Crypto Gets Guidance — Finally with Phantom CEO @BChillman, SPI Prez @KristinSmith & CahillNXT @NYcryptolawyer

Welcome to the Crypto and America Live, the only show bringing you candid conversations

on the biggest news stories, legal issues, and policy development shaping the crypto world.

Every Friday at 1230 Eastern.

Happy Friday, y'all.

Happy Friday.

Happy Friday.

We made it through the week.

It was a very busy week.

Yeah.

That was good one.

It was.

It was a fun week.

It was a fun week for everyone in the industry who was at DC Blockchain Summit.

I think we saw like everybody we know there.

It was packed.

Yes.

Yes.

There was a ton of people and a lot of fans of the show.

So shout out to them for stopping us and saying you love the show.

That was very, very appreciated.

Yes.

Very cool.

Very cool.

And then a big week for us too.

And in honor of that week, we have something cool coming out later, which we'll tell you guys

about next week.

But for this week, we also had something cool, which I think we're going to pull up right

now, which was a little bit of a.

We're out there.

I will.

Yeah.

A little bit of a plug.

There we go.

On Wall Street.

No less.

We are on literally the Wall Street station.

I believe the bowling green station somewhere in the West Village.

I have to get out into Manhattan today and like finally for the team.

And then also we will be in DC, right, Gerald?

Yeah.

Yeah.

You guys know DC better than me.

I can't state where we're going to end up there, but we all over the place.

Yeah.

Yeah, there we go.

Exactly.

I think kind of for us, and I got to give credit to Gerald, because this was originally his

idea.

And I was against it initially, but the idea of putting crypto in America on Wall Street,

like we're all, you know, money is moving and everything was just like kind of a no-brainer

for us.

And then putting it in DC as well, I think speaks for itself.

So yeah.

I did have a couple of my friends from the floor of the New York Stock Exchange reach

out to me because they all take that subway.

They all come out of the Stock Exchange and they all go down there and like, oh my goodness,

you're on the subway.

Oh my gosh, we saw you.

Congratulations.

So, you know, a lot of big and important people, I think, pass bad at subway every day.

So exciting for us, exciting for crypto and American, exciting for the growth of the brand

that we plan to bring more news about, you know, in the coming weeks, coming months.

So stay tuned for more news from crypto and America.

Yeah, one step further towards global domination.

Just one.

Exactly.

One early one.

Yeah.

Well, in the meantime, we have another big show coming up for you this Friday.

We have Brandon Millman.

He is the CEO of the non-custodial Fenton wallet.

He will join us to break down what the company is.

No action letter from the CFTC actually means.

We have Solana Policy Institute's president, Kristen Smith, to discuss the SEC's token

taxonomy, where Solana has been deemed a digital commodity.

And Lewis Cohen of law firm, Kay Hill, Gordon, and Randell, to break down the CFTC SEC

interpretive guidance that's got the whole market talking this week.

So a lot of headlines also to get through that doesn't even include any of that, where

to start probably the SEC's NASDAQ approval so that they can start introducing tokenized

trading for certain securities.

I feel like this cutting up buried in the latter half of the week after the interpretive

guidance came out.

I mean, there was a lot of buzz around it, but it kind of was like a news drop at like

6 p.m.

I think on Wednesday night, and it was like, oh, wow, this is actually a really big deal.

Basically, market participants, NASDAQ customers will be able to opt in to have some of their

stock trades settled as tokenized securities, rather than go through the traditional methods.

But these shares will be traded alongside the regular shares, it's not like they're creating

new assets.

It's going to have the same order books, same tickers, prices, and investor shareholder rights.

So pretty big move here.

I think it sort of is the big kind of unlock, I guess, for tokenized trading to be introduced

into the US public equity markets.

Yeah.

Go ahead, Jackie.

Oh, okay.

I'll go ahead.

I think, I mean, this ties into NASDAQ's bigger tokenization plan and ties into the pilot

run with the depository trust company, which will handle like the clearing and settlement

of tokenized trades.

And NASDAQ also files for regulatory permission on this in September.

So it's kind of interesting to see how it's like unfolded.

And I believe under the framework, like eligible NASDAQ participants can choose whether or

not they have their trade settled, you know, as blockchain-based tokens or the more

traditional method of what we've seen over the past few decades, it can kind of opt

in.

It's like, it's a pilot, right?

It's basically, let's see how this works.

Yeah.

So it's a pilot.

And then it's also like post-initial trade.

So it's basically check a box and you say, I want to token.

Like you said, it's all the same rights redemption, which is interesting because a lot of the

other tokenization efforts we've seen have been some weird set of rights that are not

necessarily tied one-to-one to the equity.

And then I think importantly, it'll still be after T plus one settlement.

So you'll basically get a token after T plus one, which doesn't give us 24.7 yet, but

it's pretty cool.

And then the other big thing that I'm not quite sure how this is going to work on yet

is where can you take these tokens?

So what a lot of people talk about with tokenized equity is the ability to loop it into D5 elsewhere

and go trade it on like other platforms.

So because DTC is here, because it's NASDAQ, I think it also plays a little bit into Kraken's

parent company Payward, distributing tokenized securities via X-Docs.

So they're looking at 24.7 and trading these instruments offshore.

But you do need these big venues, like traditional players, sort of down to have a tokenized representation

of these instruments.

So like a lot to be seen, like you said, it's a pilot.

It's a good progress, I guess, towards this march towards tokenized everything.

Yeah.

Yeah.

Jack.

You know, we got to have Kevin back on.

We had the head of NASDAQ's American Markets on the podcast.

We should have him back to react to this, because I think this was one of the things he

said he was most excited about this in the 24.5 trading.

So reminder to get him back on for a Friday episode.

Let's move on to some of the news we heard on crypto legislation this week.

So yesterday, I did stake out the Republican member meeting in Senate, uh, DERX and

building.

It's really exclusive.

So part of this isn't really exclusive, and another part is not.

So I'll start with the not, first of all, which is just sort of like an overall breed

on where we are with clarity and the potential for now.

We may be getting some merging of some provisions from the Senate housing bill now being attached

to clarity.

I don't know how, if this is going to happen, but it was discussed in this member meeting

yesterday and, and Politico did break this story.

So in a nutshell, community banking deregulations were floated as part of the Senate banking

housing bill that's actually just passed the Senate, right?

But the, the, the house does not want to take it in its current form.

And, and part of those quibbles is these deregulations around community banks.

So what was floated yesterday in that meeting is actually attaching some of those community

bank deregulations into clarity.

So making the, the housing act easier to pass and putting some of these rex on to clarity.

So who knows whether house Republicans will take that.

Who knows whether like clarity will be able to pass with that.

But that was discussed in the meeting yesterday.

Political broke, political broke that story.

And part of this that's my exclusive is that there is also a study that the White House

Council for Economic Advisers has done that examines stablecoin yields, potential impact

on deposit flight and bank lending.

And apparently, it is very pro crypto.

So the study that was done examines all of that.

And it kind of says, you know, not word for word, but basically deposit flight and lending

is not, you know, this existential crisis that the banks are saying it is.

It's been done.

It's been shared with some members of the banking committee, but the White House has yet

to release it.

So yesterday, some of these Republican members, Tom Tillis and the alumnus, Haggerty, I think

too, they were pressing Patrick Whitt to have the White House release it.

They haven't released it yet.

So that was my little scoopy exclusive there.

So let's see if they release that.

I feel like if that is the case, then that will go a long way to helping crypto's cause.

But then do we have a yield deal?

We may or may not have a yield deal now.

I think the news yesterday was that they're 99% there on the yield deal.

So, you know, maybe they're putting this to bed now.

We'll see.

But there's other areas of the bill.

As we know, we heard about on stage all week at DC Blockchain Summit.

You know, there's the DeFi stuff, the ethics stuff.

But I think there's been progress this week.

That's the bottom line here.

Just more or less, they were optimistic on this.

Like was the general feeling you were getting from these conversations more positive than

negative?

Yes.

But definitely on the yield side, it seemed more positive.

And then I think there was definitely a sense of like, oh, this is a patent.

Well, I mean, Cynthia Lamis gave me a quote when she came out of the, came out of the meeting

room.

And she said, you know, this is a path I would not have expected to encounter when I walked

in the room talking about possibly putting these new provisions onto clarity.

Because when you talk about, you know, adding something from a completely separate bill

onto a bill that's already kind of like precarious, right?

It's like, oh, this could, this could kind of derail.

So yeah, I think when it comes to yield, definitely positive.

When it comes to the overall bill, I think it's still kind of as she said in a delicate

state.

So we'll see.

Yeah.

And I want to point out, I think Senators Tillis and also Brooks have been working on the

compromises as you've reported on as we've talked about in the show before that is like nobody

is super duper happy, but it potentially gets us past this issue.

And then I do want to clarify on the, I know it's still classified and we haven't seen

the, the contents of the report yet, but the Council of Economic Advisors report sounds

like what it actually is as pro math, not necessarily pro crypto.

It's just, it's one of these things where like the arguments that the ABA and others have

been making for a long time is that we're going to have all this deposit flight risk and

it's going to destroy the banking system and like, there haven't really been any models.

There's not really been any math that shows that that would happen.

And so shout out to the, to the CEA to actually do some, some math and some investigation here

and, and figure out that maybe it's not quite as bad as the banks are saying, and maybe

stablecoin adoption could actually be like a net benefit for the financial system, which

is what the industry has been saying for a long time.

And so hopefully those two things coming together, this compromise and then this new data

that maybe it's not going to wreck the banks is, is a pretty good sort of accumulation

of this issue.

And then we can move on to all the other things that we have to figure out before we actually

get this thing on the president's desk.

So overall pretty positive.

Yeah.

No, this is economic analysis.

I'm told, but it's a hypothetical analysis because it's like stablecoins haven't taken

off yet.

So I feel like we need to, there needs to be a period of time where we can kind of see

the effects of what actually would happen or does happen.

How are they measuring that is my question, like, where is this analysis coming from?

You say math, but like, where are they finding these numbers?

We got, we need to report that they have a lot of data, they have a lot of sources of

data.

But yeah, we got to see how it works out because I do think like, we've talked about how

this was applied to money market funds in the past.

They didn't destroy all the banks.

Like we've talked about how this impacts community banks.

And so hopefully there will be some really interesting data points that they are able to

uncover with all the data that we have access to that we don't, that actually proves

out some of these points or at least makes a strong argument that the downside is not

as significant as the upside for stablecoin adoption.

All right, well, we'll see if they release it.

But in the meantime, Morgan Stanley made headlines again yesterday by filing for their

Bitcoin ETF.

Or I think they already filed, but they release some new information, which is that they are

doing the ticker MSBT.

And they're including a 10,000 share creation.

They're also seeding it with $1 million, $1 million.

So it's going to be pretty significant, I think, add addition to the ETF landscape that

has been pretty ETFs.

Morgan Stanley is not an insignificant player, as we know.

That'll be the first big bank to release a Bitcoin ETF, right?

I mean, BlackRock I think is the most significant player on Wall Street.

But BlackRock's not a bank.

Morgan Stanley is going to be the first investor.

Direct a direct issue.

Yeah.

Yeah.

Yeah.

I feel like that ticker looks like a micro strategy is a little.

I know the MSTR, you know, maybe a little bit or maybe Microsoft as well, which is maybe

a 20 MS ticker.

But so to Ellie's point, this is a second amended filing that they've done for the Bitcoin

one.

I think they filed for Salon and Ethereum back in January, but they haven't updated those.

And so it's, I think it's interesting to see, like we said, Morgan Stanley actually

doing its own product, taking the fees, like seeing the market when a lot of ETFs are

probably not as popular, just with like market conditions.

Like this is more of a big financial player, making a long term kind of commitment to the

SaaS at class.

And so hopefully we'll keep seeing that.

I mean, obviously a million dollars for Morgan Stanley is not a big seeding commitment.

But it's, yeah, it's going to be pretty interesting to see.

And I think also just when I was looking through this before we hopped on the show, there's

126 plus pending ETF applications.

So hopefully at some point we can start clearing through that backlog.

And we'll see how it goes.

But it's also, I think, important to note, it was filed under GLS, which is largely replaced

the 19 before filing process.

And hopefully we'll continue to see like more and more assets follow under those generic

listing standards, rather than just like these core assets we've seen so far.

So overall good.

All right, is this next one overall good, polymarket and housing situation room, a bar coming

to Washington DC dedicated to monitoring the situation?

I, I, the, like the manus, the manus fear has to be happy about this one.

I don't know.

I saw, like, I saw a great tweet, shout out, I think it was Mike McKan on Twitter this

morning saying, now there will be more places for men in DC to hang out where there are

no women.

So hopefully, hopefully, well, this, this will be like a fun spot.

I think it's going to change DC brunch culture, but yeah, it's, it's going to be interesting.

Yeah.

They should make it.

So if you want to get into the bar, you have to like make a trade on polymarket.

There's a free little marketing tactic for them.

Yeah, just borderline, because you have to buy change.

Yeah, or if you want to drink, you have to make a bet, yeah, a free drink.

It's not really free because you just paid 50 bucks on the weather or something.

Yeah.

Now, there is, there is a public relations firm named the global situations room, global

situation room that has sent a cease and desist letter to polymarket over this.

And so we'll see how that goes.

I mean, I, I did point out to, to the person who sent me that, that news story.

I was like, isn't there a news room, isn't there a news show on CNN called the situation

room?

They were like, they're like, yeah, it's a news program, though.

So if it was just the bar with the same name, it would be one thing, but saying come

here and track global situations is where it treads into the global PR firms territory.

So we'll see how that shakes out, but that's just an interesting, it's a funny, like, polymarket

was up to try to be funny and cute thing.

Yeah.

Yeah.

Maybe there will be a place for us to do a live episode and monitor the situation while

we monitor the situation.

You know, if we did a, if we, if that's up and running by the time, like clarity goes

to the Senate floor or the House floor or something, then we like monitored the situation

from the monitor, the situation bar, but yeah, I will also, okay.

So one, like, like ice cold take on this, it is going to be really problematic for DC.

If a staffer can leave a meeting on the hill and walk into the polymarket situation,

and start hopping on polymarket was something that they just found out.

Right.

So hopefully we'll, we'll avoid the, the MNPI available to, to the folks who are attending

this bar, but overall, I don't know, it sounds cool, it could be, it could be interesting.

Yeah.

Yeah.

Yeah.

All right.

Well, let's get into a piece of news that did shake up the crypto world this week that

was self custodial wallet, phantom securing a no action letter from the CFTC, allowing

it to offer access to regulated derivatives markets without registering as a broker.

So to discuss this, let's bring in Brandon Milliman.

He is the CEO of phantom.

He's going to break this all down and what it means for phantom and the rest of the crypto

world.

Brandon, welcome to crypto America live here then.

Hello.

Morning, everyone.

Can you guys hear me?

Yeah.

Happy Friday.

Happy Friday.

So there was a lot of chatter and excitement.

And I think some maybe overblown takes on this on crypto Twitter, Brandon to the point

where I think even phantom had to kind of clarify like what the extent of this no action

letter did in a blog post of yours.

So you, you described it as a first of its kind, no action letter.

And there's been a lot of excitement around it.

So can you kind of clarify the scope of what this, what this milestone does for you guys?

And really what it does for phantom, but also for wallet providers as a category.

Yeah.

Totally.

Well, yeah, thanks again for having me on and give me a chance to chat about a bit more

of something that, yeah, obviously we're super excited about something that we've been

working on for a while.

And yeah, just excited to have an opportunity to chat about it.

So yeah, at high level, the news is that phantom received, like you said, this CFTC no action

letter.

Brandon, I was just going to ask.

So you were making the point about not being a broker for some of these regulated markets.

I was just explaining the like DCM aspect of this, so it was non-securities.

But then there was an important designation that I think was first of its kind, which

is a wallet getting that TSB designation.

Can you, can you like talk to us about that a little bit?

Yeah.

So, yeah.

I'm not sure exactly where I caught off, but basically, you know, self-custody phantom

users will be able to interact with these derivatives markets.

So I think like call sheet or futures markets or options exchanges directly from their wallet

with self-custody crypto.

And yeah, basically this is a process that folks may already be doing by extracting crypto

from their wallet, making multiple bank transfers, interacting with a host of different

intermediaries.

And basically this setup makes things much simpler, safer and easier.

You'll just be able to open a position that you want directly from the wallet with stable

coins or other potentially other crypto that you're self-custing.

And yeah, basically, you know, typically in an arrangement like this in the past, you

would have the FCM or DCM, which the actual, you know, futures market.

And then the introducing broker, which is an intermediary on top that actually helps

users place orders and transfer funds to the market.

What's novel about this approach is that it basically brings that concept into the modern

day, which includes technologies like obviously blockchains, self-custody, et cetera.

And recognizes that, you know, the introducing broker distinction doesn't necessarily fit

the mold of, you know, the technological reality of today.

And so yeah, I mean, one really exciting aspect about all of this is that the CFTC also

recognizes that.

And they have been having a very pro-innovation pro-technology stance.

And yeah, I mean, they recognize that a lot of their rules and licensing requirements

don't necessarily, you know, fit technology of today.

So yeah, it's been super exciting.

Brennan, I know Phantom has made it clear that this doesn't cover DeFi derivatives.

I think Ellie mentioned that before.

So what still can't be done today?

And then from the other side of the spectrum, for users, what actually changes here?

What can they do now that they couldn't do before?

Just like laid out.

Yeah, so this specifically affects users that are in the US.

So now if you are in the US, you'll be able to use Phantom to interact directly with

regulated derivatives markets.

In the US, you'll still, you won't be able to interact with DeFi derivatives markets,

you know, through a Phantom first party interface.

So this rule making, or this, this no action letter does not necessarily cover DeFi markets

or DeFi derivatives or anything like that.

So if you're a US user, you still can't use that through Phantom, but then this will

open access to you to a broader market of regulated derivatives markets.

And hopefully also open sort of the over 10 window or just the, you know, the aperture

of the discourse around what do we do about DeFi derivatives and innovations there, but

this sort of a baby step to making that happen.

How would you say those conversations are going, Brandon, I mean, are you having meetings

with the SEC and the SEC and the CFTC?

I guess maybe compared to, obviously compared to the prior administration, I'm sure it's

going much better, but just in terms of like the conversation around DeFi, it's still

maybe a bit of a sticky topic, maybe a bit of a, you know, still a bit unclear around

that.

So how are those conversations going?

And do you think that the conversation around like self-custody and DeFi is going better?

You know, are they understanding it more?

Kind of what's your read on how regulators are thinking about it at this current moment?

Yeah, well, yeah, obviously definitely a night and day difference from the previous

administration's posture around digital assets and blockchain tech.

Like I said, both CFTC and SEC feels like every day there's some new news out from them,

which is demonstrating how pro innovation they've been.

And when we talk to folks like this, I think the way that we view our role specifically

is very much this educator type of role, especially as a consumer app that is actually tangible

and people can play with.

So it makes it a lot easier for us to approach one of these conversations in a super productive

way, show regulators what blockchain tech looks like today.

It's not the so scary experience from 10 years ago.

I think a lot of their perceptions are shaped by a lot of outdated notions.

And so yeah, we can show them what sort of the modern day on-chain finance experience

looks like, that's sleek and mobile, et cetera, with consumer protections and things like

that.

That's a big topic for them as well as a lens that they take when they approach our

live conversations is around consumer protections.

And so obviously being a consumer product, we're able to communicate with them a lot easier

than stay a protocol company that's a little bit more niche.

So yeah, overall super bullish on everything going on and yeah, really proud to play

our part in moving all this stuff forward.

Yeah, Brandon, I know one of the big aspects of the no action piece seemed to be the

self-custodial nature of Phantom, like that was a pretty big piece and I'm sure it took

some effort to get the CFTC's head around sort of the walled architectures you guys were

using.

And one of the things that maybe this opens up from my perspective because I obviously

got a lot of questions internally on this when the no action letter came out was this

could potentially open the door for others to like maybe like a metamask or some I guess

more self-custodial wallets like that to be able to plug in obviously I think the industry

is kind of over relying on like similar facts and circumstances to be able to do stuff.

So obviously this really just applies to you guys for right now, but how do you think

self-custody will play into this and business models like this versus maybe like more custodial

interfaces and the rules that apply to them like how much of your technology stack was was

like a differentiating factor here.

Yeah, so I guess just to adjust the first part of what you said.

So one of one of our goals with this was to do something that really helped further the

ecosystem and really wanted to position this as something that was kind of helping to

lead the way or a template that other people can follow.

Obviously it's not a full rulemaking or legislation so it cannot necessarily be relied one-on-one

a one-to-one from another party, but I think we did pretty good job in terms of trying

to make it template-tizable enough for other members of our industry.

In terms of self-custody, I think basically there's always going to be a world where there's

self-custody solutions is always going to be a world where there's custody solutions.

Our goal is to make all of the experience and technology around self-custody match the

ease and safety of use that Custody can provide while maintaining sort of the core aspect

of self-custody, which is literally you know, you custody your own assets and your control

of your own assets.

And yeah, I do think that because that's such a different concept, you've never really

been able to connect to the internet with self-custody assets in your physical wallet

before, you know, it's just kind of breaking a lot of regulators' brains around what that

actually means.

And so I think we'll still be in this period where there's going to be a lot of education

needed for regulators and consumers, but I'm pretty optimistic that, you know, self-custody

tech is basically going to be as invisible and as seamless as normal custody tech in pretty

short order.

Okay.

Great.

Thank you so much, Brandon, for coming on.

Yeah, thanks, Brandon.

And congrats again.

Yeah.

Yeah.

Yeah.

That's easy.

Oh, thanks.

Alrighty.

So it reminds me to check my phantom wallet.

Do I have a ton of knowledge?

Always a kiss.

Don't mention it.

Yeah, there we go.

Yeah.

Alrighty.

The SEC CFDC interpretive guidance included 16 crypto tokens as examples of digital commodities

including Bitcoin, Ether, XRP, Doge, Cardano, and Solana offering long-awaited clarity to

many projects that were previously sued by the SEC as unregistered securities.

And Smith is the president of the Solana Policy Institute, and she remembers that period

very well.

Kristen, welcome back to CIA.

It's great to be here.

Thanks for reaching out and having me on.

Good to see you.

Good to see you.

Yeah.

It was a salt Wyoming, right, when we had you on the podcast for the first time, it feels

like a long time ago now.

You were sick.

I know.

It was nice to be sitting around the fire.

I think we're all in our hotel rooms or whatever we're at today, you know.

Except when we were getting attacked by sprinklers, if you remember that.

Yeah.

And some people cut in and walked in kind of soft, but.

Yeah.

Well, let's start with the guidance, the interpretive guidance, because that's sort of been the killer

headline of the week, I think.

But at a high level, in your view, what do you think is actually changed here?

And what do you think people should be paying attention to that might not actually be like

as obvious just from sort of the headlines and the media articles from this week?

Yeah.

Well, I think back to not even the Gensel years, but like the J Clayton years when the

ICO boom was happening and all of these projects were issuing white papers and issuing tokens.

You know, there were a bunch of questions around how the securities laws apply to crypto.

And so you had all the crypto lawyers that were going out there trying to look at the case

law, look at what was happening and make their, make their best guess.

I think we would have killed for something like what we got this week that many years ago,

because it would have prevented a lot of the litigation that happened during the Gary

Gensler administration.

So I think this is a hugely significant piece.

It's, I think it's about 68 pages long.

It's very substantive.

It defines five different categories of digital assets and four of those five categories

are not securities.

It's pretty clear about that.

It goes on to name some tokens like Salana that are part of ETFs as specifically being

among the many tokens that are not securities.

But more importantly, the thing that had confounded the crypto industry for a long time that

there was a lot of discussion about how to navigate is the how we test.

And that's, you know, where you have an investment of money into a common enterprise where you

expect a return based off of those efforts.

And, you know, for the first time, the SEC has explained, you know, a workable pathway

for how to deal with that.

And it essentially comes down to what are you promising the project will do?

And once you've filled that promise, then you are no longer a part of an investment contract

and can move forward.

And so I think it's, it's incredibly encouraging.

I think there are obviously additional steps we want to see.

And we've, we've the chairs of the agencies have talked about doing follow-on wool

makings to make this something that has, you know, some ability to some staying power.

But I think it was, it was an incredible step forward and also very complimentary to the

legislative process that's going on right now.

With this in mind, Kristen, how does this guidance kind of impact how exchanges and training

platforms and those kind of ones that are, you know, listing products, especially things

like derivatives or tokenized assets?

Yeah, I think that today the exchanges have a pretty robust process for doing this and

have taken particularly in the last year a more aggressive approach when it comes to listing

new assets.

And so I think this will give them more flexibility going forward.

I think the audience that is most impacted by this are potential builders of new projects

because they have a pathway forward in some, some, the guidance to look at when trying

to figure out, you know, how to go about structuring, you know, raising money to build their

project and what that pathway looks like.

And so I think this should, this should for new projects and new innovation here in

the US.

Yeah, Kristen, on that point, I don't want to get too deep in the weeds on like the

legalies of some of the like funding arrangements that we use now, but like you mentioned sort

of the ICO period, we've moved on to like a safe warrant structure for a lot of projects

that obviously does include an investment contract, but then potentially ends and then the warrant,

you know, when the, when the network is launched effectively, investors are, I guess, not

losing rights, but are changing into a different type of interest in the project.

And then I know the staff was also like explicitly mentioned in the guidance.

When you say new builders approaching fundraising mechanisms, like, how do you see this playing

out?

Do you think there's going to be maybe opportunities for projects to be lighter touch

on the initial kind of things that they're putting out there or that largely maybe this

will, will remain similar in, in the way that you're kind of raising from the DevCo with

equity and that's clearly an investment contract and they're moving beyond that.

Like, how are you thinking about how that plays out?

Yeah, well, I think, you know, right now, within the absence of legislation, you know,

this is a pretty open-ended, almost choose your own adventure type style of fundraising.

So I think, I actually think that the SEC putting this out there should incentivize

Congress to get the legislation done.

And actually, I think particularly puts pressure on the democratic side to get things done.

But no, I think this will provide some more flexibility that doesn't exist today.

I think that it allows projects to define what they want to build and not have to tailor

what they're building to a specific, like, decentralization milestone.

And so I think that, you know, I think a lot of it is going to, you know, the investor is

going to need to, like, look very deeply into what they're building and what they're promising

and to make sure that makes sense.

And so I think investors, you know, professional investors, but it's to the point

if this reaches retail investors need to look very, very closely at these things.

But I think it should provide a lot more flexibility and not have the situation

where projects either choose to just not want to begin with or to go overseas to do it.

I think this is a real strong signal that we want this innovation here in the United States.

You know, we mentioned that Solana having digital commodity status.

Obviously, it's a big unlock for clarity, Kristen and for so long, so many projects

were kind of operating under the question of my security and my commodity and my something

in between.

But is this more so just kind of like clearing up, you know, what the crypto community

already sort of knew that a lot of these tokens are not securities and are actually commodities?

Or does it actually sort of like fundamentally change things in the ecosystem for some

of these projects?

So like Solana being a commodity, that doesn't change anything for the ecosystem.

It's kind of just business as usual.

It's like, okay, we just know, we know what we are now and we can move forward.

Yeah, I mean, I think listen, we thought Solana was a commodity for a long time.

We thought it going back many, many years now, but particularly when the ETFs went live

this past fall, that really kind of confirmed the status.

But it's very helpful for the SEC to say that, you know, I don't think, you know, people

talk about this world where we go back to, you know, Gary Gunsler's twin brother shows

up and is running the agency.

And I just think, you know, at the passage of the Genius Act, you have a lot of blockchains

out there where stablecoins are being issued on top of them and, you know, you're not going

to want to have that sort of disruptive litigation that you had in the past.

But no, certainly was wonderful to see that in there.

And I think that, you know, the one thing we've learned with the securities litigation

over many years is that it turns out the crypto lawyers were right.

You know, there was a big difference of opinion between how the SEC was viewing the application

of securities laws and how the courts or how the crypto industry were.

And, you know, in most of those cases, the court sided with the crypto industry.

It turns out we can hire some pretty smart and fancy lawyers to figure all this stuff

out.

And so I think it's just really reassuring to see the agency do this.

And to do it in a way where both the SEC and the CFTC are on the same page, they're

agreeing that the same taxonomy and the same framework.

And it's just a really refreshing way to deal with regulators, you know, as they're trying

to figure this out.

Now, obviously, there's more steps like I mentioned.

We're going to want to see rule makings that put some of this into, you know, officially

on the rulebook.

And rule makings are important because it takes a long time to do a rulemaking.

And then to undo that rulemaking, it also takes a long time.

And so it's not as sticky as, say, a legislative fix is, but I think that, you know, this is a

really nice way to get the process going while Congress wraps up the work that it's

doing on the clarity act.

Yeah, Kristen.

Yeah.

Yeah.

So to change, yeah, Jacqueline, go ahead.

I think you're going to ask this.

No, no, no, you go.

Please.

Okay.

Well, we were told that you're speaking at the American banker on chain summit later on

today.

I believe a panel with someone from ABA.

Are you going to be talking about the stablecoin yield debate at all?

We know that's been a hot topic, especially on our show, but definitely in the crypto industry

as a whole.

I think it's going to be a great respect for your panel later today.

Yeah.

I imagine that that as a topic that's going to come up, but I was on the train yesterday coming

up to New York and sitting across from me was Nick with with coin desk is going to be

a moderator and you more or less told me that he's going to be opening with that question.

So I think that, you know, listen, the clarity bill is at a hugely important moment.

You really, you know, want to see this bill enacted.

This bill is has potential to be very, very good for crypto and is very good for Salana.

You know, there are some details that need to be worked out there.

There are essentially sort of five big open questions.

And to get to the other four questions, we have to solve the rewards yield issue.

And I know there are a lot of discussions going back and forth between the banks and crypto.

And I think most importantly, you know, senators tell us and also Brooks in the Senate.

And so, you know, I think that there, there's a lot of progress.

It sounds like they have text.

I don't know anyone who's seen the text and I've talked to a lot of people.

And so we need to, you know, make sure that this is something that is that is workable.

But, you know, I think we're, I'm very encouraged by the level of attention that this is getting

in the Senate right now.

And if we can get that piece done, then I think some of the issues around the tokenization

language, just the defile language, some of the title one issues that deal with disclosures

and who can do those, you know, those are separate conversations that are moving along.

And they're moving along fairly well, I think, you know, they're not maybe perfect.

But I think the dialogue is very good.

And so I'm optimistic that those issues will get, you know, addressed.

And then ultimately, there's the outstanding kind of ethics issue with the Trump family

businesses.

And I think that is probably the last issue that is going to get fixed.

So I mean, listen, this is like really hard stuff, right?

Like those don't just pass, like we've talked about this before.

Like I think this is, this is incredibly ambitious.

But all the pieces are there, you know, the, the sort of political dynamic is there.

The policy substance is there.

We've got the right members of Congress and both the House and Senate in the room.

We have the White House in the room.

Like this is, this is a recipe for an environment that can get a bill done.

And so I think that the pressure is on.

And, you know, hopefully we will see some developments in short order here.

Because at some point there is, you know, it does take time to get these things through

through the committee and through the floor and then back over to the House.

And we want to make sure that, you know, there's enough runway between now and the end of

the Congress to get a bill to the President's desk.

So with all this in mind, then, Chris, and what would be the timeline that you have for

actual clarity to come through?

Well, so the Congress goes through, you know, the end of the year.

I guess technically like January 3rd.

And the big wild card is the Congress going to do anything in December because, you know,

you could very well have a final House vote on an identical bill or something in December.

But the problem is that's not a guarantee.

So you really want to scoot it up to the fall.

Congress in midterm elections tends not to be around in Washington much during October.

So there's that kind of September window there.

It's a really tight window because that's when all the appropriations bills need to get

done.

And they have to fund the government.

Everyone wants to get out of town.

But again, there could be time for a vote there.

But I don't think we want to have to depend on September.

So that puts us into, we really need to get this through by the August recess, which starts

in early August.

That's when when Congress goes home.

And so, you know, that's two weeks in April.

It's a couple weeks in May, a couple weeks in June and a couple weeks in July.

So there's time there to do it.

But, you know, we got to start doing that.

If you recall with the Genius Act, that took about four weeks to get through the Senate

floor.

And this is, you know, a significantly more complicated piece of legislation.

And so we want to get the bill out of the committee as soon as possible so that, you know,

they can begin the process of working it through the Senate floor.

So Chris, one of the dates that we heard thrown around a lot this week was like June, July.

And it sounds like if you had to put on over, over under to be it, like signed on the

President's desk, it sounds like you're a little over on that.

I think we have a little bit more time.

I mean, I listen, time pressure does like amazing things, right?

Like we can debate something all day long, but when everyone has their plane tickets and

they're ready to get on a plane and go back home, sometimes they just coalesce around

and knock things off the to-do list and get it done.

I do think, you know, some people have said, well, the midterms are starting now, you

know, that this is kind of the time, like if we don't get something done immediately,

this is sort of the time where everything jams up.

But I think crypto is a unique issue in that there is bipartisan interest in getting something

done.

And so compared to like a typical issue that is maybe more partisan, I think that, you

know, we have a little bit of a longer window than a different issue might have.

And so, you know, again, we don't want to like play with fire here.

We want to get it done as soon as possible.

But I do think that, you know, if we can get it out of committee, you know, by the end

of April, there should be plenty of time to complete the rest of the process.

All right.

We will see.

Kristen, great takes.

Thank you so much.

Thanks for having me.

You're good to see you.

All right.

Well, to wrap us up, let's get Lewis Cohen in to come and talk about all of this stuff.

He is, well, Lewis Cohen.

We've had him on the show.

He's great.

Friend of the show.

Yeah.

He's the new crypto lawyer, aka Kay Hill next own.

Come on in Lewis.

Good to have you back.

Hey, Ellie, guys, thank you so much for having me.

And this is a great conversation.

I agree with a lot of what Kristen said.

And I've spent a lot of time thinking about the SEC guidance.

I think the way I look at it, guys, is it's an amazing bridge toward clarity.

The clarity act is the real solution here.

I think what the SEC is doing with this guidance is helping people sort of make it from the current

state to that state.

The challenge here is there's a little bit of a slight of hand going on.

It's great that the SEC is confirmed that most crypto assets are not themselves securities.

But if they have these promises or representations following them around, then the transactions

are securities transactions and all the same rules apply.

So we have a little bit of Heisenberg's uncertainty theorem here.

I think the hope and the idea would be for new projects that they be very precise about

what promises they're making when they start, when they end, and everybody knows.

But guys, it's crypto, right?

Never works that way.

There's all the legacy assets.

What were they saying?

What did they do?

What did they mean?

Are they being trailed around by their promises and representations that are as yet unfulfilled?

And for new projects, there are a lot of ways things happen.

So things that concern me here are the potential.

We know that the SEC did a great job by confirming if a promise or a representation is made

after a sale takes place, nobody's relying on it.

Totally fair, great, great point.

But many projects do multiple sales.

So let's say you do that big initial TGE sale, half your supply rate raised tons of money,

and then three months later you do a much smaller little sale, but you make some promises

or representations there.

All the tokens are fungible.

Did you just have sort of the like carry, you know, the hand coming up from the, oh, no,

you're back to being a securities transaction?

There's a lot of uncertainty in terms of how this works.

So it's a fantastic effort.

I can only commend the commissioners and the staff for pulling this all together and getting

it done.

But we just need to move toward clarity.

This is not an end state.

It's not an end state where people can have certainty about what they're dealing with.

The other concern I have, and Gerald, I know you and I talked about this a bit, is around

disclosures.

And one of the things that I think is absolutely inadvertent here, but if the standard

for something falling into that securities transaction bucket is that the issuer made

representations of warranties, then what we're going to see is very skinny disclosure.

And we've seen this with some of the sales on big exchanges, very, very little information.

But we know there's much more information.

We know VCs get lots and lots of information privately and not widely disseminated.

That's not an end state we want.

We want everybody to get equal and similar information.

The clarity act would do that.

It would provide a common set of standards.

And most importantly, it wouldn't put people at risk for having securities transactions

for their securities by being clear about what they're doing.

So you're saying because this framework is, or the projects in crypto, they're all,

it's sort of not one size fits all, right?

I kind of look at this thing and it's like, it is almost like, you can't write this broad

crypto framework to fit every single project.

And a lot of the token investment contracts when you say it's ended, right?

That's very subjective.

So how does the SEC kind of square that?

I mean, if a token project comes into them and says, how do we know when our potential

investment contract is supposed to have been reached?

Like, this doesn't really kind of answer their questions, right?

Is that a complaint?

Who is that?

No, you're right, Ellie.

And look, we hope everybody is straight up and down the middle.

I made a very clear, I did a token sale.

I made some very specific promises.

We'll have the canonical bridge to L1 set up, you know, they make a very clear promise.

We'll have the canonical bridge to main net set up by the end of the second quarter.

It's the end of second quarter.

The bridge is up.

Great.

Wonderful.

But sometimes projects can be a little loosey, goosey about things.

What if a project says something's been fulfilled, but everything?

So sure you fulfilled that promise there, buddy, right?

How do we interpret that?

Are we now free from being security transactions?

And one of the most important things is that there are many market participants for whom

it really matters.

If you're a broker, a dealer, a market maker, many different parties, you need to know

are you engaged in security transactions or not?

And if you're not sure, you're going to air on the side of caution.

And what I worry about with the framework is it's going to pull actually, ironically,

much more back onto the security side.

I think with the Clarity Act, we'll have much more clear and bright line rules.

So again, I want to emphasize, this is a fantastic effort by the SEC.

I just don't think it would be a real shame if this was an end state, because it would

really, I think, clutter the and create a lot of noise as people try and figure all these

points out.

So yeah.

Yeah, Luis, I want to dig into the disclosure piece and the, I guess, number of parties

who are involved in a lot of these, like, larger ecosystems, right?

So we've talked before about, in this legacy model, maybe it's a foundation or it's another

entity that actually launches a token.

It's the labs code that's making a lot of these initial promises that you're talking about

to the private market investors.

And then even if you're looking at a secondary sale on exchange later, it's probably not

the labs code that's selling that so like, how do you think this gets squared?

One with just the legacy model where there are a lot of entities involved and who have the

potential to sell a digital commodity or network token versus like what we're actually going

to be expecting from all those different parties if we get clarity or just operating under

this guidance.

It's a perfect question, Gerald, and you're right.

The concept of issuer and the guidance actually includes people who are affiliates, which

is a very broad group.

People who are promoters, I don't know, who's the promoter is a VC fund, a promoter.

People who are agents, you know, oh, you did a token swap with somebody.

Are they now your agent?

You know, they're going around promoting that KOLs, you know, KOS.

Are they, you know, where's all this going?

So I think that raises a lot of concerns about, you know, who's going to be doing what,

who's responsible for what.

And I think ultimately what we're going to see is a bifurcation.

The yellow projects are going to yellow like they do and just not care at all.

And I think what concerns me is the well advised projects are going to take conservative

views and find themselves actually in a much more difficult position, post this guidance,

than they were before it.

Because now they're going to be asking all these, these really challenging questions about,

was that am I responsible for that statement or not?

You know, was that person an affiliate, were they deemed to be my agent or a promoter

that I'm responsible for?

There's, you know, and again, when do these promises begin and end?

And there's new promises.

One of the things I think people forget, crypto is software and software is never finished.

People are constantly iterating and there are teams and we look around, right?

We want people to iterate, we want people to develop.

But these are large teams, very often labs will have 100 or 150 people working for them.

You know, saying that there's no managerial efforts there, really, there's nothing anybody's

doing over there.

So I think, you know, so I think we don't want to scare that off.

We want the people, the builders to build.

We just don't want them to be worried that if they talk about what they're doing, all

of a sudden they're going to backdoor into being subjects of security's regulation.

And I think clarity addresses that.

I think this is a great star.

And hopefully, like, you know, Kristen said, it's a bridge to really provide that impetus

and drive everybody forward and let's just get clarity done as the message.

Yeah, Lewis, I mean, the idea that a token can be sold as part of an investment contract

is something that, you know, the prior SEC under Gensler pushed for.

And it's not included in the clarity act as is.

So why do you think they chose to reinforce that here instead?

It's a great question, Jacqueline.

And I'd say it's because it's the best available choice to the regulator.

Congress's job is to fix the law.

The law doesn't really cover that situation.

And I think the SEC is trying to find a way to sort of say, look, there is stuff going

on and we don't have a means to ensure that investors are protected.

So we're going to just say these are securities transactions.

There's no law.

Let's be careful.

And I think you guys know we wrote this giant article, Intellectable Modality of Security's

Law.

And we went through every security case.

So how a case that implies that an asset that's not a security sold later is somehow trailed

around by its promises.

It's just not a thing.

It's great.

And I applaud the creativity.

It's trying to solve a problem of how do we fit, you know, a square peg and threw around

hole.

And I think it's a good effort.

But it leaves so many interpretive questions on, well, how exactly is that going to work

when you get into the details that really what it is is best viewed as a bridge toward

clarity, rather than I think a long term and state that people will have to, or if it

is, there will be a lot of guidance and a lot of nuance and frankly, a lot of paying

lawyers.

I don't want you guys to have to pay me.

Go do your stuff.

Build your stuff.

Don't go buy expensive lawyers, right?

You know,

Yeah.

I know we could talk for a long time about this.

And we will.

It's at another point.

But before we let you go, I want to ask you something about what you said on more compliance

sort of well-backed projects, getting stock or sort of pigeon hold here versus some of

these projects that will yellow or like may decide in the end that even with this guidance,

like an offshore model is better for them.

One of the takes that I've seen out there is that this actually could incentivize projects

to go with a more limited scope of promises to begin with, right?

And so how do you think that this, how do you think that we fix that element of it where,

you know, I'm just, hey, it's a network, read the white paper, good luck, like, how do

we square that?

Yeah, it worries me, Gerald.

I mean, we've seen, well, we won't name any particular projects, but we've seen some

large-scale projects go out with very, very limited information and I don't think that's

good for the market.

I don't think it's good for the project.

I think we want to be able to tell the people in the space what we're doing, how we're

developing, how we're responding to new developments in the market, everything's changing.

Imagine if Uniswap stopped at V1 or V2 and didn't continue to progress.

We want and need that development.

If what we're doing is scaring people, saying, gosh, if I tell people where my roadmap

is going, all of a sudden now I'm going to be potentially bringing my token back into

being part of an investment contract transaction, the people aren't going to say that.

They're not going to say it publicly, but they'll probably tell their venture investors,

they'll tell folks.

One of the scenarios, Gerald, I wondered about is, let's say you're at a conference,

and somebody says something at a conference, and Nick Day is there, and he picks it up

and records on it.

Is that the kind of Raman, and you say something, you know that reporters are in the room.

It's now widely disseminated.

That just create a new promise ahead of a token sale.

They're just going to be, and again, the yellow projects were yellow, but the well-advised

projects will, you know, oh my goodness, what do we do now kind of thing?

And we don't want that.

We want people to know going in, where they stand, and allow them to build and grow the

space, and just, you know, get stuff done.

Absolutely.

Well, hopefully we'll get more clarity, and then we'll be done with that word for a

while.

We'll see.

But yeah, really enjoy the conversation, and look forward to talking again soon.

Thanks, Lewis.

Thanks, y'all.

Appreciate it.

Yeah.

We got to have them on for a full hour.

Be so entertaining.

Yeah.

Have a good day, Drew.

Yeah.

All right, guys.

Great show today, and good job this week.

Great.

We can do see.

Yeah.

Yeah.

Good day.

All right.

Bye, guys.

Yeah.

Yeah.