Značka: sec

CFTC chief says Bitcoin is the only commodity in the wake of FTX collapse

The chief of the United States Commodity Futures Trading Commission (CFTC), Rostin Behnam, claimed Bitcoin is the only crypto asset that can be viewed as a commodity during an invite-only crypto event at Princeton University, reported Fortune.Behnam’s comments are quite a contrast to his early statements in October, where he claimed Ether (ETH) could also be viewed as a commodity. The CFTC chief was answering a question on which crypto assets should be seen as commodities and which ones qualify as securities.The CFTC chief’s backtracking of his comments on ETH comes in the wake of heavy scrutiny of U.S regulators and accusations of corruption, with Republican lawmakers accusing the SEC chair of coordinating with FTX ‘to obtain regulatory monopoly.’The debate over which cryptocurrencies qualify as commodities under the law has been a long-drawn one. Bitcoin is unanimously seen as non-security because of its true decentralized nature whereas the status of Ether and several other cryptocurrencies have been a controversial topic. Ripple is currently facing a security lawsuit from the SEC as well.The American financial regulator has found itself in hot waters in the wake of the FTX crypto exchange collapse primarily because of its association with the exchange. CFTC was poised to receive oversight capacity through proposed Senate legislation called the Digital Commodities Consumer Protection Act (DCCPA), The CFTC chief faced a lot of criticism for the same but defended the commission’s actions claiming they don’t have the luxury to wait.Behnam said the committee has limited oversight powers and blamed the “matrix of regulators” as an imperfect system. However, he called for better collaboration among the long list of regulatory bodies to come up with formidable regulations.Related: Here’s how the CFTC could prevent the next FTXThe CFTC chief is slated for a congressional hearing on Dec. 1, discussing the collapse of the now-bankrupt crypto exchange FTX and the lessons learned from the debacle. Breaking: 8 Congress Members tried to stop the SEC from inquiring into FTX by questioning the SEC’s authority to inquire about Crypto5 of those 8 members also received campaign donations from FTX, ranging from $2,900 to $11,600— Nancy Pelosi Stock Tracker ♟ (@PelosiTracker_) November 25, 2022The close ties of former CEO Sam Bankman-Fried with US policymakers and his lobbying efforts to make CFTC the primary crypto regulatory body has been questioned by many in the crypto community. A recent report also alleged that 8 U.S. congressman tried to stop the SEC from inquiring into FTX.

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EmpiresX 'head trader' to face 4 years of prison over $100M crypto 'Ponzi'

One of the leading figures convicted of being behind the $100 million crypto “Ponzi” scheme, EmpiresX, has just been handed an over four-year jail sentence by a United States court.The sentencing was handed to Joshua David Nicholas, the “head trader” of purported crypto platform EmpiresX, who is nowset to serve a 51-month prison sentence along with three years of supervised release for his role in the fraudulent scheme. It follows a Sept. 8 guilty plea from Nicholas for conspiracy to commit securities fraud.According to the Department of Justice (DOJ), over a two-year period, Nicholas made claims the platform would make daily “guaranteed” returns using a trading bot that utilized “artificial and human intelligence” to maximize returns. In reality, the “bot” was fake, and Nicolas and his associates, Emerson Pires and Flavio Goncalves, operated a “Ponzi” scheme that paid earlier investors with money from later investors. The DOJ alleges blockchain analytics shows Pires and Goncalves, both Brazilian nationals, laundered investors’ funds through a “foreign-based” crypto exchange.Only around $1 million of investor funds were sent to a futures trading account for EmpiresX with the majority of funds either lost or misappropriated according to the Commodity Futures Trading Commission (CFTC) which filed civil actions against the three in June.At the same time, fraud charges were leveled against the trio by the Securities and Exchange Commission (SEC) which said investor money was used to “lease a Lamborghini, shop at Tiffany & Co., make a payment on a second home, and more.”Related: HashFlare founders arrested in ‘astounding’ $575M crypto fraud schemeInvestors were also told EmpiresX was registered with the SEC as a hedge fund and that Nicholas was a licensed trader.The SEC said the platform was never registered with the Commission and Nicholas’ was suspended from trading by the National Futures Association for misappropriating customer funds.The scheme ran for two years, from around September 2020 until early 2022 when it fell apart as the platform refused to honor customer withdrawals who were likely wanting to leave the crypto market due to significant price drawdowns that began at the time.Pires and Goncalves, who were residing in Florida, allegedly began winding down the operations of EmpiresX in early 2022 and left the U.S., they are now believed to be in Brazil.

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LBRY says it ‘will likely be dead’ following SEC loss

The firm behind the decentralized content platform LBRY said its days are likely numbered following its recent loss against the United States Securities and Exchange Commission (SEC) in court.It is specifically LBRY Inc that must die, the LBRY protocol and blockchain will continue. pic.twitter.com/SWwbqTq9In— LBRY (@LBRYcom) November 29, 2022The SEC initially took LBRY Inc to court in Mar. 2021 over its LBRY Credit (LBC) tokens, alleging that the firm had been conducting unregistered securities offerings since 2016. The SEC ultimately won that battle last month on Nov. 7, after a judge deemed the tokens to be securities in a major blow to the industry. Providing an update on the state of the business via Twitter on Nov. 30, LBRY Inc explained that the company “will likely be dead in the near future,” however the underlying protocol and blockchain will carry on: “We’d like to be upfront about the fact that LBRY Inc. will likely be dead in the near future. We expect the LBRY mission to continue on, but the company itself has been killed by legal and SEC debts.”LBRY Inc essentially provides a blockchain-based alternative to YouTube that offers less stringent censorship policies on its hosted content. The platform also facilitates direct tips in LBC to content creators as opposed to the standard advertising revenue share model. In the SEC’s case against LBRY, it alleged that LBC was designed for pure speculation, while LBRY had argued that the tokens served key utility functions for its platform such as tipping, publishing, purchasing and boosting video content. Despite the SEC winning the court dispute, LBRY suggested on Twitter earlier this week that the government agency has continued to be difficult to deal with in terms of settlement negotiations. Responding to a post about its Nov. 29 status report on its ongoing SEC negotiations, the company noted that it offered the SEC “everything we have” but this proposal was still rejected. Defense lawyer and former federal prosecutor James Filan questioned whether this was due to the SEC seeking out more drastic stipulations on future LBC sales. “Let me guess. That’s because they want a Consent Judgment that also includes a specific agreement that every sale, even on the secondary markets, is a sale of a security,” he said. In response, the LBRY Inc team simply supplied an emoji showing their lips are sealed. — LBRY (@LBRYcom) November 29, 2022

It is also worth noting that Filan, who has 131,000 followers on Twitter, has remained up to date with the LBRY case due to his long running commentary on the ongoing dispute between the SEC and XRP creators Ripple Labs.Related: LBRY alleges Apple forced it to censor certain terms amid COVID-19 pandemicThe cases are of a similar nature to each other in that the SEC has aggressively pushed to get both LBRY and XRP deemed as securities in court. Given that these are some of the first major crypto and securities related court cases, the outcomes could be seen as reference points for future rulings in the future.

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SEC chair's crypto oversight strategy in question as ecosystems collapse

While regulations are often aimed at protecting citizens from bad actors, the effectiveness of crypto regulations in the United States is in question owing to the colossal fall of major exchanges and ecosystems over the past year — FTX, Celsius, Voyager, and Terra (LUNA).Congressman Tom Emmer showed concerns about the oversight strategy implemented by Gary Gensler, the chair of the U.S. Securities and Exchange Commission (SEC) for the crypto ecosystem. Emmer has been vocal against Gensler’s “indiscriminate and inconsistent approach” toward crypto oversight. On March 16, the Congressman revealed being approached by numerous crypto and blockchain firms that believed Gensler’s reporting requests to be overburdensome and stifling innovation.We are even more concerned now as we’ve seen his strategy miss Celsius, Voyager, Terra/Luna– and now FTX.— Tom Emmer (@RepTomEmmer) November 25, 2022Congressman Emmer had previously asked the SEC to comply with the standards established in the Paperwork Reduction Act of 1980, which was designed to reduce the total amount of paperwork burden the federal government imposes on private businesses and citizens. On an end note, Emmer said that “Congress shouldn’t have to learn the details about the SEC’s oversight agenda through planted stories in progressive publications,” adding that he was looking forward to Gensler’s public testimony before the Financial Services Committee.Related: My story of telling the SEC ‘I told you so’ on FTXAmerican CryptoFed DAO, the first official DAO in the U.S., began a litigation battle with the SEC over 2021 token registrations and opted not to have attorneys in its fight for registration.American CryptoFed also indicated its plans to file a motion for extending the deadline for its answer to the SEC’s Order Instituting Administrative Proceedings.

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American regulators to investigate Genesis and other crypto firms

Cryptocurrency lending firm Genesis Global Capital and other crypto firms are under investigation by securities regulators in the United States, according to reports on Nov. 25. Joseph Borg, Alabama Securities Commission Director, confirmed that its state and several other states are participating in inquiries regarding Genesis’ alleged ties to retail investors, including if Genesis and other crypto firms might have violated securities laws, Barron’s reported. It is still unclear what other companies are being investigated.Borg noted that the investigation focuses on whether Genesis and other crypto companies influenced investors on crypto-related securities without obtaining the proper registration.The investigation is another chapter in the Genesis saga after the company revealed around $175 million worth of funds stuck in an FTX trading account. On Nov. 16, Genesis announced it had temporarily suspended withdrawals, citing “unprecedented market turmoil” following FTX’s collapse on Nov. 11. The firm is reportedly facing difficulties raising money for its lending unit. However, Genesis has refuted speculation on an “imminent” bankruptcy due to a $1 billion shortfall. The company told Cointelegraph on Nov. 22 that it does not plan to file for bankruptcy “immediately” and continues to negotiate with creditors in a constructive manner: “We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”Genesis hired restructuring advisers to explore all possible options that include, but aren’t limited to, a potential bankruptcy, as reported by Cointelegraph on Nov. 23. Moelis & Company, an investment bank, has been hired by the firm to explore options, while people familiar with the situation emphasized that no financial decisions have been made and that the company may still avoid bankruptcy.Genesis has been in the spotlight due to concerns of a supposed contagion in the industry as a result of FTX’s bankruptcy, along with its sister company, Grayscale Investments and their parent company Digital Currency Group. A tweet from Grayscale on Nov. 18 reassured investors that all digital assets underlie Grayscale’s digital asset products are stored under Coinbase’s custody, citing a letter from Coinbase’s CFO Alesia Haas and CEO Aaron Schnarch.4) All digital assets that underlie Grayscale’s digital asset products are stored under the custody of Coinbase Custody Trust Company, LLC. Read more from @Coinbase’s CFO Alesia Haas, and CEO of Coinbase Custody Aaron Schnarch: pic.twitter.com/InBP9zPDkC— Grayscale (@Grayscale) November 18, 2022Cointelegraph reached out to Genesis Global Capital, but did not receive a response prior to publication.

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Approving a spot crypto ETF is 'all about political power' — Perianne Boring

Perianne Boring, founder and CEO of blockchain advocacy group Chamber of Digital Commerce, placed the lack of approval of a Bitcoin exchange-traded fund in the United States squarely on Securities and Exchange Commission chair Gary Gensler, suggesting politics played more of a role than economics.Speaking to Cointelegraph at the Texas Blockchain Summit in Austin on Nov. 18, Boring said the events surrounding FTX’s collapse may have “emboldened the regulation by enforcement approach” from the U.S. Securities and Exchange Commission and Treasury, with Republican lawmakers likely to focus on oversight using their House majority in the next Congress. According to the Chamber of Digital Commerce CEO, passing any kind of legislation — including bills on crypto, blockchain, and stablecoins — will be “incredibly difficult” in a divided government, making the possibility of executive orders and regulation by enforcement more likely.“In the House side, we’re going to see increased oversight efforts, but I don’t think crypto is actually going to be the priority,” said Boring. “Oversight hearings […] they’ll have subpoena authority, they have the authority to administer oaths, so they could bring in different people within the agencies to scrutinize their approach to digital assets.”The Chamber CEO suggested the seeming lack of urgency from Congress could delay the passage of crypto-related legislation, while a Bitcoin (BTC) exchange-traded fund, or ETF, was in the SEC’s hands:“It’s been a decade since the first spot Bitcoin ETF was put forward […] We still don’t have one, but we have a futures Bitcoin ETF. So, how does this make sense? It’s all about political power, so it really comes down to chairman Gensler.”Did you know the industry has been trying to bring a spot #bitcoin ETF to market since 2013? Almost 10 years in the making and we still don’t have one. Begs the question: why? Our report breaks this down and more https://t.co/QdnstH1rpa— Perianne (@PerianneDC) October 7, 2022Related: Chamber of Digital Commerce says ‘the time has come’ for the SEC to approve a Bitcoin ETFBoring clarified that Gensler prioritized oversight of crypto exchanges prior to the SEC approving any spot crypto investment vehicle. Under the SEC chair, the financial regulator has turned down or delayed decisions on numerous applications for spot crypto ETFs, including from Grayscale, Bitwise, VanEck, and ARK 21Shares. Grayscale filed suit against the government agency in June following its latest ETF rejection.

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My story of telling the SEC ‘I told you so’ on FTX

“I hate to say I told you so” is a phrase oft-repeated but rarely sincere. It’s a delightful feeling to claim credit for warning about a problem in advance. That’s a liberty I’m taking with federal financial regulators at the United States Securities and Exchange Commission.In January of this year, while serving as a member of the SEC Investor Advisory Committee that advises SEC Chairman Gary Gensler on crypto and other matters, I filed a petition with the SEC. I asked them to open a formal public comment about unique issues presented by crypto and other digital assets. I pointed to crypto custody and intermediary conflicts of interest as key issues the SEC should address. I called this fresh start a “Digital Asset Regulation Genesis Block” that would help the SEC improve crypto regulation. The SEC aggressively ignored me.Upon my term ending on the SEC’s advisory committee last week, I took the chance to give Chair Gensler some strong words about his abuse of digital assets. Check out Gensler’s response. pic.twitter.com/3oa5xJU1Ch— J.W. Verret, JD, CPA/CVA (@JWVerret) March 15, 2022The SEC and U.S. bank regulators’ failure to adapt rules to crypto intermediaries didn’t directly cause the blowup at FTX. Yet their failure to create working rules for U.S. crypto intermediary exchanges to custody crypto has enabled an environment where scammers like Sam Bankman-Fried could thrive overseas.Let’s start with the basics. The point of crypto is not to have a new product trade within the traditional financial system. Crypto is a revolution in finance that empowers asset owners. The point is individuals get the same control over their assets that Goldman Sachs partners enjoy over their assets as they transfer, lend and exchange crypto in a decentralized financial system.Related: Federal regulators are preparing to pass judgment on EthereumDoing that right is an awesome responsibility for new users. It requires knowing something about the smart contract code you’re interacting with, familiarity with cold storage wallets and basic operational security for encryption keys. The full revolution will take time. The revolution will not be brought to you by JPMorgan (so, don’t buy the JPMorgan Coin). Yet most new users will initially enter crypto through custodial intermediaries that look a bit like traditional financial intermediaries. Intermediaries that custody crypto for newbie retail users need a rule book to protect customers from conflicts of interest and custody shell games — i.e., the FTX/Alameda playbook. Yet the cookie-cutter application of rules promulgated for paper stock holdings under 1933 and 1934 statutes just won’t cut it.Federal bank and securities regulators have created artificial frictions for banks and brokers trying to custody crypto assets under existing rules. On the other hand, they insist that federal regulation is essential to protect customers. While crypto exchanges navigated between that rock and hard place created by U.S. regulators, the FTX fraud thrived overseas.Crypto exchanges need intelligently designed custody rules. While that would not have solved the problems at FTX’s overseas exchange, it would have helped more international retail activity flow into the U.S. instead. Efforts by existing crypto exchanges to get clarity from the SEC about crypto custody have hit a brick wall. States such as Wyoming developed a path for bank custody of crypto, but the Fed refuses to give those banks access to Fed master accounts.Related: 5 reasons 2023 will be a tough year for global marketsThe Federal Deposit Insurance Corporation informed banks that any efforts to custody crypto will require the bank to explain themselves to their bank examiners. That’s regulator-speak for “don’t touch it.” Many crypto exchange lawyers tell a similar story about applying to the SEC for an alternative trading system license that was slow-walked to death.We will soon hear regulators complain that if only they had a little more power, and a little more funding, they could protect customers from crypto. That style of illusionist misdirection is no different from Bankman-Fried dodging diligence requests from investors.Keep your eye on my lovely assistant (not what’s under the table).Crypto needs protection from the regulators. Innovators in crypto are developing solutions like multisignature wallets and Merkel tree root-based reserve proofing that are light years ahead of customer protections in traditional banking and exchange custody. The fact that Bankman-Fried did not use them does not mean they’re not real.If the SEC and bank regulators want to be part of the solution, rather than part of the problem, they should do two things. First, start the Digital Asset Regulation Genesis Block process across agencies. Then, when securities and banking lawyers for crypto intermediaries knock on the door with good ideas for how to comply with adapted rules, listen.J.W. Verret is an associate professor at the George Mason Law School. He is a practicing crypto forensic accountant and also practices securities law at Lawrence Law LLC. He is a member of the Financial Accounting Standards Board’s Advisory Council and a former member of the SEC Investor Advisory Committee. He also leads the Crypto Freedom Lab, a think tank fighting for policy change to preserve freedom and privacy for crypto developers and users.This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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First official DAO in the US to fight SEC without attorneys

The first official decentralized autonomous organization (DAO) in the United States is taking on the Securities and Exchange Commission (SEC) over its 2021 token registrations. American CryptoFed DAO has told Cointelegraph it will represent itself without an attorney over SEC allegations that it omitted and misstated information in a securities registration last year. The DAO registered its native, interdependent stablecoin Ducat and governance token Locke in its 2021 filing with the SEC, but the regulator has begun proceedings to issue a stop order citing a raft of problems with the registration. In correspondence with Cointelegraph, American CryptoFed chief operation officer and organizer Xiaomeng Zhou confirmed that the DAO will argue its case against the SEC without legal representation:”We just filed the Notice of Appearance according to the SEC’s rules. This letter means that we told the SEC that we will represent ourselves without attorneys in this case.”American CryptoFed has also indicated that it will file a motion to extend the deadline for its answer to the SEC’s Order Instituting Administrative Proceedings. This will open up a 20-day period in which to build its argument against the SEC’s move to stop American CryptoFed’s registration.Related: Wyoming legally recognizes first DAO in the United StatesThe DAO’s September 2021 filing outlined the details of the inter-dependent stablecoins named Locke and Ducat, which serve as tools for its proposed Wyoming-based monetary system.As Cointelegraph previously reported, the Ducat is an inflation and deflation-resistant stablecoin that will be used for daily transactions and as a store of value. Locke is the governance token of the DAO, which is intended to stabilize the Ducat and facilitate the administration of its ecosystem.These tokens are intended to be used by municipalities, merchants, banks, crypto exchanges and other participants in the DAO.By registering with the SEC, American CryptoFed would become a reporting company and would have to carry out periodic reporting obligations to the regulatory body.In its whitepaper, CryptoFed noted that its native ecosystem tokens are intended to be used as utility tokens. The DAO looked to preempt any issues with the SEC by registering both Ducat and Locke tokens as securities to ‘ensure compliance with Securities laws and related regulations.’

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American CryptoFed registration at risk as SEC alleges filing anomalies

American CryptoFed DAO, the first decentralized autonomous organization (DAO) to get legal recognition in the United States, is at risk of losing its registration after the U.S. Securities and Exchange Commission (SEC) dug up anomalies in the Form S-1 registration statement dated Sept. 17, 2021.The Wyoming Secretary of State’s office recognized American CryptoFed as a legal entity in July 2021, at a time when the organization’s CEO, Marian Orr, believed that “Wyoming is arguably the top blockchain jurisdiction in the world.”However, on Nov. 18, 2022, the SEC instituted administrative proceedings against the DAO to determine the issuance of a stop order. A stop order from the SEC would retract American CryptoFed’s registration and bar sales of in-house tokens, Ducat and Locke.According to the SEC’s Division Of Enforcement, the Form S-1 registration statement filed by American CryptoFed lacks vital information, such as audited financial statements and details about its business and management. The SEC further believed that the American CryptoFed filing contains “misleading statements and omissions” while being inconsistent in describing the tokens as securities.In this regard, David Hirsch, Chief of the Enforcement Division’s Crypto Assets and Cyber Unit stated that:“American CryptoFed not only failed to comply with the disclosure requirements of the federal securities laws, but it also claimed that the securities transactions they seek to register are not in fact securities transactions at all.”Hirsch clarified that issuers must provide the required disclosure information to the SEC. However, the SEC claimed non-cooperation from American CryptoFed during its examination of its registration statement.Based on the information made available to the public, Hirsch shared SEC intent regarding the DAO:“The Enforcement Division is seeking to stop American CryptoFed’s registration to protect investors against misleading information.”Cointelegraph found that the official Telegram channel for the DAO has been disabled. Official Telegram account of American CryptoFed is not found. Source: Cointelegraph (via Telegram)However, the deletion of the Telegram account was not yet linked to the SEC’s investigation at the time of writing. American CryptoFed has not yet responded to Cointelegraph’s request for comment.Related: US national crypto laws should look like New York’s, says state regulatorThe Securities Commission of the Bahamas (SCB) recently ordered the transfer of all digital assets of FTX Digital Markets (FDM) to a digital wallet owned by the commission.Securities Commission of The Bahamas Assumes Control of Assets of FTX Digital Markets Ltd. pic.twitter.com/IzW4PGZSJm— Securities Commission of The Bahamas (@SCBgov_bs) November 18, 2022The assets were seized “for safekeeping,” according to an official statement shared by the SCB.

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CFTC Commissioner Mersinger says the time has come for action on crypto regulation

United States Commodity Futures Trading Commission (CFTC) commissioner Summer Mersinger suggested that the time to act on cryptocurrency regulation may have arrived. Speaking at the Texas Blockchain Summit on Nov. 18, Mersinger considered what it may take for effective crypto regulation in the United States.“Lately it’s probably been 70-80% of what we talk about,” Mersinger said of crypto. “We are clearly in a situation where we need to stop, we need to gather the facts, we need to understand what’s happening […] to move policy ahead.”Mersinger saw forward movement in the process. “We are getting to the point that maybe we are past the education stage and now it’s the action [stage],” she said. “But it’s an interesting political question because it isn’t partisan issue.”CFTC Commissioner Summer Mersinger at @txblockchain1 Summit. Cc @lee_bratcher @blockcoalition @cascadiacounci1 @wtia pic.twitter.com/sLtlHp4MfS— Arry (@ArryinSeattle) November 18, 2022The CTFC and Securities and Exchange Commission will work out jurisdictional issues eventually, Mersinger continued. “There’s a role for both, we just have to figure out to make it work,” she said. They may need some help:“Congress may have to say, ‘No, no, no, you really have to work together. […] And here’s when you’re going to meet and here’s what you’re going to talk about.’” Real-time proof of reserves may be part of digital asset regulation in the future. “We expect that from our regulated entities. We don’t ask for it every day, but we can. And I think that’s fair,” Mersinger said. “Maybe the control is decentralized, but you take customer funds and you put them in this central location that the regulators know about and see and can check.”Related: US regulator touts ‘aggressively’ policing crypto in new reportIn the meantime, “Until there’s some decision at the federal level, the states are the first line of defense,” Mersinger said. “Sometimes in Washington we forget that the states were the first actors and the first regulators here and that they play an important role. I think a lot of times states get left out of the conversation, and that’s unfortunate.”Mersinger, a Republican, was nominated to the CTFC by President Joe Biden in December. She dissented from the commission’s treatment of Ooki DAO, calling it regulation by enforcement.

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