Coins Research Papers - Academia.edu (original) (raw)

Cryptocurrencies such as Bitcoin and Ether encourage the owners of computing resources to bring ever-increasing levels of processing power to bear in validating the distributed ledger of cryptocurrency purchases and sales. Initial coin offerings (ICOs) involve the sale of cryptocurrency coins or tokens with the aid of on white papers. Crypto coin white papers involve a mixture of scientific, sociopolitical, and economic speech. They often contain extended arguments for how users of the coins and the Internet or society in general could benefit from a new way of organizing economic relations, assembling and deploying assets, or exchanging messages or entitlements. While they share some similarities with forms of commercial speech that enjoy quite limited First Amendment protection, they are arguably more similar to other economic statements that enjoy First Amendment protection against censorship, or to direct advertisements that are deemed insufficiently misleading to result in civil liability. Nevertheless, some interpretations of U.S. securities and commodities law would prohibit authors of such white papers from raising funds for crypto coin platforms if the coin's users expect to earn a return on their investment and rely on the coin issuer's expertise or representations.

This article explores principles of free expression that could shield truthful speech and subjective opinions about new crypto coins from some of the worst chilling effects of U.S. laws. It examines ways in which crypto coins may benefit marketplace participants and economic efficiency, including by providing a beneficial alternative to traditional software app stores, logistics infrastructures, or banking and payment systems. It then surveys the First Amendment and other constitutional issues that onerous regulations raise, and draws analogies to doctrines that reconcile the freedom of economic expression with the cause of consumer or investor protection under the Lanham Act, the Securities Exchange Act, state deceptive practices laws, and the law of warranties. Several themes in the case law are ripe for application to ICOs: the need for precision and proportionality in framing regulation, the proscription against regulatory overkill and one-size-fits-all approaches, and the requirement that basic freedoms be preserved. More specifically, the securities or commodities are not properly read as applying to many crypto coin offering papers, and describes other concepts such as virtual commodities or virtual barter systems from other jurisdictions that may be a better fit.

The article urges American lawyers and judges to probe thoroughly whether the interests served by prohibitions and penalties on crypto coin speech justify the burdens imposed on information providers. Regulating false statements of existing fact and enhancing the remedies for making them will be more effective and less constitutionally infirm measures than those aimed at preempting merely potential harm. Courts must balance the values of fraud prevention and remediation with the values of freedom of expression and expanded economic opportunity. Analogous fields of law provide several tools with which to achieve this balance, including the distinction between general or universal fraud prohibitions and narrower securities or commodities regulation regimes, the difference between forward-looking and other statements in several area of fraud law, First Amendment principles governing professional and occupational licensing, and rules against vague or discriminatorily enforced regulations.

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