By Eleni Poulos

 

Technology innovations, generally, can have a large impact on the law field because it requires continuous and, at times, significant changes in how attorneys conduct their practice.[1] These changes can be difficult for attorneys to implement and keep up with, especially if attorneys are wary of embracing the innovations to their field.[2] After all, these innovations often require a significant investment of an attorney’s time and money.[3]But even more specifically, how do these changes effect in-house counsel? Working in-house as general counsel for any company or organization already requires any attorney to know the basics of most legal specialties, like employment law, contract law, and regulatory compliance, to name a few.[4]

 

Each day brings new challenges and different responsibilities—especially when tech innovation is constantly occurring and implementation into every day work is multi-faceted.[5] Adding another layer to the intricacies of tech innovation is what happens when the business is tech focused, and the law hasn’t quite caught up.[6]

 

Enthralled by the fast past innovation in technology are general counsels of companies within the tech field.[7]One reason for this is because “technology is moving so quickly that it’s outpacing social dialogue and outpacing regulation.”[8] In other words, state and federal regulations have not laid out much of any kind of guidelines on how a tech company should conduct their business or what technology use is, or is not, permitted.[9] A notable example of new and evolving technological advancements is genetic-testing, like the services provided at 23andMe.[10] In a recent panel with several large tech companies, the company’s chief legal and regulatory officer of 23andME, Kathy Hibbs, discussed the difficulties of handling a field with little regulation—including customer privacy and computer facial recognition and bias.[11] In addition, she mentioned how crucial it was that the company take  the privacy of its customers seriously—as it was “probably the most important issue to customers.”[12] This effect of constant innovation is felt around the world and in different sectors, too.[13] For example, in the manufacturing field these innovations “are not only an opportunity—they’re a considerable risk.”[14]

 

Countries around the world consider cybersecurity as the biggest risk to general counsels because as more things become tech-based the ability to steal others research and products.[15] General counsels face several other issues brought on by technology innovation, such as digitalizing the supply chain, which produced more cyber security risk, data and information protection, and general compliance.[16] According to a survey conducted by Forbes, the general counsel’s believe these difficulties come from “keep[ing] tabs on the safeguarding and whereabouts of data.”[17]

 

Overall, as the world continues to make technological advancement after technological advancement, general counsels in all fields, and particularly in the tech field, will have to continue to make evolve with the changing technology.[18] This evolution requires attorneys to change the way they work, and to adapt and think ahead to what legislation and regulations will look like as more technology is created.[19]

 

[1] The Unexpected Challenges to Adopting New Technology in Your Law Firm, LexisNexis (Apr. 16, 2020) https://www.lexisnexis.com/community/lexis-legal-advantage/b/insights/posts/the-unexpected-challenges-to-adopting-new-technology-in-your-law-firm.

[2] Id.

[3] Id.

[4] Innovation Raises Novel Legal Issues for Tech General Counsels, A.B.A. (Aug. 19, 2019)https://www.americanbar.org/news/abanews/aba-news-archives/2019/08/innovation-raises-novel-legal-issues-for-tech-general-counsels/.

[5] Lexis

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Id.

[13] Hugo Moreno, General Counsel and Technology Risks, Forbes (Oct. 30, 2017) https://www.forbes.com/sites/forbesinsights/2017/10/30/general-counsel-and-technology-risks/?sh=19b24818f95c.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] See supra note 1.

[19] Id.

Image Source: “Secure Data – Cyber Security -“ by perspec_photo88 is licensed under CC BY-SA 2.0, https://search.creativecommons.org/photos/5e907343-7c47-49ce-acd7-f93bf877316d.

By Logan Childress

 

In normal years, there many accessible sources of capital for small business owners. But, as we all know, 2020 and 2021 have been anything but normal. And the pandemic is continuing to have far-reaching effects. Small businesses are continuing to feel the pressures of closures and safety measures intended to flatten the curve and slow the spread of COVID-19.[1] And, making matters worse, small businesses are finding it more complicated to raise funds due to uncertainty and volatility resulting from the pandemic.[2] Thankfully, in an attempt to address some of the challenges faced by small businesses, the Commission adopted temporary final rules on May 4, 2020, to allow quicker access to urgently needed capital in a timely and cost-effective manner.[3] The temporary final rules provided “flexibility for eligible issuers to assess interest in a Regulation Crowdfunding offering before preparation of full offering materials, and then once launched, to close such an offering and have access to funds sooner than would be possible in the absence of the temporary relief.”[4]

 

What is Regulation Crowdfunding?

 

Regulation Crowdfunding is a relatively new funding method.[5] It allows the general public to invest during the early stages of a business without having to be an accredited investor, which is a usual requirement imposed by other private placement exemptions under the United States securities laws.[6] Because the requirement of being an accredited investor is relaxed, the SEC attempts to protect investors by limiting the amount of funds that can be raised and invested through Regulation Crowdfunding to $1.07 million during a 12-month period.[7] Further, each Regulation Crowdfunding offering must be exclusively conducted on an online platform.[8] And the intermediary operating the online platform must be a broker-dealer or a funding portal that is registered with the SEC and FINRA.[9] Finally, in normal years, there are certain disclosure and reporting requirements for the issuers.[10] Pre-COVID-19, an issuer that offers securities through Regulation Crowdfunding must file with the SEC an offering statement on the Form C.[11] Further, Form C requires disclosure of certain business and financial information of the issuer with the initial Form C filing.[12]

 

What is the Temporary Relief?

 

The Commission temporarily amended Rules 100, 201, 301, 303, and 304 of Regulation Crowdfunding and Form C under the authority found in the Securities Act.[13] This generally means that the SEC’s temporary rule relaxed certain financial information and timing requirements for these offerings.[14] The temporary rules allow an issuer to omit the financial information required in its initial Form C filing with the SEC (to the extent that such information is not available at the time of its initial filing) and commence its offering.[15] However, please note, that the financial information is required to be included in a subsequent amendment to the Form C filing and provided to investors and the intermediary before the intermediary accepts any investment commitments in the offering.[16]

 

Additionally, the intermediary is not required to comply with the usual 21-day requirement imposed on Regulation Crowdfunding offerings.[17] Instead, the intermediary has to make the required issuer information publicly available on the intermediary’s online platform before any securities are sold in the offering, but only if the issuer has provided the required financial information.[18]

 

Are There Conditions to the Temporary Relief?

 

Yes. To rely on the temporary relief, a company must meet the existing eligibility requirements for Regulation Crowdfunding and:

1. The issuer cannot have been organized and cannot have been operating for less than 6-months before the start of the offering; and
2. An issuer that previously sold securities in a regulation crowdfunding offering must have complied with the requirements in 15 U.S.C. 77d-1(b) (“Section 4A(b)”) of the Securities Act and the related rules.[19]

 

There is also a requirement to provide “clear disclosure to investors with respect to the issuer’s reliance on such relief.” [20] In other words, this means that an issuer relying on the temporary relief must provide prominent disclosures in its Form C that the offering is being conducted on an expedited basis due to circumstances relating to the COVID-19 pandemic and under the SEC’s temporary regulatory relief.[21]

 

Of course, this blog post is only a summary of some important features of Regulation Crowdfunding and the temporary relief. If you are a small business owner considering regulation crowdfunding, the temporary final rules apply to securities offerings initiated under Regulation Crowdfunding until February 28, 2021.[22] Regulation crowdfunding will still be available after February 28, but all requirements will be back in place.[23]

 

[1] Temporary Amendments to Regulation Crowdfunding; Extension, 85 Fed. Reg. 54,483, 54,483 (Aug. 31, 2020); see, e.g., MetLife & U.S. Chamber of Commerce, Special Report on Coronavirus and Small Business (April 3, 2020).

[2] See Jamie Herzlich, Small Business: COVID-19 Makes Raising Capital Harder, Newsday (June 28, 2020, 6:00 AM), https://www.newsday.com/business/jamie-herzlich-angel-investors-covid-19-1.46108235.

[3] Temporary Amendments to Regulation Crowdfunding; Extension, 85 Fed. Reg. at 54,484.

[4] Id.

[5] Max Crawford, Regulation Crowdfunding 101 For Entrepreneurs, StartEngine (Jan. 24, 2019),https://www.startengine.com/blog/regulation-crowdfunding-101-for-entrepreneurs.

[6] The SEC Has Provided Temporary COVID-19 Relief from Certain Requirements of Regulation Crowdfunding, but Will It Make Securities-Based Crowdfunding a More Attractive Fundraising Option?, Black Rome (May 26, 2020), https://www.blankrome.com/publications/sec-has-provided-temporary-covid-19-relief-certain-requirements-regulation.

[7] Id.; Crawford, supra note 5.

[8] Regulation Crowdfunding: A Small Entity Compliance Guide for Issuers, SEC (Apr. 5, 2017), https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm.

[9] Id.

[10] The SEC Has Provided Temporary COVID-19 Relief from Certain Requirements of Regulation Crowdfunding, but Will It Make Securities-Based Crowdfunding a More Attractive Fundraising Option?, Black Rome (May 26, 2020), https://www.blankrome.com/publications/sec-has-provided-temporary-covid-19-relief-certain-requirements-regulation.

[11] Id.

[12] Id.

[13] Temporary Amendments to Regulation Crowdfunding; Extension, 85 Fed. Reg. at 54,490.

[14] See Press Release, SEC, SEC Provides Temporary, Conditional Relief to Allow Small Businesses to Pursue Expedited Crowdfunding Offerings (May 4, 2020).

[15] The SEC Has Provided Temporary COVID-19 Relief from Certain Requirements of Regulation Crowdfunding, but Will It Make Securities-Based Crowdfunding a More Attractive Fundraising Option?, Black Rome (May 26, 2020), https://www.blankrome.com/publications/sec-has-provided-temporary-covid-19-relief-certain-requirements-regulation.

[16] Id.

[17] Id.

[18] Id.

[19] Temporary Amendments to Regulation Crowdfunding; Extension, 85 Fed. Reg. at 54,484.

[20] Id.

[21] Brian Bloomer & Albert Vanderlaan, SEC Provides Temporary Relief from Certain Regulation Crowdfunding Requirements in Response to COVID-19, JD Supra (May 28, 2020), https://www.jdsupra.com/legalnews/sec-provides-temporary-relief-from-14594.

[22] Temporary Amendments to Regulation Crowdfunding; Extension, 85 Fed. Reg. at 54,483.

[23] See Temporary Amendments to Regulation Crowdfunding; Extension, 85 Fed. Reg. at 54,483.

Image Source:  “Crowdfunding” by Rocío Lara is licensed under CC BY-SA 2.0, https://search.creativecommons.org/photos/8fbbf111-9dbd-4358-ac53-3e3f3fa0d3ea.

By Ian McDowell

 

GamesStop (ticker: GME) is a video game retailer that, prior to the events described in this blog, had mostly been written off by professional investors due to a largely outdated business model.  This negative outlook led a substantial number of professional investors to “short” the stock, benefitting as the price of GameStop declined (while conversely, losing money if the price goes up, highly risky given that the maximum price of a stock is hypothetically infinite). [1]  The mechanics of a short-sell are simple- the investor hoping to profit on a stock’s decline borrows that stock (for example, from their broker), sells it on the open market, and then buys it back at a lower price (thus making a gain) before returning it to the lender at the lower price. [2]  If the price goes up, that investor faces losses and may get “margin called” by their broker, which requires them to deposit funds to cover potential losses on the short. [3] A “short squeeze” refers to a situation where investors act to raise the price of a stock through purchases, which may force those short in the stock to purchase it themselves to cover the losses from their short position, which raises the price even more. [4]

 

Over January 2020 alone, GameStop appreciated by over 1500% due to investors (or uninformed speculators, depending on one’s view) driving up demand to “short-squeeze” the hedge funds that were shorting the stock. [5]  As of this writing, the price of GameStop has declined significantly from its peak valuation, signaling that the short-squeeze is over. [6] The GameStop short-squeeze of 2020-2021 is notable because it signaled the emergence of retail investors as a powerful market force, and highlights the increasing importance of discussions on social media platforms in accounting for why a security might move in a certain way.

 

It must be emphasized that the retail traders that decided to buy the stock (or call options- a right to purchase a stock at a higher price in the future) to influence the price were not doing so because of typical revelations that could influence a stock to appreciate in value, such as positive changes in the company’s financial data, a new management strategy, the acquisition of the company, lower interest rates, and so on.

 

Given that many individuals participated in this coordinated strategy, there is not one single motivation for picking GameStop (out of thousands of tradable securities) as the primary stock to target.  For some, driving GME up was a way to exact revenge on hedge funds for the 2008-2009 economic crisis, despite the fact that the funds that were notably short on GME simply did not engage in the activity that caused the collapse of the housing market and the subsequent broader recession in 2008. [7]  Even if certain Reddit posters were incorrect in their assessment of recent financial history, these posts nevertheless indicate that a long-standing resentment of Wall Street in an era of great uncertainty and wealth inequality was a significant motivating factor for many to take the risk of buying GME stock and potentially cause financial pain to hedge funds.  In response to the short squeeze, SkyBridge Capital managing partner (and former White House Communications Director) Anthony Scaramucci commented that observers were witnessing the “French Revolution of Finance.” [8]

 

Other traders of course may have simply wanted to collect on the gains, and might have never had any particular ideological motivation behind buying the stock.  In addition, prominent figures such as Elon Musk and Chamath Palihapitiya tweeted favorably about the GME surge, which certainly influenced the price to trend upwards. [9]

 

While the media has portrayed retail traders as being responsible for the GME short squeeze, it has emerged that many institutional investors have recently purchased the stock, and retail traders did not solely influence the price movements. [10] It is clear that many of the individuals that were speculating on GameStop’s price were not sophisticated investors, as evidenced by large purchases of another stock under the ticker GME at the same time that the short squeeze was taking place. [11]

 

If legal, there is a certain appeal to disregarding more traditional investing strategies in favor of collectively banding together with others over social media to influence the price of a stock (despite any concerns over the company’s health).  Specifically, the price will (in the ideal scenario) appreciate with near-immediate effect solely because the investors have banded together to cause a rise (whereas, with other stocks without any coordination it might take years to see a stock appreciate), regardless of any other factor.  The risk to the social-media coordination strategy is precisely that it ignores the fundamentals of the stock, and that after large numbers of the traders that caused the price of to go up sell to realize their gains, the stock price will inevitably go down as demand decreases, leading to the price reflecting a more reasonable interpretation of the publicly available data of the company.

 

Given the serious price fluctuations with GameStop and the public spectacle of a perceived contest between retail traders and professional investors, it was only natural that there would be a subsequent federal investigation.  The Justice Department’s fraud section, the San Francisco U.S. Attorney’s Office, the Commodity Futures Trading Commission, and the Securities and Exchange Commission are all currently investigating potential illegal activity in relation to trading around GameStop. [12] Daniel Hawke, a former chief of the SEC’s market abuse unit and a partner at Arnold & Porter Kaye Scholer LLP noted that users of a social-media platform “egging each other on, [. . .] effectively constituted a crowdsourced pump-and-dump scheme” and that the traders on social media were “making no effort to conceal their apparent intent to manipulate the price of the stock.”  [13]

 

The GameStop Short Squeeze raises broad questions of the appropriate role of forums and social media platforms with regard to trading of other securities.  Public figures such as Elizabeth Warren have harshly criticized the SEC for having a woefully inadequate response to potential GameStop and potential market manipulation, which could lead to increased enforcement of existing policy in the future, if not new regulations. [14]

 

In addition to a potential federal response, the President of the NASDAQ stock exchange has indicated that the organization has technology that monitors and evaluates market-oriented discussions on social media, and that NASDAQ would potentially halt trading of any stock if there was unusual trading activity that matched social media conversations.[15]  Further, it is plausible that social media companies may seek to limit discussions regarding financial markets to protect against any civil or criminal legal liability.  To conclude, while the extent to which forums such as Reddit will be able to influence securities pricing in the future is uncertain, it is plausible that a regulatory response can be expected to curb the risk of market manipulation vis-a-vis forums or social media platforms.

 

[1] Alex Fitzpatrick, So, Uh, What’s Up With GameStop’s Stock?, TIME (Jan. 26, 2021), https://time.com/5933242/gamestop-stock-gme/

[2] Chad Langager, What are the Minimum Margin Requirements for a Short Sale Account, Investopedia (updated Jan. 7, 2021), https://www.investopedia.com/ask/answers/05/shortmarginrequirements.asp.

[3] Justin Kuepper, Margin Call, Investopedia (Updated Jan. 28, 2021), https://www.investopedia.com/terms/m/margincall.asp.

[4] Cory Mitchell, Short Squeeze, Investopedia (Updated Jan. 28, 2021), https://www.investopedia.com/terms/s/shortsqueeze.asp.

[5] Yun Li, GameStop, Reddit, and Robinhood: A Full Recap of the Historic Retail Trading Mania on Wall Street, CNBC (Jan. 30, 2021), https://www.cnbc.com/2021/01/30/gamestop-reddit-and-robinhood-a-full-recap-of-the-historic-retail-trading-mania-on-wall-street.html?&qsearchterm=GameStop

[6] Caitlin Ostroff, Peter Santilli, The Rise and Fall of the GameStop Frenzy, Wall Street Journal (Feb. 11, 2021), https://www.wsj.com/articles/the-rise-and-fall-of-the-gamestop-frenzy-11613083164.

[7] See Rick Newman, What the GameStop vigilantes get Wrong About the 2008 Financial Crash, Yahoo! (Feb. 1, 2021), https://www.yahoo.com/now/what-the-gamestop-vigilantes-get-wrong-about-the-2008-financial-crash-201225688.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAJ5yqGflZktchbEej_LAShPPsFmNWQdKSf-3QL2fJRn4uqX2EfiVX5wPYRpXXobkF6tden5uoshR_z4Zf2PThAQUlPFdAMZKbOWylAZbf_rTBJweycXCKBYEUxFHEqgk5SsEcnzLgl-pq2raPzamEdMCMmEeKGFv4zjrr8buEacs.

[8] Nicole Casperson, How Social Media Fueled the GameStop Stock Surge, Investment News (Jan. 27, 2021), https://www.investmentnews.com/how-social-media-fueled-the-gamestop-stock-surge-202018.

[9] Id.

[10] See Maggie Fitzgerald, GameStop mania may not have been the retail trader rebellion it was perceived to be, data shows, CNBC (Feb. 5, 2021), https://www.cnbc.com/2021/02/05/gamestop-mania-may-not-have-been-the-retail-trader-rebellion-it-was-perceived-to-be-data-shows.html.

[11] See Justin Harper, GameStop: Share Buying Mistakes ‘on the rise’, BBC News (Feb. 11, 2021), https://www.bbc.com/news/business-56020950 (discussing a spike in an Australian mining company that also trades under the ticker GME, as well as other recent instances of clear trader error, such as the recent 1500% spike in Signal Advance stock (SIGL) after Elon Musk tweeted favorably about an (unrelated) messaging app called Signal).

[12] Dave Michaels, GameStop Mania is Focus of Federal Probes Into Possible Manipulation, The Wall Street Journal (Feb. 11, 2021), https://www.wsj.com/articles/gamestop-mania-is-focus-of-federal-probes-into-possible-manipulation-11613066950.

[13] Dave Michaels, Alexander Osipovich, GameStop Stock Surge Tests Scope of SEC’s Manipulation Rules, The Wall Street Journal (Jan. 28, 2021), https://www.wsj.com/articles/gamestop-surge-tests-scope-of-secs-manipulation-rules-11611838175.

[14] Thomas Franck, ‘You’ve got to Have a cop on the Beat’: Elizabeth Warren Slams SEC Over GameStop Chaos, CNBC (Jan. 28, 2021), https://www.cnbc.com/2021/01/28/elizabeth-warren-gamestop-robinhood-market-manipulation.html.

[15] Jason Rechel, How Social Media Moves Markets: Analyzing GameStop (GME) Using Social Listening Data, Sprout Social (Jan. 28, 2021), https://sproutsocial.com/insights/gamestop-stock-social-media/.

Image Source: https://menshumor.com/viral/the-best-jokes-about-whats-happening-right-now-with-gamestop-stock/

Questioning Facial Recognition Tech Following the Capitol Riots

By Alexandra Tillman

 

As Capitol rioters are found and charged, the public has applauded.[1] The rioters have been found through a variety of methods—public tips, videos and photos posted online, some members of the public have even posed as conservatives on dating apps to “catfish” unsuspecting rioters into sharing their photos of the riots and turning those photos over to the FBI.[2]  But law enforcement’s most recent method of finding suspected rioters via facial recognition technology is under scrutiny.[3]

Read More

By Trevor Vonu

 

Virginia is the latest state to legalize online sports gambling, joining the existing 19 states (and Washington D.C.) that have already legalized some form of sports betting. This move followed the Virginia General Assembly’s legislative approval of sports gambling last March.[1] The legislation charged the Virginia Lottery with regulatory authority over gambling activity.[2]

 

On January 21^st, the Virginia Lottery granted its first gambling license to FanDuel Sportsbook, allowing residents to make their first sports wagers just in time for Super Bowl LV.[3] The Virginia Lottery will grant, at most, 11 additional licenses to mobile sportsbooks.[4]

 

Virginia constitutes a large market capable of becoming one of the leaders in the sports betting industry.[5] PlayVirginia estimates that the state will generate more than $13 billion in the first three years of operation.[6] By the third year of operation, analysts predict that the market will produce $5 billion in annual wagers, $400 million in operator revenue, and $60 million in annual state taxes.[7] Now, a once untapped market can become a substantial contributor to private industry and government revenue.

 

Despite public policy concerns, legislative approval evidences strong fiscal policy. Prior to the authorization of state-licensed sports books, thousands of Virginia residents still made online sports wagers.[8] However, these bets had to be made with international sportsbooks, such as Bovada.[9] By allowing the Virginia Lottery to regulate Sportsbooks within the state, Virginia now has the means to generate billions of revenue in-house and reap the rewards of the tax payments stemming from this activity. The current code applies a 15% tax rate on sports betting revenue.[10] Further, 97.5% of the tax revenue will be used to fund education, infrastructure, and more.[11]

 

In general, the success of sports gambling is largely predicated on new-age technology. Currently, 80% of all sports wagers are placed online.[12] NeoGames CEO, Moti Mahul, predicts that 90% of all sports wagers will be placed via mobile devices within the next 5-10 years.[13] In essence, the ease of mobile gambling has played a monumental role in the development of the industry. Residents don’t have to visit a casino, racetrack, or even make a call. Everything they need is now available at their fingertips.

 

Social media has also compounded interest in sports gambling. Instagram and Twitter accounts, such as Barstool Sports, helped propel sports gambling into mainstream status.[14] Barstool Sports and accounts like it have managed to make sports gambling a trend among millennial males.[15] In fact, Barstool Sports has become so popular within the sports gambling community that it launched its very own mobile sportsbook in recent months.[16]

 

There is a massive demand for legal and trustworthy sports gambling apps. Virginia’s legislative approval could not have come at a better time. The current social environment has made sports gambling more popular than ever. Rather than discussing sports in general, more and more people are instead discussing the smart pick for the next big game. Like it or not, this is the current environment. Doesn’t it make sense for private industry and state governments to take advantage of this surging demand? Not to mention the fact that the Covid-19 pandemic is keeping people isolated and in need of alternative forms of entertainment. Sports gambling from the comfort of the home seems to be a popular choice.

 

[1] See Matt Bonesteel, Sports betting kicks off in Virginia after state awards permit to FanDuel, Washington  Post (Jan. 21, 2021), https://www.washingtonpost.com/sports/2021/01/21/fanduel-virginia-sports-betting/.

[2] See Pete DeLuca, Online sports betting begins in Virginia, NBC12 (Jan. 22, 2021), https://www.nbc12.com/2021/01/23/online-sports-betting-begins-virginia/.

[3] See Virginia Sports Betting, PlayVirginia, https://www.playvirginia.com/.

[4] See supra note 1.

[5] See Virginia’s sports betting to generate over USD 13 B in first three years, Yogonet (Feb 11, 2021), https://www.yogonet.com/international/noticias/2021/02/11/56454-virginias-sports-betting-to-generate-over-usd-13-b-in-first-three-years.

[6] See id.

[7] See Virginia sports gambling industry to generate more than 13 billion in first three years, Chatham Star Tribune (Feb. 9, 2021) https://www.chathamstartribune.com/sports/article_891a19b6-6adf-11eb-897d-e77c2470b368.html.

[8] See GeoComply Data shows Drastic Move From Black Market to Legal Sports Betting, Sportsbook Review (Jan. 26, 2021), https://www.sportsbookreview.com/news/geocomply-data-shows-drastic-move-from-black-market-to-legal-sports-betting/.

[9] See id.

[10] See Matthew Barakat, Online sports betting in Virginia nearing its debut, North State Journal (Dec. 22, 2020), https://nsjonline.com/article/2020/12/online-sports-betting-in-virginia-nearing-its-debut/.

[11] See supra note 2.

[12] See Wayne Parry, Panel: 90% of US sports betting could be online in 5 to 10 years, Associated Press (June 13, 2019).

[13] See id.

[14] See David Purdum, Inside how sports betting went mainstream, ABC News (Nov. 5, 2018), https://abcnews.go.com/Sports/inside-sports-betting-mainstream/story?id=58978446;

[15] See Betting on Legalized Sports Gambling: The Millennial Challenge, Front Office Sports (Jan. 8, 2020), https://frontofficesports.com/sports-gambling-millennials/.

[16] See Katie Kohler, Barstool Makes it 10 Sportsbooks on Tap in PA; Portnoy Calls it “Step 1 of World Domination Plan,” PlayPennsylvania (Oct. 30, 2020), https://www.playpennsylvania.com/barstool-makes-ten-sportsbooks-pa/.

Image Source: https://www.wsj.com/articles/states-weigh-bets-on-mobile-sports-gambling-1531484097

By Merrin A. Overbeck

 

Many individuals have been describing January 2021 by identifying the major events that happened on each Wednesday that month, specifically by referring to the “Four I’s”: the Insurrection that occurred when supporters of former President Donald J. Trump breached the Capitol building, the beginning of Impeachment proceedings when Democrats pushed through a non-binding resolution calling on then-Vice President Mike Pence to invoke the 25th Amendment to declare former President Trump unfit after his incitement of the previous week’s insurrection, the Inauguration of President Joseph R. Biden, and finally “investments” to refer to the dramatic and rapid increase of the value of various stocks due to individual investors organizing on an online forum. This blog post will discuss the intersection of law and technology as it relates to the rapid increase of the value of GameStop stocks.

 

On January 27, 2021, millions of small investors invested in companies, such as GameStop and AMC, leading to dramatic increases in the values of their stocks.[1] Small investors, including millions of amateur traders, organized themselves on a Reddit discussion board to take this opportunity to grow their own wealth while also teaching large hedge funds on Wall Street a lesson – a use for social media that has not occurred on such a scale prior to this event. Many of these retail investors decided to do this because hedge funds and other professional money managers were shorting GameStop’s shares, essentially betting that its stock would continue to decline in value.[2] The retail investors, by buying shares of these stocks and essentially pushing against these hedge funds, increased GameStop’s market value to over $24 million from $2 billion in a matter of days.[3] This behavior by retail investors led to hedge funds losing billions of dollars, and thus led to retail brokerage firms such as TD Ameritrade and Robinhood to restrict the trading of GameStop, AMC, and other stocks based on this unprecedented behavior.[4]

 

In response to this restriction of trade on the Robinhood platform, at least 30 parties across 10 states have filed lawsuits in federal court against the stock-trading application, including class-action lawsuits in the Southern District of New York and the Middle District of Florida in Tampa, based on an allegation that Robinhood’s actions “were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers.”[5] According to Michael Taaffe, one of the attorneys working on the class action lawsuit in Florida, “Robinhood’s negligent failures are all the more serious given the company’s history of such breakdowns including last year during the biggest single-day point gain in the history of the Dow Jones Industrial Average…The restrictions put in place by Robinhood fly in the face of the principles the company promoted to its own customers through its marketing materials and agreements…In short, Robinhood breached its obligations and was negligent in allowing this to happened – all at the expense of its customers.”[6] At this point in time, it is not clear whether these lawsuits will be successful because Robinhood’s terms of service allows the company to block, cancel, and restrict transactions, and even delete user accounts. Additionally, the user agreement contains an arbitration clause.[7] However, many are optimistic that the lawsuits will be successful, citing to recent settlements supporting the possibility of a court finding that Robinhood’s terms of service might not necessarily apply to its actions.[8]

 

However, unhappy customers are not the only threat that Robinhood and other retail brokerage firms face.[9]Robinhood’s decision was criticized by various lawmakers such as Representative Alexandria Ocasio-Cortez (D-NY), who sits on the Financial Services Committee, and others, calling to investigate the decision to restrict trading for its users.[10]

 

[1] See Matt Phillips and Taylor Lorenz, ‘Dumb Money’ Is on GameStop, and It’s Beating Wall Street at Its Own Game (Jan. 27, 201), N.Y Times, https://www.nytimes.com/2021/01/27/business/gamestop-wall-street-bets.html

[2] Id.

[3] Id.

[4] Id.

[5] Fernando Alfonso III, Class-action lawsuit filed against Robinhood following outrage over GameStop stock restriction, CNN.com (Jan. 29, 2021), https://www.cnn.com/2021/01/28/investing/lawsuit-robinhood-gamestop-wallstreetbets/index.html; see also Adi Robertson, Robinhood is facing dozens of lawsuits over GameStop stock freeze, The Verge (Feb. 1, 2021), https://www.theverge.com/2021/2/1/22254656/robinhood-gamestop-stonks-trade-freeze-class-action-lawsuits

[6] Dan Trujillo, Tampa firm files class-action lawsuit against Robinhood over GameStop trading restrictions, ABC Action News (Feb. 1, 2021), https://www.abcactionnews.com/money/consumer/tampa-firm-files-class-action-lawsuit-against-robinhood-over-gamestop-trading-restrictions

[7] See Alicia Adamczyk, Investors are using this app to automatically join the Robinhood class-action lawsuit amid GameStop chaos, CNBC.com (Jan. 29, 2021), https://www.cnbc.com/2021/01/29/app-robinhood-gamestop-class-action-lawsuit.html

[8] See Chime Digital Bank Outage Class Action Settlement, Top Class Actions (Dec. 7, 2020), https://topclassactions.com/lawsuit-settlements/money/banking-news/chime-digital-bank-outage-class-action-settlement/

[9] See Karissa Bell, Robinhood hit with class action lawsuit after it restricts GameStop stock, Yahoo! Finance (Jan. 28, 2021), https://finance.yahoo.com/news/robinhood-class-action-lawsuit-gamestop-191704848.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAB2P7fJHvlSg91XArj8uaUQGGbcDV5t8NigvZorVDSt80Ds9IZtv96UItaC0V0gRnWrdqsUgiyay74DfukQrS7rN2mwv83WRS7G2Nga1RV1zMHKLlUVqw_mfU78LDAFhTYtxX-Htfzmo1UMEf2zzR51glaEnryCH1hJ2P-zMSmSS (explaining that other companies such as Interactive Brokers, Webull, and TD Ameritrade also imposed similar restrictions).

[10] See Robertson, supra note 5.

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By M. Walker Upchurch

 

Very rarely is there a game that captures the essence of what it aims to portray better than the EA Sports NCAA Football Franchise. The game aimed to please collegiate fans and did their best to accurately portray what made every University special. Whether it was touching the banner in Ann Arbor, slapping Howards Rock at Clemson, or Playing Like a Champion in South Bend, the franchise got it right. The game was engaging and made every school spectacular, from the fans in the stands with ESPN signs to the college football season’s highlights like the Army-Navy game with the cadets. It understood what made the college experience so exciting. More simply put, it made the alma mater’s and small college towns feel like home.

 

Unfortunately, this magisterial game came to a close in large part due to the O’Bannon V. National Collegiate Athletics Ass’n lawsuit that took place in 2014 through 2015.[1] The case was an antitrust lawsuit decided on September 30th, 2015, in which the court held that “The NCAA’s compensation rules were subject to antitrust scrutiny; the plaintiffs suffered an antitrust injury as a result of the compensation rules; the compensation rules were subject to analysis pursuant to rule of reason; the district court did not clearly err in finding that allowing NCAA member schools to award grants-in-aid up to their full cost would be substantially less restrictive alternative to current compensation rules; but the district court clearly erred in finding it a viable alternative to allow students to receive Name, Image, and Likeness (NIL) cash payments untethered to their education expenses.”[2]

 

Section one of the Sherman Antitrust Act States, “Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, 1,000,0000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.”[3]

 

The court found that the rule of the NCAA keeping schools from competing on price in compensating college athletes for the commercial use of their Names, Image, and Likeness was an unlawful restraint of trade in violation of Section 1 of the Sherman Antitrust Act. [4]

 

This decision presented the NCAA with a bevy of amateurism problems while still wanting to make as much money as possible. Flatly, to understand this, you must understand that the NCAA did not wish to pay the players. On their website, they state that “Allowing student-athletes to be paid for athletics performance would undermine the balance between the two [athlete and non-athlete] and detract from the integration of academics and athletics in the campus community.” [5]

 

Whether you believe that to be the case, or if you are more inclined to think along the lines of Jay Bilas, Esq. who stated, “We are selling these players for literally billions of dollars, paying the coaches millions of dollars, and building gigantic facilities. . . . It’s professional in every way.” There has long been the tension of paying these players.[6]

 

However, on October 29th, the NCAA Board of Governors voted to allow athletes to profit from their name, image, and likeness.[7] According to USA Today, these players will be able to profit off of their Name, Image, and Likeness as soon as August 1st, 2021.[8] Not so coincidentally, less than four months later, after this news broke, we have the official announcement that EA Sports will be bringing back a huge moneymaker for them and the NCAA. The Official announcement that EA sports and the NCAA are partnering with The College Licensing Company to bring back college football videogames broke on February 2nd.[9]

 

In conclusion, while it will be nice for nostalgic reasons for this game to come back, many of the larger issues that have plagued college athletics remain. While the players will profit from their name, image, and likeness, we are still yet to see whether the NCAA will do well by them. College Athletics is a humongous money maker. In the years 2018-2019, the top five colleges in total revenue from athletic departments were Texas, Texas A&M, Ohio State, Michigan, and Georgia. Their overall total revenue from their athletics department was cumulatively over $1,000,000,000.[10] Simply a tremendous amount. This is particularly true when you consider that they don’t pay the players for the services rendered. Hopefully, this game coming back will build a bridge for these athletes to a more even playing field.

 

[1] See O’Bannon V. Natl. Collegiate Athletic Ass’n, 802 F.3d 1049 (9th Cir. 2015).

[2] Id.

[3] 15 U.S.C. § 1

[4] See Brief in Opposition at i, O’Bannon V. Natl. Collegiate Athletic Ass’n, 802 F.3d 1049 (9th Cir. 2015).

2016 WL 3626736

[5] See NCAA DEFENDS SCHOLARSHIPS FOR COLLEGE ATHLETICS, NCAA, https://www.ncaa.org/about/resources/media-center/feature/ncaa-defends-scholarships-college-athletes (last visited Feb. 5, 2021).

[6] See Golic and Wingo, ‘There is no such thing as a student-athlete!’ – Jay Bilas on the NCAA’s new rules, ESPN https://www.youtube.com/watch?v=qQuoDncRuL8&ab_channel=ESPN, (last visited Feb. 5, 2021).

[7] See Board of Governors starts process to enhance name, image and likeness opportunities, National Collegiate Athletics Association,  https://www.ncaa.org/about/resources/media-center/news/board-governors-starts-process-enhance-name-image-and-likeness-opportunities, (last visited Feb. 5, 2021).

[8] Steve Berkowitz, NCAA unveils proposed rules changes related to athletes’ name image and likeness, USA Today, https://www.usatoday.com/story/sports/college/2020/11/13/ncaa-nil-name-image-likeness-proposal/6281507002/, (last visited Feb. 5th 2021).

[9] Chris Bengal, EA Sports plans to revive its college football video game franchise, CBS Sports, (Feb. 2, 2021 at 5:04 PM), https://www.cbssports.com/college-football/news/ea-sports-plans-to-revive-its-college-football-video-game-franchise/

[10] Steve Berkowitz, Matt Wynn, Camille McManus Jodi Upton, Rocio Fortuny, Veer Badani, Mitch Bannon, Jishnu Nair, Santino Primerano, Samantha Rothman, Tanner Russ, Peyton Smith, Frankie Vernouski, Thomas Vielkind, NCAA Finances, https://sports.usatoday.com/ncaa/finances(last visited Feb. 5, 2021.

Image Source: https://www.shutterstock.com/image-illustration/american-soccer-stadium-3d-rendering-516354493

 

By Anna Hargett

 

Smartmatic Corporation, a voting technology company, is suing Fox News for defamation.[1] Smartmatic claimed that Fox News’ disinformation surrounding election fraud “irreparably harmed” the company.[2] The plaintiffs are seeking 2.7 billion dollars in damages, which makes this case one of the largest defamation suits ever filed.[3]

 

Smartmatic alleges that Fox News wrongly accused the company in order to create a villain in the election fraud narrative.[4] Fox has responded to the allegation by noting that they are proud of their election coverage. [5]

 

This isn’t the first time that Smartmatic has gone up against Fox News.[6] In late 2020, Smartmatic warned Fox about the spread of disinformation about the election.[7] Fox responded to earlier warnings from Smartmatic by hosting technology experts to debunk the fraud theories by opining that the Smartmatic software was not used to “delete, change, or alter anything related to vote tabulation.”[8]

 

Smartmatic’s suit is not the only defamation lawsuit that has been filed by an election technology company regarding election fraud disinformation.[9] Dominion Voting Systems, which operates in 28 states, filed a defamation suit against Rudy Giuliani for $1.3 billion. Giuliani denounced the suit as an “act of intimidation.”[10]

 

Smartmatic operated its technology during the 2020 election in Los Angeles County.[11] Although Smartmatic’s role in the election was minimal, the company alleges that it was harmed by the disinformation that was disseminated by Fox News after Attorney General Barr announced that the DOJ found no evidence of voter fraud.[12]

 

The company alleges that two distinct conspiracy theories stemmed from Fox’s spread of disinformation.[13] One conspiracy theory that stemmed from the Fox newscasts included false allegations of Smartmatic ties to Venezuela.[14] Another conspiracy theory accused Dominion Voting Systems of colluding with Smartmatic by using Smartmatic’s software in swing states and that “votes were exported out of the country to be tabulated.” [15]Both theories have proven to be false.[16]

 

Lauren Coates, a legal analyst with CNN, stated that the case has merit because the defamation elements of knowingly false statements, malice, and financial damage are fulfilled by the allegations.[17]

 

Another strength of the case is that the statements made are easily debunked and thus clearly false.[18] Because of the nature of the patently false messaging, it may be easier to prove that the Fox hosts known or should have known that the statements were false.[19]

 

Jonathan Peters, a professor at UGA Law, noted that the main point of dispute in the case will likely be the public figures involved and the free speech regarding a matter of public concern.[20] Although these issues may arise, he believes Smartmatic will prevail. [21]

 

Smartmatic’s attorney responded to concerns about the free press implications of the case.[22] He stated that this suit will actually be beneficial to the profession by bringing it “back to factual reporting.”[23]

 

Smartmatic is seeking damages that were calculated based on a $767.4 decrease in profits of Smartmatic’s parent company, along with threats against its staff members and “undermined business relationships around the world.”[24] Smartmatic is also requesting a full retraction of the false statements from the Fox News hosts regarding the company.[25]

 

[1] Meghan Roos, Smartmatic Hits Fox News, Rudy Giuliani With One of the Largest Defamation Suits Ever Filed in U.S., Newsweek (Feb. 4, 2021, 2:05PM), https://www.newsweek.com/smartmatic-hits-fox-news-rudy-giuliani-one-largest-defamation-suits-ever-filed-us-1566933.

[2] Id.

[3] Id.

[4] Oriana Gonzalez & Sara Fischer, Smartmatic files $2.7 billion lawsuit against Fox, Rudy Giuliani, Sidney Powell, Axios (Feb. 4, 2021), https://www.axios.com/smartmatic-lawsuit-fox-giuliani-powell-4c20b97f-3009-4b79-abfa-70dd17a381ea.html.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Roos, supra, note 1.

[10] Id.

[11] Gonzalez & Fischer, supra, note 4.

[12] Associated Press, Fox News and Three Hosts Sued for $2.7 billion by Voting Machine Company Over Election-Fraud Claims, USA Today (Feb. 4, 2021, 2:47pm), https://www.usatoday.com/story/entertainment/tv/2021/02/04/fox-news-three-hosts-trump-lawyers-sued-over-election-fraud-claims/4392023001/.

[13] Oliver Darcy, Voting Technology Company Smartmatic Files $2.7 Billion Lawsuit Against Fox News, Rudy Giuliani and Sidney Powell Over ‘Disinformation Campaign’, Cnn Business (Feb. 4, 2021, 1:59PM), https://www.cnn.com/2021/02/04/media/smartmatic-fox-news-giuliani-powell-lawsuit/index.html.

[14]Id.

[15] Id.

[16] Id.

[17] Oliver Darcy, ‘There Is Real Teeth to This:’ Legal Experts Weigh In On Smartmatic’s$2.7 Billion Lawsuit Against Fox News, Cnn Business (Feb. 5, 2021, 6:48 AM), https://www.cnn.com/2021/02/05/media/smartmatic-fox-news-reliable-sources/index.html.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Oliver Darcy, supra, note 13.

[25] NPR Morning Edition, NPR (Feb. 4, 2021, 2:38PM), https://www.npr.org/2021/02/04/964097006/election-tech-company-sues-fox-news-giuliani-and-others-for-2-7-billion.

Image Source: https://www.nbcnews.com/tech/security/fox-news-sued-smartmatic-2-7-billion-over-rigged-election-n1256759