Four Lawsuits to watch In Cryptocurrency

Cryptocurrencies are on the rise and with that so are legal problems. While scams are abundant in the crypto space, the majority of high profile lawsuits brought up by blockchain technologies are more about the utility than anything else.

As the crypto continues to grow, expect these lawsuits to have long lasting effects on the industry. Here’s a look at what’s getting the attention of lawyers:

Nike Inc v. StockX LLC

In February 2022, Nike filed a lawsuit against StockX for infringing on their trademarks by selling NFTs of their Nike shoes. In most cases, this would be a simple out-of-court settlement with StockX agreeing to Nike’s terms to prevent further damages, however StockX claims that Nike is projecting a fundamental misunderstanding of the NFT concept. 

While Nike has a right to be alarmed by the NFT sales, what they are failing to acknowledge is that the NFTs are not digital products of the Nike shoes, but “claim tickets” that represent official ownership of the physical product. 

By incorporating an NFT system, StockX is enabling the shoes to be tracked by ownership so that every time they are bought and sold a provenance is kept. The NFT stored on a blockchain is merely a token which tracks the serial number and other identifiers so that potential buyers can avoid scams. 

If anything, this NFT system adds a new layer of security for sneakerheads because Nike is a well-known brand with a dedicated customer base. Unfortunately, the legal team representing Nike is DLA Piper which is one of the largest law firms in the world. It’s a David vs Goliath situation with massive implications for Intellectual Property laws regarding NFTs. 

Miramax LLC v. Tarantino

Director Quentin Tarantino has been in hot water with his new NFT project which is a collection of exclusive content from his award winning film Pulp Fiction. The collection boasts a range of goods including the original handwritten script, previously unheard director’s commentary on the film, and uncut scenes from the movie itself. 

For film lovers around the world, this collection offers great insights from one of the most highly regarded directors of all-time. However, Miramax, the production company behind the film, is not pleased. 

They are suing Tarantino for a breach of contract that violates intellectual property belonging to the company. Gray area does exist however as Tarantino, according to the contract, still has ownership over certain aspects of the film including “its soundtrack, potential spinoffs or sequels and related print publications.” 

Unlike Nike v. StockX, the case here is a matter of routine intellectual property disputes with NFTs simply being the vehicle driven to deliver goods. We shouldn’t expect this decision to have major implications on NFTs more than Tarantino himself. Yet, it is still good to see more notable figures entering the NFT space. 

Anderson et al v Binance et al

While Binance has encountered a variety of legal matters in the United States, their most recent lawsuit was dismissed by a federal judge in New York over a dispute claiming that certain tokens listed on the exchange were not registered properly and that the buyers lost their investments as a result. 

The first and most important factor considered by the judge in this matter was that Binance is not an American company and is not subject to American security laws. Beyond this fact, the original purchase of the tokens was in 2018 while the lawsuit was filed in April 2020 meaning that the buyers waited over a year causing the suit to lose much of its weight. 

It’s fair to say these buyers made a poor investment and could have done better due diligence. However, this does not mean that Binance is completely off the hook. 

The company is under a myriad of legal scrutiny in the United States pertaining to regulatory compliance. To avoid further issues, the company removed Americans from its platform in 2019 and replaced themselves with Binance.US which is run by a separate team. 

SEC v. Ripple

Recent developments in the SEC lawsuit against Ripple suggest that the SEC is being forced to settle. The SEC was recently denied a deliberative process privilege (“DPP”) which would have allowed them to prevent their internal documents from being handed over. 

Because of this denial and section which prohibits the SEC from appealing the notion, it is expected that the SEC would prefer to settle the dispute. The implication if this result is to occur would be massive across the entire crypto community. The SEC has argued since December 2020 that XRP is an unregistered security and is being illegally exchanged by Ripple. 

Generally, these matters are quickly settled out of court by blockchain companies not wishing to engage in a full on legal fight. However, Ripple decided otherwise and has stepped up to the SEC claiming that their digital token is a tool and not an investment product. 

The functionality of cryptocurrencies and blockchains are at the heart of this lawsuit which would remove the assumption that crypto tokens are solely meant to be bought for their investment value. Ripple is fighting the claim, saying that their XRP token is a utility first and cannot be subject to SEC rules. 

If the SEC is willing to settle to Ripple’s demands instead of producing their internal documents there is a possibility that a new regulatory body will be created with tailored understandings about how blockchain tokens work.