’s where it’s legal, and not, USA TODAY (Nov. 6, 2016, 10:01 AM), https://www.usatoday.com/story/tech/news/2016/11/06/ballot-selfie-beware-s-often-illegal-despite-flurry-late-attempts-change/93299316/.

[5] See id.

[6] Abby Ohlheiser, Yes, your ballot selfie still might be illegal. Sorry., Wash. Post (Nov. 8, 2016), https://www.washingtonpost.com/news/the-intersect/wp/2016/10/26/yes-your-ballot-selfie-still-might-be-illegal-sorry/?utm_term=.381c05e8dc24.

[7] See id.

[8] See id.

[9] Katie Reilly, Here’s Where You’re Allowed to Take a Selfie While Voting, TIME (Oct. 26, 2016), http://time.com/4546190/2016-presidential-election-ballot-selfies/.

[10] Katie Rogers, Can You Take a Voting Selfie? States Wage Legal Battles Days Before Election, N.Y. Times (Nov. 2, 2016), https://www.nytimes.com/2016/11/03/us/politics/voting-selfie.html.

[11] Graham, supra note 4.

[12] Daniel A. Horwitz, A Picture’s Worth a Thousand Words: Why Ballot Selfies are Protected by the First Amendment 18 SMU Sci. & Tech. L. Rev. 247, 253 (2015).

[13] Gutterman, supra note 1, at 229.

[14] Graham, supra note 4.

Image Source: https://www.texastribune.org/2016/10/26/texplainer-can-i-take-ballot-selfie-texas/

DNA Can Be Used to Send You to Prison, and Not Just Your Own

By: Jordan Carrier

More than 15 million people have had their DNA analyzed by companies like 23andMe and Ancestry following a boom in testing during 2017.[1]  This increased interest in gene testing has been attributed to companies’ advertising of genealogical testing.[2] An initial consumer concern, and one that has persisted as more consumers have their DNA analyzed, is the loss of control over genetic information and the associated risks.[3] For example, the Chief Privacy Officer of 23andMe stated in 2016 that U.S. regulatory compliance “requires that raw information be held for a minimum of 10 years.”[4] This means that even if customers close their 23andMe accounts, the information is still held by the company.[5] This information can be used for research purposes by drug companies, can lead to lack of insurance coverage based on genetic predispositions, and can be used by law enforcement.[6] While testing companies are adamant that genetic information is deidentified and law enforcement efforts will be resisted at all costs, it is possible for information to be reidentified and federal government agencies have already begun subpoenaing these companies.[7]

The risks associated with genetic data not only affect those who make the decision to send samples to testing companies but have potential ramifications for family members as well.[8] Perhaps most notably, the arrest of the man suspected of being the Golden State killer occurred as a result of DNA from the crime scene matching to one of Joseph James DeAngelo’s relatives on an open source DNA and Genealogy Research site.[9] Between 1976 and 1986, the Sacramento, California area was plagued by a series of rapes and murders and the killer was nicknamed “The Golden State Killer.”[10] The crimes stopped and no arrests were made in the following 32 years.[11] In April of 2018, law enforcement officers created a genome-wide profile and uploaded it to GEDmatch, a database which contains approximately one million DNA profiles.[12] The site identified a third cousin,[13] and officers created a family tree for the match and narrowed family members down by age, gender, location, and other characteristics to determine a single suspect.[14] Between April and August of 2018, 13 cases have reportedly been solved through the use of similar long range familial searches.[15]

In response to the use of long range familial searches in criminal cases, researches sought out to determine what percent of individuals of European descent could be identified by a third cousin or closer match.[16] Using the same genealogy research site used to find a suspect in the Golden State Killer case, which consists of 1.28 million individuals who had their DNA tested with consumer genomics and demographic identifiers, the study concluded that nearly 60% of long-range familial searches can identify a third cousin or a closer relative, the same level of connection that lead to Joseph DeAngelo’s arrest.[17] To test these results, the DNA of an individual, whose identity was known but was treated as unknown for the purpose of the test, was used.[18] Within one hour of uploading the sample to GEDmatch, an ancestral couple from 4-6 generations ago had been identified.[19] By the end of the day, the target person had been identified and confirmed.[20]

As the number of consumers who have sent their DNA to sequencing companies continues to increase, so will the percent of individuals who can be matched to family members through the databases. It is estimated that if a random sample of 2% of a given population’s DNA is analyzed and put into a database, then 90% of searches would produce a family member.[21] While current databases are not representative samples, with 75% of people in the GEDmatch database being of European descent,[22] the ramifications are still very real.

Ultimately, it is up to consumers to determine if participating in a genetic testing services is something that they are comfortable with,[23] and the use of genetic information in the criminal investigation context may affect consumers’ comfort levels moving forward.

 

[1] See Y. Erlich et al., Identity Inference of Genomic Data Using Long-Range Familial Searches, Science Mag. (Oct. 11, 2018), http://science.sciencemag.org/content/sci/early/2018/10/10/science.aau4832.full.pdf.

[2]See Antonio Regalado, 2017 Was the Year Consumer DNA Testing Blew Up, MIT Technology Review, (Feb. 12, 2018), https://www.technologyreview.com/s/610233/2017-was-the-year-consumer-dna-testing-blew-up/.

[3]See Patrick Cain, Privacy Risks Lurk in DNA Tests, Experts Warn, Global News (Aug. 15, 2018 8:00 AM EDT), https://globalnews.ca/news/2879276/privacy-risks-lurk-in-dna-tests-experts-warn/.

[4] Id.

[5] See id.

[6] See Eric Rosenbaum, 5 Biggest Risks of Sharing Your DNA with Consumer Genetic-Testing Companies, CNBC (June 16, 2018 9:00 AM EDT), https://www.cnbc.com/2018/06/16/5-biggest-risks-of-sharing-dna-with-consumer-genetic-testing-companies.html.

[7] See id.

[8] See Cyrus Farivar, GEDmatch, a Tiny GNA Analysis Firm, was Key for Golden State Killer Case, ARS Technica (Apr. 27, 2018 10:25 AM EDT), https://arstechnica.com/tech-policy/2018/04/gedmatch-a-tiny-dna-analysis-firm-was-key-for-golden-state-killer-case/.

[9]See id.

[10] See Laurel Wamsley, After Arrest of Suspected Golden State Killer, Details of His Life Emerge, NPR (Apr. 26, 2018 3:51 PM ET), https://www.npr.org/sections/thetwo-way/2018/04/26/606060349/after-arrest-of-suspected-golden-state-killer-details-of-his-life-emerge.

[11]See Emily Shapiro & Jenna Harrison, Suspected ‘Golden State Killer,’ Accused of Murders Across California, to Face Trial in Sacramento: Officials, ABC News (Aug. 21, 2018 2:20 PM ET), https://abcnews.go.com/US/suspected-golden-state-killer-accused-murders-california-face/story?id=57292961.

[12] See Y. Erlich et al., Identity Inference of Genomic Data Using Long-Range Familial Searches, Science Mag. (Oct. 11, 2018), http://science.sciencemag.org/content/sci/early/2018/10/10/science.aau4832.full.pdf.

[13]See Y. Erlich et al., Identity Inference of Genomic Data Using Long-Range Familial Searches, Science Mag. (Oct. 11, 2018), http://science.sciencemag.org/content/sci/early/2018/10/10/science.aau4832.full.pdf.

[14] See Emily Shapiro & Jenna Harrison, Suspected ‘Golden State Killer,’ Accused of Murders Across California, to Face Trial in Sacramento: Officials, ABC News (Aug. 21, 2018 2:20 PM ET), https://abcnews.go.com/US/suspected-golden-state-killer-accused-murders-california-face/story?id=57292961.

[15]See Y. Erlich et al., Identity Inference of Genomic Data Using Long-Range Familial Searches, Science Mag. (Oct. 11, 2018), http://science.sciencemag.org/content/sci/early/2018/10/10/science.aau4832.full.pdf.

[16] See id.

[17] See id; See also Cyrus Farivar, GEDmatch, a Tiny GNA Analysis Firm, was Key for Golden State Killer Case, ARS Technica (Apr. 27, 2018 10:25 AM EDT), https://arstechnica.com/tech-policy/2018/04/gedmatch-a-tiny-dna-analysis-firm-was-key-for-golden-state-killer-case/.

[18] See id.

[19] See id.

[20] See id.

[21] See Cyrus Farivar, GEDmatch, a Tiny GNA Analysis Firm, was Key for Golden State Killer Case, ARS Technica (Apr. 27, 2018 10:25 AM EDT), https://arstechnica.com/tech-policy/2018/04/gedmatch-a-tiny-dna-analysis-firm-was-key-for-golden-state-killer-case/.

[22] See id.

[23] See Patrick Cain, Privacy Risks Lurk in DNA Tests, Experts Warn, Global News (Aug. 15, 2018 8:00 AM EDT), https://globalnews.ca/news/2879276/privacy-risks-lurk-in-dna-tests-experts-warn/.

Image Source: https://www.smarterhobby.com/genealogy/best-dna-test/

The Rise of Cryptocurrency and the Challenge it Presents to the Law

By Florian Uffer

The recent rise of cryptocurrency has taken the financial universe by storm and left a significant level of uncertainty in the legal world. Due to its revolutionary concept and technologically advanced nature, relevant U.S. regulatory agencies have found it difficult to rightfully assert jurisdiction over it.

Cryptocurrency is an electronic cash system which does not rely on banks or third parties to verify transactions.[1]Rather, transactions are recorded on a blockchain, a digital ledger.[2]This blockchain is used to confirm upcoming transactions, thus enabling direct peer-to-peer payments.[3]It follows that,due to the bypass of financial intermediaries, cryptocurrency transactions are significantly quicker and cheaper than their financial counterparts.

Government currency is regulated by the Department of the Treasury and by the Federal Reserve, commodities by the Commodity Futures Trading Commission (“CFTC”), and stocks and securities by the Securities and Exchange Commission (“SEC”).[4]Cryptocurrency, however, lacks a single regulatory body.[5]The main hurdle facing regulators consists of a difficulty in properly classifying the range of cryptocurrencies that exist.[6]

In determining whether a certain asset classifies as a security, the SEC still uses a yardstick known as the Howey Test.[7]In SEC v. W.J. Howey Co., the Supreme Court elucidated that a transaction amounts to an investment contract[8]if (1) it is an investment of money, (2) the investment of money is in a common enterprise, (3) there is an expectation of profit, and (4) any profit comes from the efforts of a promoter or third party.[9]

In a hearing before the House Committee on Appropriations, SEC Chairman Jay Clayton slightly clarified the agency’s position on cryptocurrency. The SEC distinguishes between cryptocurrencies as a medium of exchange, such as Bitcoin or other alternative coins, and tokens.[10]According to Clayton, if a cryptocurrency is used as a medium of exchange, a replacement for currency, then it is likely not a security, and thus not within the jurisdiction of the SEC.[11]Contrariwise, tokens, generally used to finance projects, mainly fall within the realm of securities.[12]This financial area, according to Clayton, has not grown with the usual “respect” for the law which is expected to be seen in financial markets.[13]Although Clayton considers the SEC to be the proper regulator of tokens, the question as to the proper regulator for cryptocurrency as a medium of exchange remains unclear.[14]A main reason for this uncertainty consists of the fact that U.S. laws did not expect non-sovereign-backed currencies to appear.[15]

There consequently remains an issue as to the governance of cryptocurrency as a medium of exchange. Which agency will govern the matter is still ambiguous, and Clayton stated that the SEC is “not going to do any violence to the traditional definition of a security that has worked for a long time[,]” thus clarifying that the SEC would not change its approach to obtain jurisdiction over the entirety of cryptocurrency.[16]

 

[1]Adam Levy, What is Cryptocurrency?, The Motley Fool(Mar. 11, 2018, 7:15 AM), https://www.fool.com/investing/2018/03/11/what-is-cryptocurrency.aspx.

[2]See id.

[3]See id.

[4]See Stephen J. Obie & Mark W. Rasmussen,How Regulation Could Help Cryptocurrencies Grow, Harvard Business Review(July 17, 2018), https://hbr.org/2018/07/how-regulation-could-help-cryptocurrencies-grow.

[5]See id.

[6]See Daniel Araya, The Challenges of Cryptocurrency Regulation,The Regulatory Interview(Oct. 9, 2018), https://www.theregreview.org/2018/10/09/araya-challenges-cryptocurrency-regulation/.

[7]SeeKate Rooney, Congress Members Ask SEC Chairman for Clarity on Cryptocurrency Regulation, CNBC(Sept. 28, 2018, 10:26 AM), https://www.cnbc.com/2018/09/28/congress-ask-sec-chairman-for-clarity-on-cryptocurrency-regulation.html.

[8]“The term ‘security’ means any … investment contract …” Security Exchange Act of 1934, 15 U.S.C. § 78(c).

[9]See SEC v. W.J. Howey Co., 328 U.S. 293, 298 (1946).

[10]See FY 2019 U.S. Securities and Exchange Commission: Hearing Before the Comm. on Appropriations(2018) (statement of Jay Clayton, Chairman, Securities and Exchange Commission).  

[11]See id.

[12]See id.

[13]Id.

[14]See id.

[15]See id.

[16]See Kate Rooney, SEC Chief Says Agency Won’t Change Securities Laws to Cater to Cryptocurrencies, CNBC(June 6, 2018), https://www.cnbc.com/2018/06/06/sec-chairman-clayton-says-agency-wont-change-definition-of-a-security.html.

Image Source: https://bitcoinexchangeguide.com/cryptocurrency-regulation/

Is “Don’t Bet On It” Dead? How the NCAA is Responding to Legalized Sports Wagering After PASPA Declared Unconstitutional by the Supreme Court

By: Alexis George

The NCAA, or National Collegiate Athletic Association, has long held that sports wagering does not have a place in college sports. According to the Association’s national office, it opposed every form of sports wagering, whether legal or illegal, because of its “potential to undermine the integrity of sports contests and jeopardize the welfare of student-athletes and the intercollegiate athletics community.” [1] To further enforce this ideal, the NCAA launched a campaign called “Don’t Bet On It” which employs the use of advertisements, studies, and other resources to educate student-athletes and coaches on what is and what is not permitted according to NCAA rules regarding sports wagering.[2]  Furthermore, the NCAA has been conducting its own studies every four years since 2004 to research student-athlete gambling behavior.[3]  The NCAA has said that the purpose of these studies is to study the behavior of student-athletes – including “behaviors that could put student-athletes at risk.”[4] Up until recently the NCAA has also had the support of federal legislation to help restrict sports wagering.

Federal regulation of sports wagering began in 1961 when three laws were enacted to extend federal regulation of sports gambling.[5] These laws made sports gambling effectively illegal in the United States.[6] The first was the Wire Communications Act (WCA). The WCA made it illegal not only to use phones to send or receive bets or provide gambling information, but also made it illegal to place wagers on any sporting event using any form of wire communication.[7] This was followed by the Transportation in Aid of Racketeering Enterprises Act which essentially extended the prohibitions of the WCA to any form of travel or mail.[8] The Interstate Transportation of Wagering Paraphernalia Act was enacted thereafter and made it illegal to transport wagering pool paraphernalia related to sporting events.[9] Congress continued to implement various initiatives and other forms of federal legislation to combat and prevent sports gambling in the years afterwards until finally enacting the Professional and Amateur Sports Protection Act (PASPA) in 1992.[10]

PASPA was enacted by Congress to prohibit any person or government entity from creating or authorizing wagering activities that involved professional or amateur athletics.[11] The Act specifically made it unlawful for individuals and government entities to sponsor, operate, advertise, promote, license, or authorize by law any lottery, sweepstakes, betting, gambling, or wagering scheme that was directly or indirectly based on competitive sporting games in which professional or amateur athletes participated.[12] The Act therefore was very much in alignment with the NCAA’s stance on sports wagering. As a result, it meant that not only would student-athletes and coaches be violating NCAA bylaws if they participated in sports wagering, but would also be violating federal law.

Nevertheless, PASPA and the NCAA’s stance on sports wagering has stood in stark contrast to the American public’s admiration of the practice in recent years. In fact, in the months leading up to the Supreme Court’s vote to overturn PASPA, a poll conducted by the University of Massachusetts Lowell and The Washington Post indicated that 55% of Americans approved of legalizing sports wagering on professional sports.[13] Further, in a survey conducted by ESPN, it was found that 118 million Americans (or about 38% of the entire population at the time) admitted to betting on sports in 2008.[14] Another study interestingly found that Americans in fact spent more money gambling on the NCAA Tournament bracket in a week than was spent on the entire two-year 2012 presidential election campaign.[15] This means that even while PASPA was still recognized law, American engagement in sports wagering grew extensively. This is also evidenced by the continued popularity of online sports wagering and fantasy league play.[16]

Given the popularity of sports wagering in the United States and the fact that PASPA has now been overturned, the NCAA has had to make some decisions regarding how to best handle the situation, especially since the organization remains steadfastly against sports wagering among student-athletes and coaches.

One such way that the NCAA has responded to the Supreme Court’s ruling on PASPA was by issuing a statement in support of the federal regulation and even deciding to allow championships in states that choose to permit sports wagering.[17] The previous policy of the NCAA prohibited any NCAA championship competition from occurring in any state that allowed sports wagering.[18] The NCAA has also decided to do a study on how sports wagering could likely impact college sports in order to “preserve the integrity of college athletics.”[19] In order to monitor the potential impact, the NCAA national office recently decided to employ the use of technology so that it can better monitor sports wagering in the global betting market.[20] The system would provide the NCAA with alerts if suspicious wagering activities involving NCAA competitions are identified and therefore better enable the NCAA to notify member schools, conferences, and even law enforcement of suspicious activities.[21]

Despite the fact that legalized sports gambling continues to expand in the United States following the Supreme Court’s ruling, the NCAA has chosen to stick to its belief that sports wagering is inherently in opposition to what organization stands for. For example, despite the significant financial gain the NCAA stood to gain, the Association decided not to accept any profits from sports wagering.[22] The NCAA national office has said that although it recognizes that it will cost money to monitor sports wagering, it did not feel it was appropriate to access the revenue generated by sports wagering given that the organization has chosen to remain opposed to the practice.[23]

As a result, despite the Supreme Court’s ruling to overturn PASPA, the NCAA remains opposed to the practice of sports wagering and continues to advocate against student-athlete and coach involvement in the practice. Additionally, the “Don’t Bet On It” campaign continues to live on as under NCAA bylaws sports wagering by student-athletes and coaches is still strictly prohibited even in states that have adopted legalized sports wagering.

 

[1] NCAA, Sports Wagering, http://www.ncaa.org/enforcement/sports-wagering.

[2] See Id.

[3] NCAA, NCAA National Study on Collegiate Wagering, http://www.ncaa.org/about/resources/research/ncaa-national-study-collegiate-wagering.

[4] See id.

[5] Jeffrey Roeske, Doubling Down on Sports Gambling: Why PASPA Would Fail A Constitutional Challenge, 24 Marq. Sports L. Rev. 463, 465-466 (2014).

[6] See id at 466.

[7] See id.

[8] See id.

[9] See id.

[10] See id.

[11] See id.

[12] 28 U.S.C. § 3702 (1992).

[13] Rick Maese & Emily Guskin, Poll: For first time, majority of Americans approve of legalizing sports betting, Wash. Post (Sept. 26, 2017), https://www.washingtonpost.com/sports/poll-for-first-time-majority-of-americans-approve-of-legalizing-sports-betting/2017/09/26/a18b97ca-a226-11e7-b14f-f41773cd5a14_story.html?utm_term=.401e9951b790.

[14] Darren Heitner, The Hyper Growth Of Daily Fantasy Sports Is Going To Change Our Culture And Our Laws, Forbes (Sept. 16, 2015), https://www.forbes.com/sites/darrenheitner/2015/09/16/the-hyper-growth-of-daily-fantasy-sports-is-going-to-change-our-culture-and-our-laws/#56148f025aca.

[15] Chris Cillizza, Americans spend more money on NCAA Tournament betting than on presidential elections. By a lot. Wash. Post (Mar. 21, 2015), https://www.washingtonpost.com/news/the-fix/wp/2015/03/21/americans-spends-more-money-on-ncaa-tournament-betting-than-on-presidential-elections-by-a-lot/.

[16] See id.

[17] Emily James, NCAA supports federal sports wagering regulation, NCAA (May 17, 2018, 10:00 AM), http://www.ncaa.org/about/resources/media-center/news/ncaa-supports-federal-sports-wagering-regulation.

[18] See id.

[19] Matt Rybaltowski, As College Football Nears, NCAA Launches Study On Sports Gambling Ramifications, Forbes (July 27, 2018, 6:00 AM), https://www.forbes.com/sites/mattrybaltowski/2018/07/27/as-college-football-nears-ncaa-launches-study-on-sports-gambling-ramifications/#7673a8922d0d.

[20] NCAA to use technology services to monitor sports wagering, NCAA (Sept. 4, 2018, 5:00 PM), http://www.ncaa.org/about/resources/media-center/news/ncaa-use-technology-services-monitor-sports-wagering.

[21] See id.

[22] Steve Berkowitz, NCAA will not seek a cut from sports betting, association executive says, USA TODAY (June 28, 2018, 4:43 PM), https://www.usatoday.com/story/sports/2018/06/28/ncaa-not-seek-revenues-sports-betting/743201002/.

[23] See id.

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