Demand for Crypto Lawyers to Boom as Sector Evolves
It is reasonable to say that from a legal perspective the early days of crypto and blockchain were characterized in a couple of key ways. From the point-of-view of the tech heads, entrepreneurs and start-up founders, the dominant approach to legal compliance was that it was something that could be 'sorted out later'. Similarly, for regulators around the world blockchain and crypto were initially seen as something of a curiosity — and the popular narrative being pushed by sector advocates was that crypto deals sat outside traditional legal frameworks.
However, as the price of bitcoin skyrocketed in 2017 and the sums raised by crypto startups were routinely in the tens or hundreds of millions, attitudes began shifting. In the U.S the SEC's specialist Cyber Unit ramped up its enforcement actions at the tail end of 2018 — and promised more of the same in 2019
In a statement issued last November, the Commission made clear it was moving beyond participants it viewed as intentional bad actors, as in U.S. v. Zaslavskiy, for example, and on to those who might best be described as cavalier or negligent in their attitude as to whether U.S securities laws applied to them. In the conclusion of its release, the agency recommended that "those employing new technologies consult with legal counsel concerning the application of the federal securities laws."
Questionable advice
The question of whether most lawyers are prepared to deal with an influx of crypto clients, however, is worth asking. While the official line of the SEC is that people should get legal advice before embarking on a crypto venture, SEC chairman Jay Clayton is on record expressing his disappointment with the quality of advice many of those clients have received.
Speaking at last year's Securities Regulation Institute conference, for example, Clayton said he was disturbed by the number of lawyers who were: "on the one hand, assisting promoters in structuring offerings of products that have many of the key features of a securities offering, but call it an 'ICO,' which sounds pretty close to an 'IPO.' On the other hand, those lawyers claim the products are not securities, and the promoters proceed without compliance with the securities laws, which deprives investors of the substantive and procedural investor protection requirements of our securities laws."
Clayton also pointed to lawyers who he said were offering their clients "it depends" equivocal advice, rather than counseling their clients that the product they are promoting was likely a security. "Their clients then proceed with the ICO without complying with the securities laws because those clients are willing to take the risk," he said.
Crypto specific legal resources
At legal tech company BlockDrop, President Jeffrey Knight, himself a former corporate lawyer, says there are huge opportunities for attorneys in the blockchain and crypto sector and the first step for lawyers interested in the space is to seek out and invest in education. Knight says BlockDrop offers a knowledge library and document assembly tool for legal professionals — enabling users to keep track of the rapidly changing legal landscape for blockchain and cryptocurrency, with document resources curated and maintained by experienced practitioners in the space.
"We see the opportunity for law firms to develop crypto expertise as a practical reality," he says. "While it may not be the goal of every firm today to assist clients with cryptocurrency transactions, for example, in a capital raising setting, the educational focus of blockchain and crypto centric legal reference materials such as our Legal Dictionary and our upcoming Litigation and SEC Enforcement Action interactive repository are valuable resources for law firms and in-house counsel to understand what is going on in the industry – and how it may disrupt their clients' businesses."
At Brave New Coin (a BlockDrop strategic partner) CEO Fran Strajnar says the healthy evolution of the blockchain and cryptocurrency sector is heavily dependant on proactive regulatory compliance and sector-focused commercial agreements — and the resources provided by organizations like BlockDrop come at a critical time for the industry. "As we move beyond utility tokens to digital assets representing traditional securities such as physical assets and equities, there is going to be huge demand for 'crypto ready' legal services," he says.
Knight says for those law firms that have already established a blockchain/DLT practice or even a 'working group', the BlockDrop subscription drives efficiencies, both in legal research and in document management, as BlockDrop integrates with iManage — a popular document management system used by many AmLaw firms.