US digital asset disputes updater: exploring the latest cases, regulatory developments, and legal trends

Key Takeaways:

• Legal notice via NFT allowed in Celsius bankruptcy
• SEC’s Division of Examinations announces crypto priorities for 2025
• Wells Notice issued by SEC against Web3 company Immutable
• Consensys emphasizes SEC “regulatory power grab” in answer to SEC’s suit

Recent Legal Developments

Legal Notice via NFT Permitted in Celsius Bankruptcy

Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York recently ruled that the litigation administrator of the Celsius bankruptcy proceeding can notify defendants via “airdrop.” An airdrop takes place when a token is sent to a wallet address. Judge Glenn explained that “this Court finds that service via NFT is the best possibly way for the Litigation Administrator to provide Defendants with notice,” explaining that “the airdrop process is automatic and does not require the recipient to take action to receive the NFT.” As such, NFTs will be used, in part, for service in the Celsius bankruptcy. 

Insight: Service via NFT is not a novel approach—other courts have greenlit this method in the last two years. In reality, this method is likely a little more direct than email so long as the wallet remains in use. However, an NFT being airdropped as notice does speak to the benefits of blockchain technologies: that these are immutable, public ledgers which can be integrated into the public infrastructure of courts. 

SEC’s Division of Examinations Announces its 2025 Priorities

The SEC’s Division of Examinations has announced its priorities for 2025, and digital assets have been mentioned. The Division stated that its priorities for risk areas included crypto assets, explaining that “[e]xaminations of registrants will focus on the offer, sale, recommendation, advice, trading, and other activities involving crypto assets that are offered and sold as securities or related products, such as spot bitcoin or ether exchange-traded products.” Moreover, the Division’s examinations will ask whether registrants “routinely review, update, and enhance their compliance practices (including crypto asset wallet reviews, custody practices, Bank Secrecy Act (BSA) compliance reviews [and more])[.]”

Insight: The SEC’s Division of Examinations have not significantly shifted their priorities—though enforcement itself may change following this election—compared to last year. However, one new note is that the SEC has appended to its crypto assets section the words “crypto assets offered and sold as securities or related products.” This addition does suggest one key clarification that the SEC has already committed to in filings: that digital assets themselves are not securities. This clarification, alongside election results broadly, may well portend new horizons for digital asset regulation. 

Immutable Receives Wells Notice

Immutable, a Web3 gaming platform built on Ethereum, has recently received a Wells Notice from the SEC. In a statement, Immutable explained that they had “received a Wells notice from the SEC, the latest in their de facto policy of regulation by enforcement,” likely regarding their IMX token sales in 2021. Wells Notices have become all too common for the digital asset industry, with crypto firms pushing back due to unclear regulatory guidance from the SEC. As such, Immutable stated that “[t]he industry desperately wants clear guidelines for compliance[.]” Immutable ended its statement by noting that they would “keep building,” pointing to a call from SEC Commissioner Hester Peirce for regulatory clarity.

Insight: New Wells Notice issued—though now for a Web3 gaming platform. Immutable has been a key part of the Web3 gaming space for some time, having issued its Immutable X (“IMX”) token in 2021. Wells Notices are, as noted above, seeming all too common for digital assets now, and suggest the existence of a pre-election systemic risk regarding the issuing of digital assets. However, perhaps now those winds may be changing—and perhaps SEC Commissioner Peirce may yet be proven right for regulatory clarity. 

Consensys’ Answer to SEC: S.E.C. v. Consensys Software Inc.

Consensys, the blockchain software developer behind the MetaMask wallet, has filed its answer in the SEC’s suit against the company. For context, the SEC sued Consensys for allegedly acting as a broker, offeror, and seller of securities through its non-custodial “Swaps” and “Staking” features. In its preliminary statement, Consensys explains that “[t]he SEC is wrong on the facts and wrong on the law.” Further, it notes that the SEC is wrong because (1) Consensys’ MetaMask features are simply user interfaces, like web browsers; and (2) none of the activities alleged deal with securities, as digital assets are not themselves securities. Throughout its robust answer, Consensys reaffirms these positions.

Insight: Consensys’ answer is forceful in its contention that it’s a software developer, not a broker. This concept is similar to the arguments made around the SEC’s proposed Alternative Trading System rule and DeFi—and, moreover, SEC Commissioner Peirce’s core question in the wake of the SEC’s dealer rule finalization: “How can a software protocol register as a dealer?” This question is more than appropriate—a wallet is software, much like a DeFi protocol. This case will certainly be one to watch unfold. 

The Mempool: Noteworthy Reads:

• The Case for Cross-Chain Aggregation: Marc Boiron, CEO of Polygon Labs, has put out an opinion piece making the case for cross-chain collaboration: aggregation. Through an aggregation layer, he explains, cross-chain settlement would be possible and that would enable even greater levels of flexibility across all platforms. It’s no surprise that traditional platforms like Swift are also exploring similar capabilities—but are doing so using blockchain technologies.
• Is Crypto M&A Back?: Following Stripe’s recent acquisition of stablecoin platform Bridge, Yogita Khatri wrote for The Block about the growth of crypto M&A. As they note from interviews, the market is maturing, leading to more comfortability to mergers and acquisitions, as well as the growth of stablecoins as an alternative payment method. Khatri’s article provides great insight into the potential future of crypto M&A as well.
• Digital Gold: BPI’s Policy Brief: The Bitcoin Policy institute just published a policy brief on a strategic Bitcoin reserve for the United States. The brief emphasizes the strategic benefits of the United States holding a Bitcoin reserve, as doing so would foster technological and economic strength, and emphasize financial inclusion amongst the unbanked.

If you have any questions about these developments or your own digital asset-related litigation matters, please contact NRF’s Digital Asset Disputes team to set up some time to discuss your questions.