This post is intended to provide an update to the community on the status of the Legal Research proposal funded back in our September budget. The rationale for funding this proposal was to provide the Dash project and community with professional legal advice and clarification on the regulatory framework around digital currencies and Dash in particular, and how it may affect our users and investors. Dash has many features that are not present in other networks like Bitcoin and thus would benefit from legal research.
We strongly believe that providing users, investors and potential business partners with up to date legal opinions on Dash’s features will provide them with the knowledge and confidence to participate further on the Dash economy. We decided to initiate researching these topics based on the United States law, since it is one of the leading markets and one that many other countries tend to emulate when formulating their own regulatory framework around new technologies like virtual currencies. By funding this expense once through the network, individual masternode owners can avoid replicating this cost on an individual basis and benefit from the legal opinion.
To this effect we contacted and retained the services of Marco Santori - one of the leading attorneys in the field - and we feel confident this in an appropriate choice for these objectives.
Initially we signed a contract, funded the retainer, and started the project when Marco Santori was still part of Pillsbury Law. Shortly thereafter, Mr. Santori accepted a new role leading the Fintech team at another law firm, Cooley LLP (www.cooley.com). We decided to move with Marco to Cooley LLP, as he was the primary reason we selected Pillsbury. The process of transferring our retainer and legal representation to the new firm delayed the project several weeks.
Starting in November, Ryan and I have worked closely with Marco and his team to clarify facts and answer questions about the way Dash’s protocol operates. Some of the topics they are investigating and forming a legal opinion on are:
1) The treatment of masternode block rewards under the Internal Revenue Code
a. Whether they are treated similarly to bitcoin block rewards
b. Whether the initial collateral might be treated similarly to an investment
2) The liability of master node operators for the transactions they relay
a. Whether they could be responsible for criminal activity connected with these transactions
i. If so, under what circumstances
b. Whether their participation in “mixing” transactions might give rise to criminal liability
i. If so, under what circumstances
3) The liability of exchanges for supporting Dash transactions
a. Whether such an exchange might be held liable for criminal activity connected with these transactions and guidelines for operating within the law
The first part of the project was preparing a statement of facts that describes how Dash and it’s different features work. This step is critical as small differences in the mechanics can impact regulation like who holds private keys in different parts of the process or the services that are required from nodes to receive payment. Both Ryan Taylor and I participated in a series of meetings with the lawyers to educate them on Dash mechanics and answer all their questions. We officially received the first version of the statement of facts on December 19th and then provided some feedback and corrections. At this point we have completed our part as the clients and the law firm is working now on their research. We should receive the first version of the legal memos soon and we'll make sure to let the community know when we do. This research is very important so we are giving Marco and his team the time they need to complete their work and deliver the memo, though we have requested an updated date range of when the project will be complete.
Many community members have asked if the contents of the memos will be released publicly. Upon completion, unfortunately we will not be able to release the memos in their entirety, but will be able to share the key findings and some of the main rationale for those findings. If we were to disclose the full content of the memos publicly, we have been advised that it would constitute a breach of attorney client privilege. However, it will be possible to summarize the findings and by doing so, deliver the full benefit of the findings to the community. In addition, we have been told there will be mechanisms to present the findings privately in a manner which does not violate attorney client privilege, for example by signing NDAs or having Mr. Santori’s law firm verbally share key findings and answer questions. Should instances in which the full details of the work are required, we will provide a means to provide a higher level of support (for example a masternode owner facing an IRS audit). We will be as transparent as possible with the community while maintaining the integrity of the work and our attorney relationship.
We strongly believe that providing users, investors and potential business partners with up to date legal opinions on Dash’s features will provide them with the knowledge and confidence to participate further on the Dash economy. We decided to initiate researching these topics based on the United States law, since it is one of the leading markets and one that many other countries tend to emulate when formulating their own regulatory framework around new technologies like virtual currencies. By funding this expense once through the network, individual masternode owners can avoid replicating this cost on an individual basis and benefit from the legal opinion.
To this effect we contacted and retained the services of Marco Santori - one of the leading attorneys in the field - and we feel confident this in an appropriate choice for these objectives.
Initially we signed a contract, funded the retainer, and started the project when Marco Santori was still part of Pillsbury Law. Shortly thereafter, Mr. Santori accepted a new role leading the Fintech team at another law firm, Cooley LLP (www.cooley.com). We decided to move with Marco to Cooley LLP, as he was the primary reason we selected Pillsbury. The process of transferring our retainer and legal representation to the new firm delayed the project several weeks.
Starting in November, Ryan and I have worked closely with Marco and his team to clarify facts and answer questions about the way Dash’s protocol operates. Some of the topics they are investigating and forming a legal opinion on are:
1) The treatment of masternode block rewards under the Internal Revenue Code
a. Whether they are treated similarly to bitcoin block rewards
b. Whether the initial collateral might be treated similarly to an investment
2) The liability of master node operators for the transactions they relay
a. Whether they could be responsible for criminal activity connected with these transactions
i. If so, under what circumstances
b. Whether their participation in “mixing” transactions might give rise to criminal liability
i. If so, under what circumstances
3) The liability of exchanges for supporting Dash transactions
a. Whether such an exchange might be held liable for criminal activity connected with these transactions and guidelines for operating within the law
The first part of the project was preparing a statement of facts that describes how Dash and it’s different features work. This step is critical as small differences in the mechanics can impact regulation like who holds private keys in different parts of the process or the services that are required from nodes to receive payment. Both Ryan Taylor and I participated in a series of meetings with the lawyers to educate them on Dash mechanics and answer all their questions. We officially received the first version of the statement of facts on December 19th and then provided some feedback and corrections. At this point we have completed our part as the clients and the law firm is working now on their research. We should receive the first version of the legal memos soon and we'll make sure to let the community know when we do. This research is very important so we are giving Marco and his team the time they need to complete their work and deliver the memo, though we have requested an updated date range of when the project will be complete.
Many community members have asked if the contents of the memos will be released publicly. Upon completion, unfortunately we will not be able to release the memos in their entirety, but will be able to share the key findings and some of the main rationale for those findings. If we were to disclose the full content of the memos publicly, we have been advised that it would constitute a breach of attorney client privilege. However, it will be possible to summarize the findings and by doing so, deliver the full benefit of the findings to the community. In addition, we have been told there will be mechanisms to present the findings privately in a manner which does not violate attorney client privilege, for example by signing NDAs or having Mr. Santori’s law firm verbally share key findings and answer questions. Should instances in which the full details of the work are required, we will provide a means to provide a higher level of support (for example a masternode owner facing an IRS audit). We will be as transparent as possible with the community while maintaining the integrity of the work and our attorney relationship.
