If you’ve been paying the least amount of attention to the digital assets space, you will know that there are few clear answers to what the law and regulation will allow. 

Clients come to us in a fog of confusion. The [insert regulator name here, but for the sake of this blog, we’ll use the SEC] SEC says one thing, their enforcement cases say another, ‘legal experts’ on Reddit or discord have their opinions, and then there are the countless projects which seem to be operating in ways that don’t square with any of the above.  

Clients come to us with questions and confusion. Over time, it has become clear that there are a few key principles that help clients make decisions based on legal advice in this environment:

1. Almost any decision is going to have some risk. We can give advice about the letter of the law and the most likely interpretations of that law. Still, in an environment where the regulators are not clear, where their statements and actions don’t match, and where there isn’t a clear pattern to discern from their enforcement patterns, anything short of obtaining a ‘no-action letter or an advisory opinion (depending on the relevant agency) will have some risk.
2. What is the goal of seeking advice? There’s a difference between being right and staying out of trouble. For MOST clients, enforcement action would present unsustainable consequences, primarily financial and reputational. For example, while Ripple has survived (even thrived) reputationally after the SEC filed its claim, I would estimate that they have paid tens of millions of dollars in legal fees to date. Not many projects can sustain that level of spending, even if they prove they are right in the end. If you are in that camp, you are likely seeking advice to stay out of trouble, in which case, all of the interesting (and valid) arguments about how the SEC has it wrong are largely irrelevant. Interesting, but not helpful for real-world decision-making. It’s helpful to your attorney to be clear about what your goals are so they can provide the appropriate advice.
3. It’s really hard to reverse engineer other project’s decisions from the outside. A common refrain: why can X do this when you have said it’s not lawful for us to? Almost all legal advice is based on specific facts and circumstances. There are so many reasons that X might be doing a thing, most of which are impossible to detect from the outside, some of which might lead your attorney to conclude that their activities are compliant with the law, others might lead your attorney conclude that they are not. That’s not to say that it’s not occasionally useful for me to look at a project and use it to interrogate my own analysis and to spark some new thinking, but it’s almost always impossible to know for sure why they are doing what they are doing, and whether it’s compliant.