This is Bloomberg Law with June Brusso from Bloomberg Radio.

This is Bloomberg Law with June Brusso from Bloomberg Radio.

Richard Glossop has been just hours away from being executed three times. He's maintained his innocence through more than a quarter century on Oklahoma's death row, telling news outlets like Sky News that he's not guilty of hiring a coworker to kill the owner of the motel where he worked in nineteen ninety seven.

Richard Glossop has been just hours away from being executed three times. He's maintained his innocence through more than a quarter century on Oklahoma's death row, telling news outlets like Sky News that he's not guilty of hiring a coworker to kill the owner of the motel where he worked in nineteen ninety seven.

I didn't commit this crime, and there's no down in my line that I may die because of this. I'm truly sorry for what happened to Arry. I am, but I had nothing to do with it.

I didn't commit this crime, and there's no down in my line that I may die because of this. I'm truly sorry for what happened to Arry. I am, but I had nothing to do with it.

Glossop's case has garnered international attention.

Glossop's case has garnered international attention.

You never done this before. Yeah, it's close to a murder before.

You never done this before. Yeah, it's close to a murder before.

What is it doing in a place like it?

What is it doing in a place like it?

Sister Helen Prejahn, the death penalty opponent portrayed in the nineteen ninety one five movie Dead Man Walking, has taken up his cause, as have celebrities like Kim Kardashian and Susan Sarandon.

Sister Helen Prejahn, the death penalty opponent portrayed in the nineteen ninety one five movie Dead Man Walking, has taken up his cause, as have celebrities like Kim Kardashian and Susan Sarandon.

Richard's case is so typical, you know, bad representation to trials that were ridiculous, no physical evidence. You know, he's put there by a snitch who actually did kill the person, and then the snitches has life, and this guy is being put to death.

Richard's case is so typical, you know, bad representation to trials that were ridiculous, no physical evidence. You know, he's put there by a snitch who actually did kill the person, and then the snitches has life, and this guy is being put to death.

And now Glossop has support from an unprecedented place. Oklahoma's Republican Attorney General, Gentner Drummond, the state's top prosecutor, has been urging the courts to undo his conviction, saying he didn't get a fair trial due to critical errors, including the destruction and suppression of evidence. The state has set nine execution dates for Glossip, and just days before he was again scheduled to be executed in May, the Supreme Court blocked his execution and this Monday decided to review his case. My guest is John Bloom, the director of the Cornell Law Death Penalty Project. How unusual is it for this Supreme Court to grant a stay of execution?

And now Glossop has support from an unprecedented place. Oklahoma's Republican Attorney General, Gentner Drummond, the state's top prosecutor, has been urging the courts to undo his conviction, saying he didn't get a fair trial due to critical errors, including the destruction and suppression of evidence. The state has set nine execution dates for Glossip, and just days before he was again scheduled to be executed in May, the Supreme Court blocked his execution and this Monday decided to review his case. My guest is John Bloom, the director of the Cornell Law Death Penalty Project. How unusual is it for this Supreme Court to grant a stay of execution?

Well, this is a court that has been in general hostile to inmates. So they've been reluctant to grant review in capital cases and have been hesitant to interstags of execution. And most of their work has been vacating stays of execution which you've been entered by lower courts.

Well, this is a court that has been in general hostile to inmates. So they've been reluctant to grant review in capital cases and have been hesitant to interstags of execution. And most of their work has been vacating stays of execution which you've been entered by lower courts.

So why do you think they took this case?

So why do you think they took this case?

Most likely the court took Gossop's case because it had the extremely unusual feature of the Attorney General of the relevant state here Oklahoma, agreeing with Gossip that he was denied the right to a fair trial, and the Supreme Court should intercede.

Most likely the court took Gossop's case because it had the extremely unusual feature of the Attorney General of the relevant state here Oklahoma, agreeing with Gossip that he was denied the right to a fair trial, and the Supreme Court should intercede.

Explain the circumstances and why the Attorney general came to that conclusion and independent investigations came to that conclusion.

Explain the circumstances and why the Attorney general came to that conclusion and independent investigations came to that conclusion.

Yes, For years been a number of questions raised about colossups in his innocence, and new evidences resurface casting light on the credibility of the main person that testified against him in this particular case. And then there was some additional evidence discovered by the prosecution and disclosed to the defense, which has formed the basis of this most recent appeal, and been several independent commissions, both of which have found serious problems with the fairness and the constitutionality of his trial. And so after reviewing all that evidence, the Attorney General concluded that he should get a new trial.

Yes, For years been a number of questions raised about colossups in his innocence, and new evidences resurface casting light on the credibility of the main person that testified against him in this particular case. And then there was some additional evidence discovered by the prosecution and disclosed to the defense, which has formed the basis of this most recent appeal, and been several independent commissions, both of which have found serious problems with the fairness and the constitutionality of his trial. And so after reviewing all that evidence, the Attorney General concluded that he should get a new trial.

Did prosecutors withhold a box of documents this whole time and just turned it over to the defense recently, Yes.

Did prosecutors withhold a box of documents this whole time and just turned it over to the defense recently, Yes.

Been referred to in the press as Box eight, But yes, they found a box of materials which cast furthered out and corroborated some of the suspicions that people had about the main witness, a person named Sneedge's credibility in this particular case, indicating that he'd been significantly coached testimony that he was under the influence of some powerful drugs that had psychiatric problems. And so after reviewing all that, the Attorney General in Oklahoma said, yes, I think this person should get a fair trial. The Oklahoma Court of Criminal Opiles said no. But I think the unique feature of this is that the judgment is not being defended by the attorney General of the state of Oklahoma. They are confessing that there was constitutional error in Glossop's case.

Been referred to in the press as Box eight, But yes, they found a box of materials which cast furthered out and corroborated some of the suspicions that people had about the main witness, a person named Sneedge's credibility in this particular case, indicating that he'd been significantly coached testimony that he was under the influence of some powerful drugs that had psychiatric problems. And so after reviewing all that, the Attorney General in Oklahoma said, yes, I think this person should get a fair trial. The Oklahoma Court of Criminal Opiles said no. But I think the unique feature of this is that the judgment is not being defended by the attorney General of the state of Oklahoma. They are confessing that there was constitutional error in Glossop's case.

As you mentioned, the Oklahoma appeals Court upheld his conviction, and the court ruling noted that the attorney General said he was not suggesting Glossop is innocent, but only that justice would not be served by executing him. Was that the main reason they didn't overturn the case.

As you mentioned, the Oklahoma appeals Court upheld his conviction, and the court ruling noted that the attorney General said he was not suggesting Glossop is innocent, but only that justice would not be served by executing him. Was that the main reason they didn't overturn the case.

I mean, I think the main reason they didn't overturn the case, at least according to what they said, is they didn't feel like this a new evidence met the legal standard in Oklahoma to file a second petition. I don't really understand that under their own rules, it would seem that this type of perspesive showing of innocence would satisfy the standard to have a second post conviction relief hearing in mister Glossop's case. But the Oaks Homeless Corkorne opils, you know, said no, and that again is unusual, and that's probably why the Supreme Court took it.

I mean, I think the main reason they didn't overturn the case, at least according to what they said, is they didn't feel like this a new evidence met the legal standard in Oklahoma to file a second petition. I don't really understand that under their own rules, it would seem that this type of perspesive showing of innocence would satisfy the standard to have a second post conviction relief hearing in mister Glossop's case. But the Oaks Homeless Corkorne opils, you know, said no, and that again is unusual, and that's probably why the Supreme Court took it.

And the state's pardoned parole board deadlocked in a vote to even grant him clemency.

And the state's pardoned parole board deadlocked in a vote to even grant him clemency.

Yes, I understand they didn't have the full panel, but the people that were there deadlocked on whether to grant clemency or not.

Yes, I understand they didn't have the full panel, but the people that were there deadlocked on whether to grant clemency or not.

Do you understand why the Attorney General thinks that this was a miscarriage of justice and yet he still believes in Glossop's guilt.

Do you understand why the Attorney General thinks that this was a miscarriage of justice and yet he still believes in Glossop's guilt.

I think that's really a mischaracterization of what he said. I think what he has that is, I'm not persuaded that Glossop is innocent, but I am persuaded that the trial itself, which produced his convictions and death sentences, was not reliable because of the fact if the jury didn't hear all the other And that's a little different from saying I don't think he's endoctent. I think he's saying no, I don't know whether he's innocent or not, and there's been questions raised about his inisence. I'm not saying that he is, but I am saying this trial wasn't sufficiently reliable to produce an outcome which I'm comfortable allowing his person to be executed.

I think that's really a mischaracterization of what he said. I think what he has that is, I'm not persuaded that Glossop is innocent, but I am persuaded that the trial itself, which produced his convictions and death sentences, was not reliable because of the fact if the jury didn't hear all the other And that's a little different from saying I don't think he's endoctent. I think he's saying no, I don't know whether he's innocent or not, and there's been questions raised about his inisence. I'm not saying that he is, but I am saying this trial wasn't sufficiently reliable to produce an outcome which I'm comfortable allowing his person to be executed.

Okay, I accept that distinction.

Okay, I accept that distinction.

So now Oklahoma set nine execution dates for him, and he's been just hours away from being executed three times. How do you think he's managed to survive through all those execution dates when you know other inmates on death row are not so able.

So now Oklahoma set nine execution dates for him, and he's been just hours away from being executed three times. How do you think he's managed to survive through all those execution dates when you know other inmates on death row are not so able.

I think the two primary reasons, which aren't necessarily mutually exclusive, One is that he's had a lot of very good lawyers working very hard to save his life over the years. And two, he's been fortunate, been lucky in some respects that this has been stayed. And often that's what it takes, right, people working really hard and a little bit of luck thrown in.

I think the two primary reasons, which aren't necessarily mutually exclusive, One is that he's had a lot of very good lawyers working very hard to save his life over the years. And two, he's been fortunate, been lucky in some respects that this has been stayed. And often that's what it takes, right, people working really hard and a little bit of luck thrown in.

The Supreme Court did consider his case once before, although not the merits of it explain why one of his execution dates was set aside by the Justices in twenty fifteen.

The Supreme Court did consider his case once before, although not the merits of it explain why one of his execution dates was set aside by the Justices in twenty fifteen.

Yes, there was previously a challenge to the execution methods in this case, and part of that and whether he could be executed humanly under lethal injection. So it didn't deal with this question of whether there's a pervasive showing events and sufficient to warrant a new evidentiary hearing or some new proceedings, So they look at different issues.

Yes, there was previously a challenge to the execution methods in this case, and part of that and whether he could be executed humanly under lethal injection. So it didn't deal with this question of whether there's a pervasive showing events and sufficient to warrant a new evidentiary hearing or some new proceedings, So they look at different issues.

The Supreme Court had been weighing his appeal since late September. Do you have any indication or do you have any suspicions about why the delay in acting.

The Supreme Court had been weighing his appeal since late September. Do you have any indication or do you have any suspicions about why the delay in acting.

It's not that I don't want to say it's that typical, but it's not uncommon for a case to be the technical term is relisted a conference and relisted and those of the court talks about it, and then they don't do anything, and then it comes back and relisted. Sometimes that means that they are trying to look more deeply at the record. Sometimes it means someone is going to dissent or write an opinion. Sometimes it means there's going to be a procureum reversal. In other words, they are going to just go ahead and reverse it on the pleadings without doing it and in this case, they just sat on it and decided to look at the meyristocket. So, I mean, there's a lot to go through in this case, and I think it just is a further indication that the court was troubled by this, and I think it's unlikely they took it to say, yeah, we're going to let you execute it. And usually when they take a case in this posture, they're taking it to reverse it.

It's not that I don't want to say it's that typical, but it's not uncommon for a case to be the technical term is relisted a conference and relisted and those of the court talks about it, and then they don't do anything, and then it comes back and relisted. Sometimes that means that they are trying to look more deeply at the record. Sometimes it means someone is going to dissent or write an opinion. Sometimes it means there's going to be a procureum reversal. In other words, they are going to just go ahead and reverse it on the pleadings without doing it and in this case, they just sat on it and decided to look at the meyristocket. So, I mean, there's a lot to go through in this case, and I think it just is a further indication that the court was troubled by this, and I think it's unlikely they took it to say, yeah, we're going to let you execute it. And usually when they take a case in this posture, they're taking it to reverse it.

Wasn't there a similar situation to Glossups a year ago and the justices ordered Texas Appeals Court to look at the case again and it was a death row inmate who had the backing of prosecutors as well.

Wasn't there a similar situation to Glossups a year ago and the justices ordered Texas Appeals Court to look at the case again and it was a death row inmate who had the backing of prosecutors as well.

Yes, I mean, this is not a completely unique situation, but it's virtually unprecedented in many ways. And in this case, you have not only the attorney general, a lot of very conservative lawmakers in Oklahoma are also coming forward supporting gloss Up and just saying we shouldn't execute him at this time. So it's a very I think the fact that he has a lot of people supporting him who are not what you would generally call the usual suspects is part of what makes this case stand out and probably explain the Supreme Court decision to review it.

Yes, I mean, this is not a completely unique situation, but it's virtually unprecedented in many ways. And in this case, you have not only the attorney general, a lot of very conservative lawmakers in Oklahoma are also coming forward supporting gloss Up and just saying we shouldn't execute him at this time. So it's a very I think the fact that he has a lot of people supporting him who are not what you would generally call the usual suspects is part of what makes this case stand out and probably explain the Supreme Court decision to review it.

It's gotten national attention. There's been a documentary and Susan Sarandon brought a tangent to it. Kim Kardashian urged her social media followers to contact the parole board. So he's gotten more attention than most death row inmates.

It's gotten national attention. There's been a documentary and Susan Sarandon brought a tangent to it. Kim Kardashian urged her social media followers to contact the parole board. So he's gotten more attention than most death row inmates.

That is true, and credible showings of innocence tend to do that.

That is true, and credible showings of innocence tend to do that.

What is the question the High Court is actually going to decide, Well.

What is the question the High Court is actually going to decide, Well.

Basically they've been asked to decide whether the prosecution's failure to disclose this evidence the prime glossip of a fair trial. This information was with hell. There's a Supreme Court decision called Brady versus Maryland who says prosecutors have a duty under the due Process clause to disclose material exculpatory information. And the Oklahoma Court Criminal Appeal said this didn't fall into that category, and the cirt Peedition says, we think it does. We won't use Supreme Court to rule on that. What they're going to rule upon.

Basically they've been asked to decide whether the prosecution's failure to disclose this evidence the prime glossip of a fair trial. This information was with hell. There's a Supreme Court decision called Brady versus Maryland who says prosecutors have a duty under the due Process clause to disclose material exculpatory information. And the Oklahoma Court Criminal Appeal said this didn't fall into that category, and the cirt Peedition says, we think it does. We won't use Supreme Court to rule on that. What they're going to rule upon.

If the Supreme Court reverses his conviction, could he be tried again.

If the Supreme Court reverses his conviction, could he be tried again.

For the murder?

For the murder?

Yes, I mean theoretically yes. The Court isn't in the business as saying, no, you can't retry this person again. Normally what they do as they say, there was a problem this trial. We remanded back for proceedings consistent with his opinion. I do think, given all the evidence which points towards CLASSPS innocence here at the Supreme Court reverses extremely unlikely there will ever be another trial.

Yes, I mean theoretically yes. The Court isn't in the business as saying, no, you can't retry this person again. Normally what they do as they say, there was a problem this trial. We remanded back for proceedings consistent with his opinion. I do think, given all the evidence which points towards CLASSPS innocence here at the Supreme Court reverses extremely unlikely there will ever be another trial.

I'd also like to get your reaction to Attorney General Merrick Garland's decision this month to seek the death penalty for the massacre that occurred at a Buffalo supermarket last year. After he took office, Garland had issued a moratorium on federal executions, and this is his first approval of a new capital prosecution.

I'd also like to get your reaction to Attorney General Merrick Garland's decision this month to seek the death penalty for the massacre that occurred at a Buffalo supermarket last year. After he took office, Garland had issued a moratorium on federal executions, and this is his first approval of a new capital prosecution.

Very disappointing. I mean, president did run on an anti Deathtony campaign. I relized. This isn't the president himself, This is the president's attorney general, so there is some independence and what the attorney general does versus what the president does. But you know, for whatever reason they felt compelled to do this, maybe because they did it in Pittsburgh, you know, I don't know.

Very disappointing. I mean, president did run on an anti Deathtony campaign. I relized. This isn't the president himself, This is the president's attorney general, so there is some independence and what the attorney general does versus what the president does. But you know, for whatever reason they felt compelled to do this, maybe because they did it in Pittsburgh, you know, I don't know.

Do you think that even bringing one capital case diminishes their protestations against the death penalty?

Do you think that even bringing one capital case diminishes their protestations against the death penalty?

That's true. I mean, I think the main lesson one of the reasons the presidents that he opposed it was wasn't persuaded that it could be done fairly in the majority of cases. And there's lots of evidence to support that, and it can't be done anymore fairly in the case. I mean, And of course I would never say that what happened in Buffalo wasn't anything but horrific. You know it clearly was. But still the death only is not going to solve what created that crime, what caused that crime, and in the end, isn't going to bring anyone's.

That's true. I mean, I think the main lesson one of the reasons the presidents that he opposed it was wasn't persuaded that it could be done fairly in the majority of cases. And there's lots of evidence to support that, and it can't be done anymore fairly in the case. I mean, And of course I would never say that what happened in Buffalo wasn't anything but horrific. You know it clearly was. But still the death only is not going to solve what created that crime, what caused that crime, and in the end, isn't going to bring anyone's.

Love them back.

Love them back.

It's such a difficult topic. Thanks so much for sharing your insights with me. That's John bloom director of the Cornell Death Penalty Project. Coming up next, another face off in federal court over crypto. I'm June Grossow, and you're listening to Bloomberg. A hearing in federal court in DC is being closely watched by the crypto industry because it could help determine the extent of the SEC's jurisdiction over digital assets. If that sounds familiar to you, it's because the same issues were the subject of a hearing in another case last week in Manhattan Federal Court that was the legal battle between the SEC and Coinbase. This is the legal battle between the SEC and Binance. These two hearings are about the threshold issue of the definition of a security. The SEC's actual case against Binance differs from the case against its rival Coinbase because it includes allegations of fraud and market manipulation. In fact, last November, Attorney General Merrick Garlott announced that Binance was paying one of the largest corporate penalties in US history four point three billion dollars for money laundering.

It's such a difficult topic. Thanks so much for sharing your insights with me. That's John bloom director of the Cornell Death Penalty Project. Coming up next, another face off in federal court over crypto. I'm June Grossow, and you're listening to Bloomberg. A hearing in federal court in DC is being closely watched by the crypto industry because it could help determine the extent of the SEC's jurisdiction over digital assets. If that sounds familiar to you, it's because the same issues were the subject of a hearing in another case last week in Manhattan Federal Court that was the legal battle between the SEC and Coinbase. This is the legal battle between the SEC and Binance. These two hearings are about the threshold issue of the definition of a security. The SEC's actual case against Binance differs from the case against its rival Coinbase because it includes allegations of fraud and market manipulation. In fact, last November, Attorney General Merrick Garlott announced that Binance was paying one of the largest corporate penalties in US history four point three billion dollars for money laundering.

Finance facilitated billions of dollars of unregulated cryptocurrency transactions. It willfully enabled hundreds of millions of dollars in transactions between American users and users subject to US sanctions, and its platform accommodated criminals across the world who use finance to move their stolen funds and other criminal proceeds.

Finance facilitated billions of dollars of unregulated cryptocurrency transactions. It willfully enabled hundreds of millions of dollars in transactions between American users and users subject to US sanctions, and its platform accommodated criminals across the world who use finance to move their stolen funds and other criminal proceeds.

Joining me is securities law expert James Park, a professor at UCLA Law School. Jim. The SEC has argued that most crypto assets fall under its jurisdiction and are subject to its rules. Is it taking too broad an approach?

Joining me is securities law expert James Park, a professor at UCLA Law School. Jim. The SEC has argued that most crypto assets fall under its jurisdiction and are subject to its rules. Is it taking too broad an approach?

And I think that the SEC has to think about the limits of its arguments. What are the limits of its ability to regulate crypto assets? And in fairness to the SEC in litigation, you are, you know, trying to advance the position and trying to advance as broad of a position as possible. And I think that is to some extent reflected in the positions the SEC has taken. At the same time, as a regulator, you have to understand that at some point you have to define standards that will give some guidance as to the limits of your authority. And I think that's what the SEC has to continue to think about now.

And I think that the SEC has to think about the limits of its arguments. What are the limits of its ability to regulate crypto assets? And in fairness to the SEC in litigation, you are, you know, trying to advance the position and trying to advance as broad of a position as possible. And I think that is to some extent reflected in the positions the SEC has taken. At the same time, as a regulator, you have to understand that at some point you have to define standards that will give some guidance as to the limits of your authority. And I think that's what the SEC has to continue to think about now.

They have to.

They have to.

Find some limits, right For example, they have concluded that bitcoin is not a security, and bitcoin is the most valuable crypto asset that's out there, worth you know, almost a trillion dollars if you believe the valuation, and the SEC is saying we're not regulating bitcoin. So, you know, I think that the SEC has set some limits, and the question is whether the courts are going to require or define further limits for the SEC regulation of crypto assets.

Find some limits, right For example, they have concluded that bitcoin is not a security, and bitcoin is the most valuable crypto asset that's out there, worth you know, almost a trillion dollars if you believe the valuation, and the SEC is saying we're not regulating bitcoin. So, you know, I think that the SEC has set some limits, and the question is whether the courts are going to require or define further limits for the SEC regulation of crypto assets.

Does the SEC's case against Binance differ from its case against coinbase because it includes allegations of fraud and market manipulation.

Does the SEC's case against Binance differ from its case against coinbase because it includes allegations of fraud and market manipulation.

It is different, and I think that the case against Finance is more compelling because of those allegations relating to a lack of compliance by the exchange in regulating questionable transactions, and I think that that is ultimately going to make Finance an easier case for the SEC. Having said that, these initial motions to dismiss that have been argued are about certain threshold issues with respect to the definition of the security that are pretty much the same in both the Binance and the coin based cases. So there are some fundamental similarities about the initial stages of these cases. I expect though, that as the litigation moves forward, assuming that it does move forward, that the SEC will have an easier time in the Binance case than the coinbas case.

It is different, and I think that the case against Finance is more compelling because of those allegations relating to a lack of compliance by the exchange in regulating questionable transactions, and I think that that is ultimately going to make Finance an easier case for the SEC. Having said that, these initial motions to dismiss that have been argued are about certain threshold issues with respect to the definition of the security that are pretty much the same in both the Binance and the coin based cases. So there are some fundamental similarities about the initial stages of these cases. I expect though, that as the litigation moves forward, assuming that it does move forward, that the SEC will have an easier time in the Binance case than the coinbas case.

So where does this piece fit in Binance and its CEO pleaded guilty to Justice Department charges and settle with the CFTC and the Treasury Department in November, with Binance paying four point three billion dollars and shangpen Jao agreeing to step down as CEO?

So where does this piece fit in Binance and its CEO pleaded guilty to Justice Department charges and settle with the CFTC and the Treasury Department in November, with Binance paying four point three billion dollars and shangpen Jao agreeing to step down as CEO?

Does that fit anywhere?

Does that fit anywhere?

Into this case?

Into this case?

Fits in? But indirectly, I think my understanding of those charges as they related to compliance with various money laundering statutes that require financial institutions to monitor suspicious transaction, and Finance did not do that. Now there's a separate question as to whether or not the Binance exchanges are they securities exchanges, and that's an entirely separate issue that is being litigated with the sec Then I expect that the fact that Finances litigating this case seems to indicate that they think that they can continue to do business even with a substantial settlement like the one with the Department of Justice, and that they believe that if they can win I'm against the sec that they have a viable business going forward. And it also speaks to the amount of revenue these exchanges have generated that they're able to afford such a large monetary penalty and still continue doing business.

Fits in? But indirectly, I think my understanding of those charges as they related to compliance with various money laundering statutes that require financial institutions to monitor suspicious transaction, and Finance did not do that. Now there's a separate question as to whether or not the Binance exchanges are they securities exchanges, and that's an entirely separate issue that is being litigated with the sec Then I expect that the fact that Finances litigating this case seems to indicate that they think that they can continue to do business even with a substantial settlement like the one with the Department of Justice, and that they believe that if they can win I'm against the sec that they have a viable business going forward. And it also speaks to the amount of revenue these exchanges have generated that they're able to afford such a large monetary penalty and still continue doing business.

So, as you mentioned, the case hinges on whether the tokens fit within the definition of an investment contract. So for those who have not been following this crypto debate, explain what that means.

So, as you mentioned, the case hinges on whether the tokens fit within the definition of an investment contract. So for those who have not been following this crypto debate, explain what that means.

The term. The phrase investment contract is listed in the definition of a security in the major federal securities laws. At the very beginning of the Statute. They have definitions, right, and one of the key definitions is that of a security, and there is a long list. I mean, if you ever get a chance to read the definition of a security in the Federal Securities Acts of nineteen thirty three, or or security is a Change Act in nineteen thirty four, you won't really be able to make heads or tails of it. It's a long laundry list. And I think that the fact that you have this long list of different types of things that could be securities evidence is an intense by Congress that the definition of security is fairly brought. So you have included in the definition of a security some standard securities like a stock, a bond, securities we're all familiar with. And then there is this category of investment contract. And the meaning of investment contract is not self evident. It's been defined though in a Supreme Court case, the Howie case, and the big essence of it, it's an investment in a common enterprise where there is an expectation of profits through the efforts of others. That's a mouthful, but it is a broad definition that is meant to capture those financial arrangements that do not quite fit into the category of stock or bonds, but we think of as having the fundamental attributes of a security and to try to translate that legal definition into sort of common concepts. I think the basic idea is you're investing in a business, a common enterprise that is expected to generate profits, and you are not the one running the business. You are somebody who has invested with the expectation that the folks who are running the business are going to generate profits. And that is the fundamental essence of a security. And the sec has maintained that some crypto assets are essentially like an investment in a type of business that is expected or hopes to generate profits, and that's why investors are buying these crypto assets.

The term. The phrase investment contract is listed in the definition of a security in the major federal securities laws. At the very beginning of the Statute. They have definitions, right, and one of the key definitions is that of a security, and there is a long list. I mean, if you ever get a chance to read the definition of a security in the Federal Securities Acts of nineteen thirty three, or or security is a Change Act in nineteen thirty four, you won't really be able to make heads or tails of it. It's a long laundry list. And I think that the fact that you have this long list of different types of things that could be securities evidence is an intense by Congress that the definition of security is fairly brought. So you have included in the definition of a security some standard securities like a stock, a bond, securities we're all familiar with. And then there is this category of investment contract. And the meaning of investment contract is not self evident. It's been defined though in a Supreme Court case, the Howie case, and the big essence of it, it's an investment in a common enterprise where there is an expectation of profits through the efforts of others. That's a mouthful, but it is a broad definition that is meant to capture those financial arrangements that do not quite fit into the category of stock or bonds, but we think of as having the fundamental attributes of a security and to try to translate that legal definition into sort of common concepts. I think the basic idea is you're investing in a business, a common enterprise that is expected to generate profits, and you are not the one running the business. You are somebody who has invested with the expectation that the folks who are running the business are going to generate profits. And that is the fundamental essence of a security. And the sec has maintained that some crypto assets are essentially like an investment in a type of business that is expected or hopes to generate profits, and that's why investors are buying these crypto assets.

Let's look at the arguments from both sides in the case. So an attorney for Binance said that the company had no obligations to investors after selling certain tokens, which would need to be the case if the assets were to be considered securities.

Let's look at the arguments from both sides in the case. So an attorney for Binance said that the company had no obligations to investors after selling certain tokens, which would need to be the case if the assets were to be considered securities.

That's essentially trying to say it's not a contract, and they are really focusing in on the plain meaning of investment contract. We need some sort of a contract between the investor and the common enterprise and they maintain that there is no such contract. I think there are a couple of responses one can make to that argument.

That's essentially trying to say it's not a contract, and they are really focusing in on the plain meaning of investment contract. We need some sort of a contract between the investor and the common enterprise and they maintain that there is no such contract. I think there are a couple of responses one can make to that argument.

The first is.

The first is.

That you know, to have a contract, it's an agreement. It's an agreement, and it doesn't have to be written down. So long as there is a expectation between the investor and the enterprise that the enterprise is working to increase the value of the crypto asset. Wants to argue that that element of an agreement has been satisfied. Now, I think Binance would say, well, you need something more than that, because you know, there's nothing that says if I'm an investor in crypto assets and the founder of the project, they basically just take the money and don't do anything with it. They don't make any efforts to create a network that is valuable. If that happens, the person who buys the crypto asset has no recourse. They have no ability to sort of sue and enforce some obligation that may or may not be technically true. It's a dangerous argument, I think for Binance and the crypto industry, though, because you know, why would I buy a crypto asset if the people who raise money by selling tokens take the money and do whatever they want with it. They don't use the money to build a valuable system that's going to increase the value of my crypto asset. I think there is an understanding there, or there should be, that if I buy a crypto asset from a venture where they represent that they're going to use the funds to build a valuable decentralized network, that's going to increase the value of my crypto asset, I believe most investors, knowledgeable investors would have an expectation that they will use that money and use it in a way that potentially results in profits. And so I think that's essentially what the SEC has concluded.

That you know, to have a contract, it's an agreement. It's an agreement, and it doesn't have to be written down. So long as there is a expectation between the investor and the enterprise that the enterprise is working to increase the value of the crypto asset. Wants to argue that that element of an agreement has been satisfied. Now, I think Binance would say, well, you need something more than that, because you know, there's nothing that says if I'm an investor in crypto assets and the founder of the project, they basically just take the money and don't do anything with it. They don't make any efforts to create a network that is valuable. If that happens, the person who buys the crypto asset has no recourse. They have no ability to sort of sue and enforce some obligation that may or may not be technically true. It's a dangerous argument, I think for Binance and the crypto industry, though, because you know, why would I buy a crypto asset if the people who raise money by selling tokens take the money and do whatever they want with it. They don't use the money to build a valuable system that's going to increase the value of my crypto asset. I think there is an understanding there, or there should be, that if I buy a crypto asset from a venture where they represent that they're going to use the funds to build a valuable decentralized network, that's going to increase the value of my crypto asset, I believe most investors, knowledgeable investors would have an expectation that they will use that money and use it in a way that potentially results in profits. And so I think that's essentially what the SEC has concluded.

I was going to say that sounds like the argument from the attorney for the SEC that marketing efforts by Binance to promote its tokens suggests that investors expect a profit as they would when investing in securities. Is that about the same argument it is?

I was going to say that sounds like the argument from the attorney for the SEC that marketing efforts by Binance to promote its tokens suggests that investors expect a profit as they would when investing in securities. Is that about the same argument it is?

It is.

It is.

I think the fact that they are representing to the crypto accet holders that they are going to do this, they are making these sorts of statements and representations. Whether you think that creates the formal contract or not. There is some understanding there. There is some understanding there. Whether it rises to the level of a contract, I think is a complicated issue, but there's an expectation and because the Supreme Court has read how we fairly broadly in the past that I think that even if there is not a formal enforceable contract there, the sec has an argument that you know, it's not crazy for the investor to think that there is an obligation on the part of those who have sold the tokens to use that to build something that is valuable and Jim.

I think the fact that they are representing to the crypto accet holders that they are going to do this, they are making these sorts of statements and representations. Whether you think that creates the formal contract or not. There is some understanding there. There is some understanding there. Whether it rises to the level of a contract, I think is a complicated issue, but there's an expectation and because the Supreme Court has read how we fairly broadly in the past that I think that even if there is not a formal enforceable contract there, the sec has an argument that you know, it's not crazy for the investor to think that there is an obligation on the part of those who have sold the tokens to use that to build something that is valuable and Jim.

Are these arguments similar to the arguments that coinbase made last week and other crypto platforms have made in the pasts.

Are these arguments similar to the arguments that coinbase made last week and other crypto platforms have made in the pasts.

They are very similar. They're very similar. The same argument essentially has been made by both coinbase and Finance, and even in prior cases Ripple and Terrorform, the major arguments have been the same, which indicates to me that some of the best legal minds in the country has come to the conclusion that this is the best hope for the crypto industry to avoid classification as a security.

They are very similar. They're very similar. The same argument essentially has been made by both coinbase and Finance, and even in prior cases Ripple and Terrorform, the major arguments have been the same, which indicates to me that some of the best legal minds in the country has come to the conclusion that this is the best hope for the crypto industry to avoid classification as a security.

Coming up next on the Bloomberg Law Show, I'll continue this conversation with UCLA law professor James Park, and we'll talk about the confusion in the courts over crypto. I'm June Grosso and you're listening to Bloomberg. Finance and the Securities and Exchange Commission faced off in federal court in DC. It's the second closely watched courtroom battle in less than a week that could help define the SEC's jurisdiction over the crypto sector. I've been talking to UCLA law professor James Park. Judge Amy Berman Jackson said the SEC seems to be saying that all digital assets are securities. She asked, how are the issuers supposed to know when they crossed the line but hasn't. The SEC said it doesn't have jurisdiction over bitcoin.

Coming up next on the Bloomberg Law Show, I'll continue this conversation with UCLA law professor James Park, and we'll talk about the confusion in the courts over crypto. I'm June Grosso and you're listening to Bloomberg. Finance and the Securities and Exchange Commission faced off in federal court in DC. It's the second closely watched courtroom battle in less than a week that could help define the SEC's jurisdiction over the crypto sector. I've been talking to UCLA law professor James Park. Judge Amy Berman Jackson said the SEC seems to be saying that all digital assets are securities. She asked, how are the issuers supposed to know when they crossed the line but hasn't. The SEC said it doesn't have jurisdiction over bitcoin.

Bitcoin is not a security. And I think that she's probing the SEC and trying to get it to take a firmer position on what the limit thought. And I think part of what she would like to do as a judge, in her opinion, is to give litigant some indication of where the limits of how we might be. It might be troubling to have a test that is so undefined that the only way we know whether something is a security is because the SEC takes the position that it is a security that is not ideal. At the same time, it may not be possible to define clearly what the limit of how we are and so I'm not sure exactly what Judge Jackson is getting it. There are a number of possibilities. One possibility is that she is really skeptical of the SEC's position and thinks that is really broad. The other possibility is he recognizes that this is a vague test, but is really trying to get the SEC's assistance in thinking about how we could be limited in some way to what extent can we provide the industry with some notice as to where the line is. Where is the line between something that's the security that is an investment contract in something that is not. You know, the SEC has tried to give some guidance, but I think that in the closer cases the line is very blurry. The line is very blurry if you are getting into digital assets that are close to the line between something that is an investment contract and something that is not.

Bitcoin is not a security. And I think that she's probing the SEC and trying to get it to take a firmer position on what the limit thought. And I think part of what she would like to do as a judge, in her opinion, is to give litigant some indication of where the limits of how we might be. It might be troubling to have a test that is so undefined that the only way we know whether something is a security is because the SEC takes the position that it is a security that is not ideal. At the same time, it may not be possible to define clearly what the limit of how we are and so I'm not sure exactly what Judge Jackson is getting it. There are a number of possibilities. One possibility is that she is really skeptical of the SEC's position and thinks that is really broad. The other possibility is he recognizes that this is a vague test, but is really trying to get the SEC's assistance in thinking about how we could be limited in some way to what extent can we provide the industry with some notice as to where the line is. Where is the line between something that's the security that is an investment contract in something that is not. You know, the SEC has tried to give some guidance, but I think that in the closer cases the line is very blurry. The line is very blurry if you are getting into digital assets that are close to the line between something that is an investment contract and something that is not.

Yeah, the judge wanted the SEC to define a boundary for what it can considered a security in regard to virtual tokens, and lawyers for the SEC said the test is designed to be flexible and that there is no bright line to make the distinction. And that's true of a lot of tests in the law, right, that there's no bright line.

Yeah, the judge wanted the SEC to define a boundary for what it can considered a security in regard to virtual tokens, and lawyers for the SEC said the test is designed to be flexible and that there is no bright line to make the distinction. And that's true of a lot of tests in the law, right, that there's no bright line.

That is true. That is something true in many areas of the law when you're trying to define something like negligence or intent, it really depends on a close examination of the fact. I think the reason why the crypto asset industry is frustrated though, by this approach, is that if you're going to build an industry, if you're going to create an ecosystem of digital assets, the entrepreneurs who are starting these projects, they want a certain amount of certainty. They want a certain amount of certainty as to when they will be regulated, when they will not be Unfortunately, I'm not sure that that certainty is possible. I'm not sure that it is possible. And that is something that you know, we'll see what the judges say, whether or not that it is permissible to leave the state of affairs as it is, or whether some judges may feel like maybe we should rule against the SEC in some of these cases and define the limits for them. And you know, I think that's certainly a possible outcome in some of these cases.

That is true. That is something true in many areas of the law when you're trying to define something like negligence or intent, it really depends on a close examination of the fact. I think the reason why the crypto asset industry is frustrated though, by this approach, is that if you're going to build an industry, if you're going to create an ecosystem of digital assets, the entrepreneurs who are starting these projects, they want a certain amount of certainty. They want a certain amount of certainty as to when they will be regulated, when they will not be Unfortunately, I'm not sure that that certainty is possible. I'm not sure that it is possible. And that is something that you know, we'll see what the judges say, whether or not that it is permissible to leave the state of affairs as it is, or whether some judges may feel like maybe we should rule against the SEC in some of these cases and define the limits for them. And you know, I think that's certainly a possible outcome in some of these cases.

And Finance was pushing that this implicates the Major Questions doctrine, which involves agency interpretation in matters of great economic or political significance, just as Coinbase did last week, and this judge, like Judge Polk last week, seemed to dismiss that.

And Finance was pushing that this implicates the Major Questions doctrine, which involves agency interpretation in matters of great economic or political significance, just as Coinbase did last week, and this judge, like Judge Polk last week, seemed to dismiss that.

Yeah, I think that's that's interesting, maybe not entirely unexpected. You know, it is a doctrine that has some potential, but the sort of application of it is unclear, and I think both judges may have concluded that, you know, the crypto asset industry is not large enough to implicate the Major Questions doctrine. And it's interesting that both judges seem to have come to that conclusion independently. And this may also be a significant decision in that it begins to set some limits to that Major Questions doctrine. And I think that, you know, that's something that is notable, but in my view, maybe not all that surprising.

Yeah, I think that's that's interesting, maybe not entirely unexpected. You know, it is a doctrine that has some potential, but the sort of application of it is unclear, and I think both judges may have concluded that, you know, the crypto asset industry is not large enough to implicate the Major Questions doctrine. And it's interesting that both judges seem to have come to that conclusion independently. And this may also be a significant decision in that it begins to set some limits to that Major Questions doctrine. And I think that, you know, that's something that is notable, but in my view, maybe not all that surprising.

As we've discussed before, courts have been divided on this issue of whether digital tokens are security subject to SEC oversight. And I've mentioned this before, but two Manhattan federal judges whose courtrooms are just one floor apart in the federal courthouse, here came to different conclusions. Now this case is in DC, and the three other cases over cryptocurrency, we're in Manhattan, the second circuit, which Justice has Marry Blackman called the mother Court of securities law. Is there more weight put on Manhattan Federal Court judges decisions.

As we've discussed before, courts have been divided on this issue of whether digital tokens are security subject to SEC oversight. And I've mentioned this before, but two Manhattan federal judges whose courtrooms are just one floor apart in the federal courthouse, here came to different conclusions. Now this case is in DC, and the three other cases over cryptocurrency, we're in Manhattan, the second circuit, which Justice has Marry Blackman called the mother Court of securities law. Is there more weight put on Manhattan Federal Court judges decisions.

As opposed to a DC federal court.

As opposed to a DC federal court.

I mean, if there are conflicting decisions, where would the greatest reliance be placed.

I mean, if there are conflicting decisions, where would the greatest reliance be placed.

It's a great question. They're both very good courts, very good judges, strong traditions, and I think it's good that we are getting some decisions outside of the Southern District of New York the Mother Court, because I think that it's good for as many judges as possible to weigh in on these issues, because if we begin to see certain patterns in their decision making, then that can indicate there's a consensus about what the law is. I think that the advantage the Southern District of New York has is the volume of cases relating to securities that the judge is here, and that gives them an ability to build up some expertise. I think that because of the location of the Southern District of New York, the pool of attorneys who end up becoming federal district court judges include many individuals who have experience working with securities or corporate law types of issues. So they are very knowledgeable, and I think that, you know, the advantage the Southern District of New York may have is that if you have multiple cases in the district, then you will have multiple decisions that can provide some guidance as to what the parameters of the law is. And then eventually some of these cases will go up to the US Court of Appeals for the Second Circuit, which is also arguably the pre eminent appellet court for deciding securities law issues, and so there is a developed body of law in the Second Circuit that district court judges are both using to guide their decisions and also influencing through their own decisions. There may be a little bit less of that in the DC Circuit simply because of the makeup of cases may be more relating to government agencies and administrative law, but they still do get a good number of significant securities law cases as well. So I think that that decision will also be influential.

It's a great question. They're both very good courts, very good judges, strong traditions, and I think it's good that we are getting some decisions outside of the Southern District of New York the Mother Court, because I think that it's good for as many judges as possible to weigh in on these issues, because if we begin to see certain patterns in their decision making, then that can indicate there's a consensus about what the law is. I think that the advantage the Southern District of New York has is the volume of cases relating to securities that the judge is here, and that gives them an ability to build up some expertise. I think that because of the location of the Southern District of New York, the pool of attorneys who end up becoming federal district court judges include many individuals who have experience working with securities or corporate law types of issues. So they are very knowledgeable, and I think that, you know, the advantage the Southern District of New York may have is that if you have multiple cases in the district, then you will have multiple decisions that can provide some guidance as to what the parameters of the law is. And then eventually some of these cases will go up to the US Court of Appeals for the Second Circuit, which is also arguably the pre eminent appellet court for deciding securities law issues, and so there is a developed body of law in the Second Circuit that district court judges are both using to guide their decisions and also influencing through their own decisions. There may be a little bit less of that in the DC Circuit simply because of the makeup of cases may be more relating to government agencies and administrative law, but they still do get a good number of significant securities law cases as well. So I think that that decision will also be influential.

So Binance is the second courtroom battle over the same issue in less than a week. How many more of these cases are in the offing?

So Binance is the second courtroom battle over the same issue in less than a week. How many more of these cases are in the offing?

You know, these are probably going to be the major ones. I think that you have other cases pending terre reform and ripple. I think these four cases are probably going to define the scope of what is a security You could potentially see some other cases rise up as well as we see additional enforcement. The question is whether or not there will be incentives to litigate those cases and whether they'll be resources. Will there be resources to fully litigate cases involving, say, individual defendants who are charged with insider trading on crypto assets. There may be, there may not be. I think the thing that distinguishes this group of four cases is that these defendants have the resources to hire top notch attorneys who can make very sophisticated, well developed arguments and litigate potentially all the way up to the US Supreme Court. And I don't really see all that many other cases having that sort of staying power. But I could be wrong.

You know, these are probably going to be the major ones. I think that you have other cases pending terre reform and ripple. I think these four cases are probably going to define the scope of what is a security You could potentially see some other cases rise up as well as we see additional enforcement. The question is whether or not there will be incentives to litigate those cases and whether they'll be resources. Will there be resources to fully litigate cases involving, say, individual defendants who are charged with insider trading on crypto assets. There may be, there may not be. I think the thing that distinguishes this group of four cases is that these defendants have the resources to hire top notch attorneys who can make very sophisticated, well developed arguments and litigate potentially all the way up to the US Supreme Court. And I don't really see all that many other cases having that sort of staying power. But I could be wrong.

Are any of these cases close to the appellate.

Are any of these cases close to the appellate.

Court level yet?

Court level yet?

Not yet?

Not yet?

And I think you know, if I had to bet. I think the one that may make it up first may be the terraform case. I believe Judge Raycop granted some rejudgment back in December, and so I think that could fairly soon be in a stage where it's in a final judgment that could be appealed to the Second Circuit and Jim.

And I think you know, if I had to bet. I think the one that may make it up first may be the terraform case. I believe Judge Raycop granted some rejudgment back in December, and so I think that could fairly soon be in a stage where it's in a final judgment that could be appealed to the Second Circuit and Jim.

One thing I want to mention is these oral arguments were incredibly long.

One thing I want to mention is these oral arguments were incredibly long.

Four hours, you know, these oral arguments were very long the financing coinbase and I commend both judges for taking the time to give both sides the time to argue extensively. These are judges that are trying to get things right on a very complicated issue. They're also very busy judges. They may have hundreds of other cases on their docket. It's very unusual to give you a block of four hours to oral arguments, but I think the fact that they did will lend some additional legitimacy to the decisions they end up making. Think it's great to have these very talented judges, you know, listening to the arguments of what are some very talented attorneys to try to get things right.

Four hours, you know, these oral arguments were very long the financing coinbase and I commend both judges for taking the time to give both sides the time to argue extensively. These are judges that are trying to get things right on a very complicated issue. They're also very busy judges. They may have hundreds of other cases on their docket. It's very unusual to give you a block of four hours to oral arguments, but I think the fact that they did will lend some additional legitimacy to the decisions they end up making. Think it's great to have these very talented judges, you know, listening to the arguments of what are some very talented attorneys to try to get things right.

It's going to be interesting to compare the conclusions these judges come to on this question that's so important to the crypto industry and to the SEC. And we discussed before the record penalty that Finance paid, and its chief executive shangpeng Xiao, had pleaded guilty as well and agreed to step down as CEO. His sentencing is coming up in February, and for the second time, a judge denied his request for permission to travel back home to the UAE while he awaits sentencing, even though he offered a post a bond of one hundred and seventy five million dollars secured by fifteen million in cash. Of course, he has a net worth of more than thirty seven billions, so maybe the judge was taking that into consideration.

It's going to be interesting to compare the conclusions these judges come to on this question that's so important to the crypto industry and to the SEC. And we discussed before the record penalty that Finance paid, and its chief executive shangpeng Xiao, had pleaded guilty as well and agreed to step down as CEO. His sentencing is coming up in February, and for the second time, a judge denied his request for permission to travel back home to the UAE while he awaits sentencing, even though he offered a post a bond of one hundred and seventy five million dollars secured by fifteen million in cash. Of course, he has a net worth of more than thirty seven billions, so maybe the judge was taking that into consideration.

The thing that may concern the judge is that there are some allegations that Finance was somewhat intentional in trying to evade US law. And to the extent that that's the case, you have, you know, a person who may be able to go pretty much anywhere and may have a mentality that you know, as long as I can avoid US law, I have no moral obligation to come back and comply with it. I think that that's what makes the judge a little bit uncomfortable. In addition to the vast resources that the CEO has.

The thing that may concern the judge is that there are some allegations that Finance was somewhat intentional in trying to evade US law. And to the extent that that's the case, you have, you know, a person who may be able to go pretty much anywhere and may have a mentality that you know, as long as I can avoid US law, I have no moral obligation to come back and comply with it. I think that that's what makes the judge a little bit uncomfortable. In addition to the vast resources that the CEO has.

It is crazy money. It is.

It is crazy money. It is.

That's what makes it so unprecedented and interesting because you know, typically the investment contract cases that seen in the past, they involved fairly small time schemes, maybe involving a few million dollars here and there. When you're getting into you know, digital assets worth billions potentially, that really changes.

That's what makes it so unprecedented and interesting because you know, typically the investment contract cases that seen in the past, they involved fairly small time schemes, maybe involving a few million dollars here and there. When you're getting into you know, digital assets worth billions potentially, that really changes.

The nature of the It certainly seems to. Thanks so much, Jim. That's Professor James Park of UCLA Law School. And that's it for this edition of the Bloomberg Law Podcast. Remember you can always get the latest legal news by subscribing and listening to the show on Apple Podcasts, Spotify, and at Bloomberg dot com, slash podcast, Slash Law. I'm June Grosso and this is Bloomberg

The nature of the It certainly seems to. Thanks so much, Jim. That's Professor James Park of UCLA Law School. And that's it for this edition of the Bloomberg Law Podcast. Remember you can always get the latest legal news by subscribing and listening to the show on Apple Podcasts, Spotify, and at Bloomberg dot com, slash podcast, Slash Law. I'm June Grosso and this is Bloomberg