Wyoming recently passed another round of substantial legislation on blockchain and crypto. Can you point out some of the highlights?

The first and most important is that there’s no state tax on crypto. In the state of Wyoming, there’s already no income tax, but there’s also no sales tax and no property tax as well for digital assets. That’s very important because there isn’t going to be another state that’s tax friendlier for crypto than Wyoming. Aside from taxes, one of the things many people in the blockchain industry have been waiting for is legal clarity about some basic issues, many of which are defined in the Wyoming statutes. The most meaningful in that regard is SF125, which ties crypto to what I call ‘the protocol layer of the legal system’ — property law. Property law governs all commerce, and in the US commercial law is governed by the states..

For the Ethereum community, there are two other laws that I’d highlight: Wyoming was the first state to recognize utility tokens as distinct from securities under state law. Eight other states are following or in the process of following as well. If they are executed in a manner that meets certain requirements, utility tokens are property rather than securities under state law, which means they may not fall under SEC jurisdiction. I think it’s important because this movement among nine states is pushing the SEC and Congress to define exactly how the should treat consumptive tokens, and this is helping the ERC-20 and other Ethereum standards to become recognized under the law and become backwards compatible with the legal system.

The other law I’d highlight for the Ethereum community pertains to security tokens, which are also frequently issued on Ethereum. They are also legal in the state of Wyoming — both in certificated form (ERC-884 standard) and in uncertificated form for corporate shares. Wyoming is the only state where that is the case.

What are your thoughts on the recent statement by the SEC?

It fits very nicely with Wyoming’s law, so we were pleased when we saw it. I must give credit to ConsenSys and The Brooklyn Project because they helped Wyoming draft the utility token law, and it’s essentially consistent with where the SEC came out.

But like all regulators, when the SEC takes enforcement actions or issues no action letters, they begin with the edge cases, the low hanging fruit. They don’t want to risk losing on their first enforcement actions, because if they lose, they lose jurisdiction. Same thing at the opposite end of the spectrum, where instead of an enforcement action, you’re giving an enabling action — a “No Action Letter.” Here again, they go after the low hanging fruit. I think everyone looked at this No Action letter and thought — ”Well, no duh, of course that’s not a security” because the facts showed it wasn’t even close to the line. The real issue is that no one knows how to parse situations that are close to the line, and the SEC has a lot of wiggle room to determine that projects are securities. Since they have all that wiggle room, they’re liable to use it.