It’s been more than a year since Arizona Gov. Doug Ducey signed House Bill 2417 — the blockchain and smart contract effort — into law. Although Arizona is not the first state to address blockchain, the state continues to display consistent growth in this burgeoning niche.
As companies follow the technological and legal developments surrounding this new law and modern form of currency, the Phoenix-based law firm of Gallagher & Kennedy is often tasked with answering questions about cryptocurrency and the intricacies of HB 2417.
Stephen Boatwright, a shareholder at Gallagher & Kennedy, is a 27-year expert who focuses his practice on business law and transactions and securities. Boatwright has active clients in the cryptocurrency space seeking to use a traditional offering method to raise capital, and answered three of the most common questions surrounding the issue.
What will the rise in state-level regulation mean? States that welcome cryptocurrency will seek to have user-friendly statutes, and those that don’t will be more prohibitive. Lack of uniform federal regulations will make this like the securities laws prior to federal preemption, and research in each state will be need to be conducted.
Will cryptocurrencies be required to be regulated like securities? Many will be, but I think some will be grandfathered in as not being so regulated as, ultimately, they are more of a currency than a security. How the SEC determines where to draw the line is difficult to determine.
Will the state initiatives be deemed to be preempted by federal statutory law in the area? At some point the feds will jump in, but for now it looks like this area is similar to the recent Supreme Court case, which gives states the right to tax internet transactions, creating a nightmare for small business. As is the case with all new asset classes, many companies will be faced with confusing and conflicting regulatory requirements.