Launchy Regulatory Roundup #78 - Digital Assets Just Got a Regulatory Reckoning

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Welcome to our 78th edition of the regulatory roundup. If you know anybody who would benefit from this content, please help us spread the word!

In Today's Edition:

• Headline: Digital Assets Just Got a Regulatory Reckoning 👀 

• Global Legal Roundup

• Case Study: Pudgy Penguins Hit with Trademark Lawsuit 🐧 

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HEADLINE

Digital Assets Just Got a Regulatory Reckoning

State of play: US financial regulators are moving on multiple fronts to bring digital assets firmly under existing legal frameworks, signaling a coordinated push to provide clarity without waiting for new legislation from Congress.

Fed clarifies capital rules for tokenized securities:

• Tokenized securities must be treated identically to traditional securities for bank capital purposes, with existing rules described as "technology neutral" regardless of whether a permissioned or permissionless blockchain is used.

• Banks may qualify tokenized securities as financial collateral under existing rules, as long as they meet the same legal and risk-management standards.

• The guidance follows a January SEC statement that tokenized securities remain subject to federal securities laws.

SEC submits crypto securities framework to White House:

• The SEC submitted interpretive guidance to the White House on March 3, expected to establish a "token taxonomy" that categorizes which crypto assets fall under SEC jurisdiction.

• As commission-level guidance, it carries greater enforceability than staff-level statements and does not require a full commission vote.

• The CFTC also submitted a separate measure on prediction markets, with Chairman Selig signaling imminent rulemaking to resolve conflicts between federal oversight and state enforcement actions.

What’s Next: The SEC's crypto taxonomy guidance is still under interagency review, while the CFTC is expected to publish formal rulemaking on prediction markets shortly. Final language on asset classification will be the key thing to watch.

Why it Matters: The Fed, SEC, and CFTC are sending regulatory signals simultaneously, reducing uncertainty for institutions looking to tokenize assets or launch crypto products.

Our Take: Regulators are showing they don't need new laws to govern digital assets, just clearer application of existing ones.

GLOBAL LEGAL ROUNDUP

America:

• 🇺🇲 Elizabeth Warren blasts SEC over Justin Sun case.

• 🇺🇲 Coinbase CEO and execs face shareholder lawsuit.

• 🇺🇲 CFTC signals rulemaking push on prediction markets.

• 🇺🇲 More crypto firms likely to get Fed master accounts.

• 🇺🇲 First US state-level stablecoin bill passes in Florida.

• 🇺🇲 Eric Trump slams banks for lobbying against stablecoins.

• 🇺🇲 Binance terrorism lawsuit dismissed, but plaintiffs could refile.

• 🇺🇲 Sen. Murphy alleges White House 'insiders' profited from Iran strike bets.

• 🇺🇲 IRS proposes letting crypto exchanges require electronic delivery of tax forms.

• 🇨🇦 Vancouver city staff asks council to drop BTC reserve motion.

Europe:

• 🇷🇺 Russia mulls simplified crypto exchange licensing for banks.

• 🇬🇧 Donations to UK party pushing pro-crypto policies reach $16M.

APAC:

• 🇵🇰 Pakistan parliament passes Virtual Assets Act.

• 🇰🇷 S. Korean authorities settle on 20% ownership cap for crypto exchanges.

CASE STUDY

Pudgy Penguins Hit with Trademark Lawsuit

State of play: PEI Licensing, owner of the 1955 Penguin apparel brand, has sued NFT brand Pudgy Penguins for trademark infringement, alleging its retail products are misleading consumers and diluting PEI's brand.

• Despite a cease-and-desist in October 2023, Pudgy Penguins pressed on, selling over one million toys through major retailers like Walmart and Target.

• PEI alleges Pudgy Penguins' retail products infringe on its trademarks and falsely imply a connection between the two brands.

• The NFT brand pivoted to physical retail in 2023 as the NFT market declined, eventually selling over one million toys at Walmart and Target.

• PEI is seeking all profits and damages stemming from Pudgy Penguins' alleged unauthorized use of its trademarks.

• The case has been filed with the US District Court for the Southern District of Florida, with PEI requesting a jury trial.

Our Take: Pudgy Penguins pulled off one of crypto's most impressive real-world pivots, but ignoring a cease-and-desist for two years was a costly gamble - and this case signals that legacy brands are ready to fight back.

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