Hire A Lawyer for Gaia

Hiring an attorney does not centralize an entity and does not “put a target” on an entity—in point of fact, the ATOM token has already been targeted in an SEC lawsuit, albeit indirectly.

(Note as well: The CFTC was fully able to prosecute Ooki DAO, and in fact they got default judgments against Ooki DAO because they did not hire representation or appear in court—they are now ordering the total shutdown of Ooki DAO, with civil and potential criminal liabilities for those who remain.)

If the Hub is going to continue pursuing “ATOM Economic Zone” plans through ICS or AADAO, it absolutely needs an attorney or legal firm to advise stakers on these substantial, complex commercial arrangements using other people’s money and the Hub’s (and/or validators’ and AADAO members’) potential compliance requirements and regulatory exposure.

There is no magically sovereign Internet-land which escapes the reach of real-world jurisdictions. Even sovereign real-world jurisdictions must comply to some degree with each other, or they court serious economic and other blowback. There will always be neighbors, even in Web3. This is not inconsistent with the vision and understanding of Web3’s founders:

Eric Hughes: “For privacy to be widespread it must be part of a social contract. People must come and together deploy these systems for the common good. Privacy only extends so far as the cooperation of one’s fellows in society.” (A Cypherpunk’s Manifesto)

Timothy C May: " Reputations will be of central importance,
far more important in dealings than even the credit ratings of
today." (The Crypto-Anarchist’s Manifesto)

Nick Szabo: “Blockchains, although reducing trust far more than any other network protocols, are still far from trustless. […] blockchains also need a human governance layer[.]” (Money, Blockchains, and Social Scalability)

Sometimes in Cosmos, devs trot out the line that we have to “move fast and break things,” but this is precisely the opposite of the genuine Web3/crypto revolution, which is the sacrifice of efficiency for security: there is nothing efficient or “moving fast” about spraying the same transactions to identical databases all over the world over and over and over, but this profound inefficiency is what secures blockchains.

We should maintain the Web3 ethos: Attorneys and legal review are highly inefficient, no doubt, but they also provide the most security for our projects. It weakens the value proposition of $ATOM and the Hub to be exposed to potential enforcement actions, far more than the potential value accrual of “moving fast and breaking things.”

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This argument can certainly be made in a legal filing, but whether it will stand up to scrutiny depends on a bunch of facts and circumstances that I don’t have on-hand—the fact that stakers are able to vote and override the vote of their validators seems to me (this is not legal advice) to provide some defense to this claim. For instance, in Rivana Trawlers Unlimited v Thompson Trawlers Inc, a federal court found that members’ choice to remain passive is not sufficient to establish a securities designation—but note this is a non-binding federal decision, not a SCOTUS ruling.

Palmiter comments specifically on crypto ICOs:

“To date, Howey has provided the framework for determining whether cryptocurrencies and ICOs warrant regulation under the securities laws. Under Howey a security appears to exist when coin/token buyers have a common interest in the value of the cryptocurrency rising because of the efforts of a promoter (even with some participation by the coin/token holder) to develop a network backed by digital or other assets. […] But a security seems not to exist when the network is decentralized, depending on the efforts of no specific promoter or group, and where the value of the coins/tokens is determined mostly by supply and demand.”

This is why I think AADAO and other such recent initiatives to corporatize the Hub, as currently structured, are substantially weakening the Hub’s regulatory status. These efforts to increase value to the token and drive returns to investors through investment of their funds are almost certainly creating a registration requirement with financial regulators and their heightened mandatory disclosure and antifraud liability protections to investors: intermediaries like AADAO (or validators on ICS) must make conflict of interest disclosures, operating disclosures, etc., and register with the SEC to comply with its rules and supervisory authority, or risk civil and criminal penalties.

There do exist exemptions to the SEC’s registration requirements, and this is why we need attorneys involved to identify compliant operating procedures to achieve our desired goals. The current implementation has had no professional review and puts the Hub and all stakers and token-holders at risk. Just because the tech allows us to do something doesn’t always mean we should.

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If ATOM is a security then validator has a duty of care to its delegations to act in their best interests. Every single major validator has a legal team. It’s absolutely irresponsible and reckless to not have stakers have an independent non-conflicted representative.

ATOM will be classified a Security as part of this law suit. Unless someone files an amicus brief that distinguishes clearly that ATOM has not been joined and is not party to this suit, if it is then it should be mandatorily join all the interested parties (all stakers on all chains named) like any other SEC lawsuit brought on behalf of the people it is supposed to be protecting from some type of fraud or criminal activity.

CoinBase and Binance clearly offered atom as a security. I’m a lawyer. That’s easy. Done deal. Whether or not the leap is made to validators offering staking as a service is distinguished properly and whether or not the ecosystem and the token itself outside of these lawsuits operates is only going to happen with lawyers. Damn good ones. SEC is backdooring a ruling that these 12 tokens are securities……Period. The suits will get settled. The point of these suits is to classify these 12 chains and POS as securities while we sit here doing nothing.

It’s bullshit. CZ bought us time guys. He literally bowed to SEC and complied with everything just to make sure the issue of these tokens being securities didn’t need to be decided by judge first. The consent decree lists everything as assets. Assets. Assets. Assets. I cannot over state of fucking important this is.

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We just need to explain what factually ATOM is and do it in ATOM stakers best interest. Binance Coinbase and the SEC are not going to make any arguments for us or explain any aspect of Cosmos outside these facts and case

I think the limitations on a lawyer to advisory or simply unbiased specialized legal knowledge with the Hub not AiB or Notional or Golden Ratio or ICF as the lawyers perspective provides so much needed just trust that would actually bridge many of the infighting and gaps and nonsense occurring in the hub.

Filing mentioned ATOM is SEC complaint alleging AiBs is the third party relied on to create expectation of profit. Okay? Someone can you just give me a straight answer on what the potential actual real world consequences and outcomes potentially are, and let stakers make decisions for themselves when it is a decision that shouldn’t be left to conflicted validators with conflicting interests.

My defense is sovereign immunity. Never would the US hold a Saudi Price let’s say accountable for outright murder of its own US citizens as long as it was done within the jurisdiction of the Saudi Price. King rules the castle. Make a moat.

You just described an attorney. The legal counsel doesn’t necessarily have to engage in motions practice and get involved with the litigation of the SEC’s enforcement actions and motions practice as noted above, but having some kind of legal counsel to provide the Hub with guidence on securities law and advise how the Hub can best position itself to avoid SEC scrutiny would be the exact role of the “independent reviewer” you described. No one else would be better suited to give this advice (or legally able to) than an attorney.

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There is a difference between hiring an attorney to represent the hub and paying a reviewer to create an independent report at least where i come from. Both may be attorneys though.

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I believe we need to make a clear distinction here. If ATOM is deemed a security, it may not have any impact on validators.

In my opinion, if ATOM is classified as a security in the US, it would mean that no CEX can offer ATOM trading unless it gets registered with the SEC in compliance with their regulations. However, this doesn’t necessarily imply that the SEC will immediately prosecute any entity associated with Cosmos for launching an unregistered security, although the likelihood of such action is high.

For validators and the network itself, this doesn’t hold significant implications since the network operates outside the jurisdiction of the SEC. However, if a considerable number of validators/VP are based in the US compared to other countries, the SEC might argue that the entire network and all of its transactions fall under their jurisdiction, which should ideally be prevented.

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The biggest reason I see here has nothing to do with the status of the atom as a security, or not. Because I’m familiar with the software development, community and cosmos, I know, for a fact that we are really just a bunch of big geeks with keyboards, and you know what else is made with keyboards?

That’s right, books! The current situation with regard to the regulation of cryptocurrency, completely neglect, the fact that the first amendment actually exists, and is real, and that Americans have a constitutionally protected right type, whatever the hell they’d like to into their keyboards.

At least now, we also have the right to run whatever code we would like to on whatever device we would like to, and it is my opinion that the endgame of all this stuff, is the loss of both first amendment, rights for authors of open source code, and the loss of the right to choose the software that runs on the devices that you choose to purchase.

To me, that is the most significant development in the recent regulatory environment. We genuinely have politicians in the United States, who are openly calling for restrictions on these basic freedoms.

I agree with all of that. However, I still don’t see how hiring an attorney for the Hub chain helps. That battle is going to be litigated by coincenter and the like. Helping them is the most beneficial way to go.

I propose to hire a person that will ignore all existing laws and chase lawyers away with (physical) sticks from Cosmos and from crypto in general. Or, for example, we could develop a tech, every time someone mentions applying law to web3, they would get a tiny electric shock coming from their keyboard. Just saying…

The Hub needs an attorney regardless of the SEC’s current cases.

The Hub is being pulled into complex, sophisticated, large-scale financial arrangements through ICS and subDAOs, and there will surely be other potential arrangements to come as the tech develops.

The innovations of the tech do not really alter the underlying economic realities taking place, and it is not the particulars of the tech but the economic realities that are regulated by financial authorities (SEC, CFTC, IRS, et al) and require professional legal review. Any organization with a $3bil market cap has attorneys reviewing its mergers and acquisitions, subsidiaries and spin-offs, etc.

As long as the Hub is acting as an “economic zone,” it needs professionals who are attentive to the economic realities that are taking place and making appropriate disclosures to the parties materially affected by those realities.

To be clear, this extends far beyond securities concerns. I personally believe securities issues are the least of our worries. The Hub and many Cosmos chains have set up “Community Pools” without any legal structure around them, meaning with every spend proposal they are racking up unstructured tax obligations for the entire chain, not just the beneficiaries of these Community Pool spends. These unstructured obligations are going to be taxed at the worst rates possible, and since they haven’t been paid, there will be ruinous fees, penalties, and interest—not to mention potential criminal charges of tax evasion and conspiracy for validators who have been paid through Community Pool spends that they voted for. This is a ‘worst case’ scenario. It’s fine and well to privately hope for the best, but we need to be materially prepared for the worst.

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I’ve seen some “sovereign citizen”-type arguments surface on this forum and in related discussions, with implication that caring about legal issues is somehow inappropriate for crypto.

Well, you are never going to change the world by burying your head in the sand and pretending the real world doesn’t exist. Enemies cannot be defeated in absentia or in effigy. Economic life is a contact sport: you get fit to the rules or someone who did will crush you.

Depriving the Hub of professional counsel only benefits those teams and projects that can not withstand scrutiny. It is fine and well if those teams and projects wish to pursue their work on their own time, in their own lane—but they should not be allowed to take advantage of the Hub’s interdependent architecture so as to implicate it in their actions without full disclosure of the risks and liabilities to all involved.

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Blockchains and legal battles – not exactly the future I envisioned for space travel and intergalactic economies.

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Thank you for that comment person. We need a lot more of these comments

We would like to quote a section of the essay we published in this post which seems particularly aligned with the debate around the necessity have a legal defence, or not.

C: Sovereign Authority: The key element to highlight here is the notion of sovereignty. For an entity to be recognized as a state, it must exercise effective control over its population and territory, while having the capacity to manage its entire state sphere. […] The crucial question now is whether we will allow centralized entities to govern these territories as sovereign authorities, or if we have the opportunity to lead a revolution using blockchain technology.

Source: [ESSAY] Cosmos Hub: The First Democratic State of Capital

Given the previous quote, it becomes apparent that existing states are unlikely to acknowledge a new digital peer. This raises the question of whether we truly need this approval. At this point we see two types of possible responses:

  • Advocates for approval may argue that a legal representative is necessary to defend against potential attacks from established governing bodies.
  • Conversely, proponents of the Blockchain governance as a revolution may argue that any attempt to comply is futile, as no court is likely to grant the recognition sought. From this perspective, the Hub is already sovereign because its constituents recognize it as such, rendering external recognition unnecessary.

Our personal stance aligns with the latter viewpoint. We firmly believe that the Hub is sovereign, transcending the governance of existing states. Nonetheless, individuals affiliated with this digital state are also subject to the legal frameworks of their respective physical states based on residency. However, the legal systems of these independent states should not dictate the governance of the Hub, especially considering the dispersed nature of its constituents across various physical states. Should a significant concentration of constituents reside in one specific physical state, potential conflicts may arise. We do not perceive the Hub to encounter such issues currently, leading us to conclude that, at present, the Hub does not require legal representation.


Thanks for reading, feel free to reply if you have arguments to support or oppose our assessments!
Govmos
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