Block & Order

Reddit Sues Perplexity, Counter-Strike 2 Skins Market Crash, Kalshi v. NY, CZ Pardon & More

• Falcon Rappaport & Berkman LLP • Season 1 • Episode 45

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In this Election Day edition of Block and Order, Kyle Lawrence and Moish Peltz kick off with SEC Chair Atkins’ proposed “innovation exemption,” a sandbox-style framework meant to move crypto oversight from ad hoc enforcement to formal rulemaking—now stalled amid the government shutdown. They unpack Kalshi’s lawsuit against New York’s Gaming Commission and what it reveals about the ongoing tension between state regulators and the CFTC’s federal preemption authority.
 
Kyle and Moish also discuss Valve’s Counter-Strike 2 update that erased roughly $2 billion from its in-game skin economy, Reddit’s DMCA anti-circumvention case targeting Perplexity and data-scraping proxies, "Bitcoin Jesus", the CZ pardon, and more. Tune in now on Block & Order!

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Please note that this show is meant for informational and entertainment purposes only. This is not legal advice. Please hire your own attorney. The hosts or guests appearing on Block and Order may hold cryptocurrency, NFTs, or other digital assets from companies mentioned during our programming. This possession of digital assets does not constitute a professional endorsement, legal advice, or financial advice. Listeners are encouraged to consult with their own legal and financial advisors for personalized guidance in the blockchain and cryptocurrency space.

Kyle Lawrence [00:00:00]:
CZ is a free man. Holy cow. Number go down and I'm just gonna say it. Daylight savings time sucks. Moishe and I are gonna break all that down and more coming up on Block it Order. Welcome to Block and Order, your one stop legal shop for all things digital assets. I'm your host, Kyle Lawrence and with me, as always, you get my vote on election day, Mr. Moishe Peltz.

Moish Peltz [00:00:36]:
I don't know if that's a good thing or bad thing, but welcome back, Kyle. It's been a. It's been a minute.

Kyle Lawrence [00:00:40]:
Yeah, well, it depends on what I'd be electing you for, really. I mean, some jobs.

Moish Peltz [00:00:45]:
That's true.

Kyle Lawrence [00:00:46]:
Yeah.

Moish Peltz [00:00:47]:
You know, I did, I did vote today on election day. We're recording November 4, 2025. And you know, did my civic duty, so I felt good.

Kyle Lawrence [00:00:56]:
I did as well. You know, it's funny, in these sort of off year elections, it's not super crowded. Obviously these are, these are important elections, but there's not a lot of people there. And it's a very muted tone. It's a stark contrast to where we were this time of year ago.

Moish Peltz [00:01:10]:
Yeah, it's true. Well, I think everyone votes early in our neck of the woods. So going today on election day, you know, not. Not that late and like kind of early. Yeah, yeah. We were like the only people walking.

Kyle Lawrence [00:01:23]:
In at that time, so I guess that's true. And election day, when I voted this morning, preceded what was something of a precipitous drop in the market today. I wonder what caused that.

Moish Peltz [00:01:35]:
Yeah, I mean, I, I saw a huge drop. I think bitcoin got just. Did it actually go under $100,000 or did it like touch it?

Kyle Lawrence [00:01:44]:
It went under a hundred for a short spell. It hit 99. I'm not sure where it is as of now at, you know, at night, but yeah, it did hit 99 for a while.

Moish Peltz [00:01:54]:
Well, there you go. Yeah, but I wonder. I mean, people there were. There was like unfounded Internet rumors, social media rumors of something big kind of blowing up a couple weeks ago. There's speculation that that might still be working through the system.

Kyle Lawrence [00:02:10]:
Another day that ends in white Internet speculation on something that no one really knows anything about. That's the way. Yeah. Well, Moishe, it has been a while, as you so aptly noted. This is episode number 45 and we're very proud of where we've come to the show and we'd like to kick off today with something that's a little. I don't want to say esoteric, but there's been a lot of talk coming out of the SEC with Chair Atkins and the innovation exemption. So if you don't mind, why don't you kick us off in talking about where things are with that.

Moish Peltz [00:02:44]:
Yeah, you know, this relates back, I think, to our last block and order recording where we were talking about having seen Chair Atkins at the Fordham Regulatory Symposium and at that time and since then, despite the shutdown in the government. So, you know, we'll set that aside for a second. Chair Atkins is really driving towards having the SEC formalizing and innovation exemption he claimed by late 2025, early 2026, again, like, subject to, you know, delays in that shutdown to remove crypto policy from this ad hoc enforcement environment to a place where there is formal rulemaking under a supervised framework. So, you know, there was also, as part of this, you know, a launch of a coordination effort with the cftc. And the exemption is framed as a sandbox style conventional relief program that lets both crypto and more traditional fintech firms pilot products onshore under the oversight of CFTC and the CC and then aligning with other broader efforts like the Genius act legislation and other contemplated or actually granted no action relief. We mentioned there's been and you know, to no action relief in crypto now. Granted. And the goal of this whole thing is to curb this flight offshore and lower the cost of complying onshore and preserve some ability for people to experiment while maintaining investor protections.

Moish Peltz [00:04:18]:
So, Kyle, I don't know. I guess my first question is like, is anything going to happen this year with the government shutdown? And like, where do we go from here?

Kyle Lawrence [00:04:28]:
Great question. It was probably a long shot anyway for it to happen this year. I mean, they got the Genius act through. Market structure has been, you know, was a bit stalled in committee prior to the shutdown. At this point in time, with the shutdown having gone on for what, three or four weeks now, it's November, Thanksgiving is coming up, Christmas is coming up. I just can't see realistically how this gets done in 2025, even on a good day. That was tough. And next year, I mean, we're going to be in the midterms and it's going to be a very, very tightly fought and contentious set of of midterms.

Kyle Lawrence [00:05:03]:
So I'm curious as to see where the focus is going to lie. And I just don't see this as being for the SEC and for Atkins, obviously, but I don't see this as being prioritized. Next year at least we had a lot of momentum this year. We always knew we had a relatively short window to get these things done. They did get some things done, and that's phenomenal. But I don't see this happening in 2025. What is interesting, though, is to think about what this exemption could look like. And as I've given it a ton of thought in recent weeks, and you hear the things that Chair Atkins is saying and Hester Purse and the other folks who work at the sec, what they're doing kind of sounds an awful lot like garden variety securities legislation.

Kyle Lawrence [00:05:44]:
You're talking about marketing standards and suitability, limits for retail exposure and prohibitions on pay to play law lockup periods, tokenomics and plain English disclosure language. All these things that are foundational principles of the federal securities laws. So I'm wondering if the, I mean, an easy, low hanging fruit thing would be to take the securities laws exemptions and just kind of, just kind of retrofit crypto into it, which is what people do anyway.

Moish Peltz [00:06:10]:
Hey, Chat GPT make these.

Kyle Lawrence [00:06:12]:
Yeah.

Moish Peltz [00:06:12]:
Securities exemptions crypto friendly, right? Yeah. I mean, how hard is that? Well, I agree with you that I think the timing here is kind of just tight. I don't see how market structure can happen now unless the government reopens today. And that's the number one priority, which it's not going to, and it's not. So, you know, I think all this gets pushed out. I guess the question is, you know, short of formal rulemaking being enacted being, you know, written, I don't know, knacked is the wrong word. But short of that rulemaking kind of going into effect, you know, the SEC probably has some ability to at least keep working, even if they're not going to formalize the rules under the government shutdown. So I guess the question is, is this still kind of proceeding forward now or is everything on pause? And I don't, I don't know if we know the answer to that just yet.

Kyle Lawrence [00:07:12]:
Well, for whatever it's worth, and I don't know if this is indicative of how the rest of the government is operating, but the other day I had to call Edgar, Filer Management. EDGAR is the electronic Electronic Data gathering and Retrieval service where if you're a public company, that's where you make your filings. And I don't know what prompted me to call. I assumed nobody was going to be there. And not only was somebody there, they answered on the first ring when I called. But they were actually really helpful. I couldn't believe it. So maybe, maybe that's the only person in government.

Kyle Lawrence [00:07:39]:
Maybe all the staff are there. I'm not really sure. I don't really know the specific inner workings of our shutdowns work, if we're being totally honest.

Moish Peltz [00:07:48]:
Well, the flip side of that is the IRS lawyer that was furloughed and decided to live his lifelong dream of opening a hot dog stand. So, hey, props to the hot dog stand lawyer out in D.C. streets. Hope you're staying warm.

Kyle Lawrence [00:08:07]:
I respect it.

Moish Peltz [00:08:08]:
Moving on to our next topic. Kalshi, Kyle, take it away.

Kyle Lawrence [00:08:12]:
Good old couch Cowshi. Well, Kalshi filed a federal lawsuit in the Southern District of New York mere hours after receiving a cease and desist letter from the New York State Gaming Commission, which alleged, among other things, that the platform was offering unlicensed sports wagering via sports event contracts. Remember when these things were totally illegal, Fanduel and draftkings and all that. Then the NFL made a phone call and boom, it all became legal.

Moish Peltz [00:08:35]:
Suddenly legal. Yeah. Now ESPN has gambling on its homepage. Great.

Kyle Lawrence [00:08:39]:
I mean, we're going to go totally off track. Sports arenas now have sportsbook. Some of them in the. In the venue. I'm not making that up. That's insane.

Moish Peltz [00:08:51]:
Anyway, like in Las Vegas or like in real cities.

Kyle Lawrence [00:08:54]:
In real cities and more on the way. Yeah, they're either in the venue or they're right outside. Like how that bar is at Citi Field. Or so I'm told. It's kind of right outside the bullpen gate. It's like that. It's right there.

Moish Peltz [00:09:07]:
Well, I mean, we're going to go even further off topic. You know, my hometown Miami Heat were, were one of their players was just dinged for gambling on games of. Or giving information away, allegedly for games that he was involved in playing. And so I think this idea of gambling in sports, I think there's a lot of discomfort across. I mean, I know it's, it's more prevalent than ever, but I think the fact that it's so present is causing a lot of discomfort. And you're seeing that, you know, bringing it home here, tying back into these events, contracts that are prediction markets.

Kyle Lawrence [00:09:44]:
Wasn't. I mean, this is a big NBA story. Didn't a bunch of people get dinged on this? Or is it.

Moish Peltz [00:09:48]:
Yeah, it wasn't just. It was like 18 players got indicted, including a couple, an active NBA coach and an assistant coach is like a big thing. Yeah.

Kyle Lawrence [00:09:57]:
Can we bet on the outcome of the litigations that our firm handles?

Moish Peltz [00:10:03]:
Whoa.

Kyle Lawrence [00:10:04]:
Kyle. Basking earnestly. That's probably unethical I don't think so.

Moish Peltz [00:10:11]:
That seems not only unethical, but. Yeah, I don't know. That makes me feel very uncomfortable. But you know, to shout out Matt Levine, who we continuously shout out on the show. His, his update yesterday was all about Brian Armstrong on Coinbase's earnings call. Effectively shouted out. There was, there was a prediction market for which words Brian Armstrong would mention on his earnings call. And at the last bit of the earnings call he just rambled on like five or six of the, the words that were subject to that prediction market, presumably they allowing them to win the event contract.

Kyle Lawrence [00:10:57]:
Wow.

Moish Peltz [00:10:57]:
And so there's this whole. Mentioning Matt Levine was, was arguing like first, like why do we even have to talk about this? This just seems stupid. And it was only like an $80,000 market so there wasn't even real money at stake. But then like at what point is this market manipulation and does it matter? Is it actually going to be enforced? Like who's, I mean subject of Kalshi. Right. In their litigation, which is where we started and we can go back on topic is like, well, is this the CFTC thing? Is this a New York, you know, Gaming Commission thing? Is it something else? Yeah, but like I, I don't know. What do you think? I don't.

Kyle Lawrence [00:11:32]:
Well, I think Pete Rose should be in the hall of fame. But Kelsey Kelsey. So to, to bring it back a little bit. Thank you, thank you audience for indulging us. But Kalshi is arguing, as you sort of alluded to, that in sports contracts are derivatives that are listed on a CFTC regulated designated contract market. So the Commodity Exchange Acts quote exclusive jurisdiction clause preempts these state gambling laws. And you see this.

Moish Peltz [00:12:01]:
That makes sense, right?

Kyle Lawrence [00:12:02]:
Yeah.

Moish Peltz [00:12:03]:
If you have federal governance over your activity, you don't want 50 states all telling you how to do or not do that. That's why you have a federal regulator.

Kyle Lawrence [00:12:12]:
But you get into this push pull of where does federal law stop in state law begin? And that's a constant battle because you see federal law struck down and the response is well, leave it up to the states to decide and then the other side gets in power. They say well we're just going to do federal law the other way. And then when you have such disparate laws, it becomes nearly impossible for operators like Kalshi to, to, to operate. Sorry about that. But, but, but yeah, that's what happens. So you know, where does one end? One begin? You know, I think couch position is exactly what you just said. Congress gave the CFTC the exclusive authority over these derivatives to avoid the total chaos from all these regimes. And New York's order is preempted.

Kyle Lawrence [00:12:58]:
I don't know if I completely disagree with that. How are they supposed to comply with all these things?

Moish Peltz [00:13:05]:
Well, I, I, I mean, I agree with the notion that it's insane that we have, you know, 50 plus regimes that you have to comply with. And the fact that those could be inconsistent from jurisdiction to jurisdiction never made sense to me. Especially now that we have the Internet available not just in every state, but around the world, and it's creating this patchwork of really inconsistent regulations. Wouldn't it be nice if we could just have federal legislation that, that covers all of that? But you know, I think from the perspective of New York, it's, this is traditional sports betting. This is something that is traditionally left to the states or even, you know, Indian tribes.

Kyle Lawrence [00:13:51]:
Right.

Moish Peltz [00:13:52]:
And states have lots of ways to enforce, you know, licensing, age limit, you know, AML safeguards, things that like states do for traditional betting. And you know, some of the court decisions here are also inconsistent. Right. Some are saying this is a federal issue, some are saying it's a state issue. So there isn't been like a consistent legal judicial approach to the outcome here either.

Kyle Lawrence [00:14:14]:
Yeah.

Moish Peltz [00:14:15]:
So, you know, this is why Kalsi, I think, sees the opportunity to, to try and create a little bit of precedent in their favor. Right. I mean, my notes here, the Maryland court already declined to enjoy in state enforcement, and attorney generals, attorneys general nationwide are treating sports wagering as federally preemptive. So it's, it's, it's kind of still evolving.

Kyle Lawrence [00:14:42]:
Yeah, yeah. And especially with something that is effectively a nascent industry like sports gambling, I mean, it wasn't that long ago where this was illegal everywhere. And so a lot of these laws are relatively new and we don't have the decades of case law and precedent to look back upon. So we're kind of similar with crypto in blockchain technology. We're sort of setting the stage on the fly. And I think that, I mean, just, just by the nature of this being a young industry, you're going to have a lot of these scenarios where it's really muddy, where you have this push pull between federal and state law and you have these states that have either taken certain actions or declined to take certain actions, which then, you know, leads into what New York's position is here. It's really interesting. Unfortunately, Kalshi is kind of stuck in the middle of it, but, you know, they're fighting a good Fight.

Kyle Lawrence [00:15:35]:
I mean I don't feel that bad doing okay.

Moish Peltz [00:15:37]:
Yeah. And I have Matt Levine's quote here which is Cal, she poses the question what if dumb bets that you and your buddies make because you are bored and like gambling were regulated by the CFTC and, and that's, you know, there.

Kyle Lawrence [00:15:53]:
You go everybody read your Matt Levine. It's your homework.

Moish Peltz [00:15:56]:
Yep, that's right. Gotta tell the associates to you start, start giving pop quizzes and I do. All right, on to our next topic. Valve's counter strike. So this, this was a week or two ago there was a major Counter Strike two update Counter Strike two being one of the most popular video games on the planet which this update allowed trade ups from formerly ultra rare in game items like knives and gloves. And then it triggered a market shock which wiped out about two billion dollars from the estimated roughly six billion dollar counter strike to cosmetic economy within within hours and high end items plunged and lower tier items spiked. So I, I highlighted this on block for block in order because I think it's one it's kind of funny whenever there's this huge video game market for things that just blows up. 2 It reminds me a lot of NFTs.

Moish Peltz [00:17:04]:
It kind of highlights the fragility of these kind of markets that Valve can just unilaterally change the terms about item scarcity, utility and then the whole market like billions of dollars just get evaporated and it raises topics that we've talked about about loot boxes and on platform training and consumer protection and and fundamentally whether blockchain rails, this is something that they're meant to solve, whether the blockchain can reduce opacity, fraud and basically centralized trust on video game developers versus like a more community based creation. And then just like last point before Kyle asked my question to you is the whole like I've mentioned this before on the show. Vitalik Buterin, the founder of Ethereum is on record saying that in, in the 1990s in Russia. He moved to Canada in 2000 when he went to school and while all during this time he was playing World of Warcraft and that one day Blizzard removed items from his beloved Warlocks siphon life spell and he went through this experience of crying himself to sleep and realized what horror centralized services could bring and decided to quit playing and ultimately build Ethereum. So as I saw the story I'm like oh, the next Vitalik Buterin is somewhere in his bedroom playing a video game crying over losing $2 billion in market value from their counter strike two knife. But hopefully now Looking to develop the next Ethereum 4.0.

Kyle Lawrence [00:18:39]:
Yeah, I never really played Warcraft, but I did play a lot of Starcraft in college and I was a big siege tank, big siege tank guy. But, but in any event, I love Vitalik. Vitalik's quote here. I mean listen, this is why blockchain exists. I mean it's a, it's a small use case but you know, you're talking about transparent rules putting skins on chain replaces these opaque, you know, mutable databases and transfer history and enforcement by code rather than surprise patches that these developers put on that are often janky and don't work. God knows what happens to your items that you've spent months if not years cultivating. You know how gamers are, you know how seriously they take this stuff. They kill someone over, over one of these things happening.

Kyle Lawrence [00:19:20]:
You know, tokenized items can be held in your wallet and traded permissionlessly, potentially ported across marketplaces like this solves all of these problems somewhat easily I think, you know, what are we doing here?

Moish Peltz [00:19:33]:
But I think, I think gamers are just the word. NFT back in 2021 took on this aura of this like bad, evil thing that gamers didn't like. And perhaps if there's some sort of rebrand, if there's now there's this kind of big incident where people are like, oh man, that's right. Decentralized economies really suck for, for these kinds of reasons. And there can be this reset where people go back to decentralized tools like NFTs. But I don't know, maybe I'm just being idealistic. I think the market kind of took this idea and spit it out and it's kind of died since, since then. So I mean there, there, there was this problem, we found the solution and the market seems to have not quite yet adopted it yet.

Moish Peltz [00:20:27]:
So I don't know, people get stuck.

Kyle Lawrence [00:20:29]:
In their world, I guess. Yeah, they get used to doing a thing a certain way. Even if it doesn't work, they're still going to do it. We talked about the government shut down about these things. But it reminds me, I don't know if it's a direct one to one, but I've been thinking a lot about George Carlin just because it's election day and he had this great quote, it's something along the lines of, I don't understand, you know, older people with tattoos. He said it used to be in counterculture days you get a tattoo to piss off the squares. The squares are, you know, have them now. So I don't know, popped in there.

Moish Peltz [00:21:03]:
So maybe NFTs will be cool again. Is that. Yeah, exactly.

Kyle Lawrence [00:21:06]:
These guys will come around. I mean gamers and NFTs, it just seems like a natural fit.

Moish Peltz [00:21:10]:
I don't know, I, I would think so. Yeah. I was a bit younger when I was playing, you know, Starcraft and Warcraft and Counter Strike One. But it would have been cool like if, if, yeah, these items were, you know, you could trade them and use them across different games, you know, but obviously the incentives for the centralized gaming developers, it's real, these are real businesses. They, they want their, they want control over their economy not just for let's, yeah, self interested purposes, but for security and compliance and you know, risk mitigation. So like I get it too. Right. There's reasons why they have these things, you know, consumer protection too.

Moish Peltz [00:21:55]:
Right. But because NFT is also, if you kind of unlock these gates and give away control, who knows what's going to happen. So there's a lot of market forces that have not allowed this to happen for mainstream like AAA gaming just yet.

Kyle Lawrence [00:22:09]:
We probably just pissed off all the gamers, or at least I did, but whatever.

Moish Peltz [00:22:12]:
Yeah, I think we just pissed off all the gamers and all the gaming developers and all the crypto people that.

Kyle Lawrence [00:22:17]:
Were doing something right.

Moish Peltz [00:22:19]:
That's right.

Kyle Lawrence [00:22:20]:
Reddit filed suit against Perplexity, SERP API, oxylabs and AWM proxy, accusing them of data laundering by scraping Reddit content indirectly via Google search results as a means to evade Reddit's anti scraping measures. Reddit seeks a permanent injunction that's expensive damages and a ban on using or selling previously scraped data. Their complaint leans on anti circumvention theories tied to bypassing technological controls on Google, Google's and Reddit systems. It highlights a history of cease and desist correspondence with perplexity amid a 40 fold jump in citations to Reddit content, the case lands against a commercial backdrop. Of course Reddit is inked to paid licensing deals with Google and OpenAI because of course raised API pricing and is trying to preserve exclusivity and monetization of its user generated content while portraying large scale scraping as harmful to users, infrastructure and platform integrity. You know, I have to say when I first started reading about this I was like, read it. It's basically like barstool. All I do is aggregate stuff that's not theirs.

Kyle Lawrence [00:23:22]:
But I think given the, given the dollars that are at stake here and the financial interest that they have in what is effectively their data, I don't know if I Necessarily completely disagree with them here.

Moish Peltz [00:23:37]:
Yeah, I mean it's really crazy because you think about like the Internet is this big limitless like thing of content. It turns out it's actually really difficult for the large language models need so much data to train on, especially something like Reddit, which has real time user generated data. And they're trying to get all this to understand what's happening in real time. And it's Reddit, which I think it's, it was almost a, has been at some point has really been revitalized and they went public, you know, in the past year and their stock market has, their stock price has really, you know, gone through the roof since they IPO'd. I think in large part due to the fact that they are now able to monetize their user generated content for large language model training. I mean. Right. It's just Google, OpenAI and other API users, including Perplexity.

Kyle Lawrence [00:24:33]:
Right.

Moish Peltz [00:24:34]:
So look, I mean this is what they're monetizing. This is where they're finding value. This is their, their now golden ticket. They have to step up and protect the golden goose. Right?

Kyle Lawrence [00:24:45]:
Absolutely.

Moish Peltz [00:24:46]:
So that's what they're, that's what they're doing here. I thought it was interesting that they're relying primarily on DMCA anti circumvention theories, which I think is like, it's, it's a kind of weird like early 2000s copyright scraping kind of theory. So I think the legal theory is actually kind of interesting of how they're going after people here and Yeah, I mean that's like, it's, it's, I think from a business model perspective though, they have to do it.

Kyle Lawrence [00:25:15]:
Yeah.

Moish Peltz [00:25:16]:
And I'm really curious to see how this turns out.

Kyle Lawrence [00:25:18]:
It reminds me a lot of when I first became an attorney and I didn't really understand a lot about intellectual property and how it gets valued and how you protect it. And one of the intellectual property attorneys at the firm I was working with explained it to me that Coca Cola at the time, this is going back almost 20 years, they valued their intellectual property on their 10k and $50 billion.

Moish Peltz [00:25:40]:
It's a lot.

Kyle Lawrence [00:25:40]:
And it's like, well, how do they protect that? It's like, well, you have these random bars on the street that have rum and Coke night. They would have people drive around and say, are you selling Coca Cola or something else? And if you weren't a licensed retailer or a reseller, then you couldn't call it that. You'd have rum and Cola night. I mean, the Worst thing that ever happened to Xerox is the word Xerox became ubiquitous. Nobody says, hey, go, go photocopy this for me. They said, go Xerox this for me. Guess what? We don't have a Xerox machine in our office. That's bad.

Moish Peltz [00:26:12]:
I will say, I mean, on the flip side, right, Play devil's advocate here. The idea of the open Internet, of the idea that user generated content is, is not behind a paywall, is not controlled by a massive public company, whether it's Reddit or Google or, or you know, Twitter now, X, whoever it is, it's, I guess the question is like, is this kind of public Internet of the Commons where there's public access and fair use and aggregation happening across an open web? Is that, is that still a world that we live in or is that like a far gone, like history? So, you know, and you think about like the users posting stuff on Reddit. These are like, this is user generated content. It's the user's creations, it's not Reddit's creations. And so it's great that Reddit has created this, you know, amazing community forum where people want to spend their time and contribute and talk about things that are happening in real time and that's what's valuable for training and perplexity and real time AI search. But it kind of gets back to like, well, what's the Internet? Is this really this massive kind of closed wall place that can be monetized for shareholder value?

Kyle Lawrence [00:27:39]:
Right. Or if they could, I mean, to really take it further, you know, based on what you're saying, is there a world where Reddit becomes effectively the gatekeeper for all the information online? I mean, is there a world where that happens based on what they're trying to do here or is that just too catastrophic of a scenario? I mean, I can go on to Google.

Moish Peltz [00:27:58]:
Yeah. I mean, look, you can compare something like Reddit, which is taking this approach to something like Wikipedia, which explicitly has, you know, Creative Commons licensing on the, on the work there. So it's user created content. Right. It's, it's kind of communally created, but then whatever is there is contributed in a kind of open licensing format. Whereas Reddit does not have that. Right. It's explicitly behind, yeah.

Moish Peltz [00:28:23]:
Terms of service that prohibits. Yeah. And there's technical measures that prohibit scraping and kind of mass scale taking of that content. So it's two very different. Yeah, you know, business models, two very different approaches to, you know, user generated content and, and fundamentally the intellectual property rights behind it.

Kyle Lawrence [00:28:44]:
It's really interesting. It's cool.

Moish Peltz [00:28:47]:
Yeah.

Kyle Lawrence [00:28:48]:
Oh, pig butchering. I'm sorry, I'm sorry if, if any of you watching this has been the victim of this, but it comes up a lot. I get, I get about one phone call a day. Which one of you, when you lead us off on this?

Moish Peltz [00:29:02]:
So there, there was a massive takedown by US prosecutors who indicted Cambodian based Prince Group, alleging that this conglomerate ran a forced labor pig butchering scam. And the Department of justice seized roughly 127, 271 Bitcoin. So people were a little concerned that the US government had dropped down and only had, you know, 100,000 Bitcoin and change. Now they've effectively doubled up another $15 billion in Bitcoin and was the largest forfeiture in Department of Justice history. And, and yeah, I mean, I'm with you. I like you get, you know, typically at least one of these kind of, I don't know, calls, but like email inquiries a day. And we've, we've worked on some of these, we've done tracing, we've, we've provided information to law enforcement that has resulted in seizures. I know, I don't think particularly this one, but you know, it's, it's, it's just really impressive that this is something that was done.

Moish Peltz [00:30:15]:
But it's also just really scary. The massive size of these schemes and the amount of money that's being stolen from, you know, from people. It's just, it's just the, the amount of, you know, you hear it on the calls, you hear it on the emails, like the amount of emotional harm, the amount of financial loss, the amount of damage that's happening to just ordinary folks that lose their life savings is really tragic. And so that, that part of it's sad and it's, it's just, you know, nice to hear. You know, this is, this is like when you're talking about, you know, what should government do, how should it use its infinite resources going after people like this, I think is, is one of those things.

Kyle Lawrence [00:30:56]:
Can't disagree with that. Obviously we want to see, you know, none of this ideally, but we at least want to reduce it to the point where we're not getting phone calls every day. I think that's a good litmus test for it. If we start getting, you know, two calls a week, I will consider that progress in this world. But what's interesting is, you know, when I was reading about this is some of the overreach concerns. Overreach is not the right word. But when you have these expansive sweeps, you do sweep up lawful actors into the enforcement. Now, if it's one or two people, you say you can live with it.

Kyle Lawrence [00:31:29]:
You can't make an omelette without breaking some eggs. But the wider that net gets cast and the more innocent actors get roped into it. I think that's where potential concerns can be. I mean, we get phone calls where people have funds listed on an exchange and someone, you know, a bad actor sends them, you know, a small amount of crypto, whatever it may be, and now their account is frozen and they. And there's no ability for them to extract it, and oops, all the while crypto's crashing and they would have cashed. You know, all these scenarios we could talk about all day. So I think that obviously it's great that we limit this and we eliminate it, but we don't want to throw the baby out with the bathwater in so doing. And I think it's.

Kyle Lawrence [00:32:10]:
It's worth keeping an eye on. Yeah, it's awesome that we seized 127,000 Bitcoin, which you mentioned. 15 billion. It's worth a little bit less today. We'll just throw that out there.

Moish Peltz [00:32:21]:
But, but, but still 12 billion in market price.

Kyle Lawrence [00:32:26]:
But nonetheless, if you, if the cost of doing that is your sort of shutting out people who in the aggregate have 150,000 Bitcoin and now they can't access it, that's where we have to be very careful of. And we're seeing a lot of. I don't know what the right word is, and I don't want to get political, but a lack of sort of coordinated effort and detail in a lot of these things, you know, at least that we're seeing. So I think it's just, it's worth noting. I'm not saying it's bad, I'm not saying, not saying don't do it, but, you know, the devil's in the details with these things. And I hate seeing people who are doing things correctly and acting in a manner that's compliant with the laws and with the terms of service of these exchanges just getting shut out of things.

Moish Peltz [00:33:10]:
Yeah, and you're exactly right. It's. We've seen the harm of innocent bystanders having their crypto frozen inadvertently as part of a law enforcement act, like, you know, seizure, freeze or whatever it is. And that's kind of one of these things where the complexity of this ecosystem and the lack of centralization, you know, there's great. That's why bitcoin is what it is, but it also creates second order problems where people like the crypto goes, you know, through a scheme and it's tagged and then it gets used down the road and you know, innocent, you know, just arm's length transactions and it's like, well, hey, you got stolen Bitcoin. It's like, well no, no, no, I'm just a guy that bought the bitcoin.

Kyle Lawrence [00:34:05]:
Yeah.

Moish Peltz [00:34:05]:
In this other completely natural way. And now I'm roped into a Department of justice seizure action or, or some other law enforcement activity. So it's very complicated and I think it's both the benefit and the curse of this decentralized ecosystem.

Kyle Lawrence [00:34:25]:
Yeah, Bonafide third party purchaser role. I remember law school, vaguely, vaguely, vaguely.

Moish Peltz [00:34:33]:
That was what, like five years ago?

Kyle Lawrence [00:34:35]:
Yeah, exactly. It was just two weeks ago. I just. Congratulations to our associates. You passed bar. And one of them is getting admitted to a tomorrow on Guy Fawkes Day. Great job. You know who you are? Small companies.

Kyle Lawrence [00:34:46]:
Strive. You've heard of these guys? A Semler Scientific shareholder has sued to enjoin the proposed merger with Strive, alleging fiduciary breaches and disclosure deficiencies in Semler's merger proxy, seeking to block or delay the vote until corrective disclosures and process cures are made. This largely stems from their digital asset treasury. The complaint targets classic pressure points, alleged conflicts, fairness valuation analyses, background of the deal narratives and deal protections, arguing Semler's board violated duties owed in a change of control scenario and that investors cannot cast a fully informed vote. You know, we're seeing a lot of these in recent months. You know, there was the DAT boom. You know, Michael Saylor obviously is everywhere. He's speaking at every one of these summits and you're starting to see some of these lawsuits come out.

Kyle Lawrence [00:35:38]:
And you know, this is just another, another example of it. So, you know, I don't even, I'm not sure where to begin. Like how do you, how do we begin to tackle these things? Is it, is it just. Shareholders don't understand them and because of that they're going to fight these things tooth and nail? I just, I don't know. Yeah, I don't know. What, I don't know.

Moish Peltz [00:35:58]:
It's easy enough to say, well there's just always going to be plaintiffs, class action lawyers like on the prowl. And the fact that you can just point and say crypto, ooh, scary, bad fiduciary breach, you know, that kind of thing is like, it just seems like low hanging fruit for, for a Certain type. So part of me is like just dismissive of, well, it's crypto. There's plaintiffs, like shareholder actions. Like, it just seems like a match made in heaven. It's just going to happen. It's part of the deal. But then, you know, you see, you know, really interesting business models forming.

Moish Peltz [00:36:37]:
You see really interesting M and A activity starting to happen with the dats now. Like, I'm sure there's some now underwater with the pricing. And so people are looking at, well, you know, the market price of the company is a discount to the, you know, asset value of the bitcoin held in its Treasury. Like, let's go buy that company to buy some cheap bitcoin. So it's, it's like, it's an interesting dynamic between the whole, the whole marketplace here of treasury companies and operating companies and miners and everything. And then there's just like a ton of M and A going on in general in the crypto space, which I think is probably a bit of a contrast to the broader market right now. So I think it's just like a super interesting place we're in, especially with Bitcoin crashing. 20% this week.

Moish Peltz [00:37:36]:
And so I don't know, Kyle, what are you seeing in the crypto M and A world? I mean, just like, I think it's really interesting kind of watching from the outside looking in. I'm curious what you think.

Kyle Lawrence [00:37:47]:
Well, we're certainly seeing a lot, a lot of activity in the crypto fund side of things. People are launching funds left and right. M and A activity in general is kind of down. You know, rates, I mean, rates have been coming down now finally, but rates obviously impacts it. Unpredictability in, you know, economic factors obviously plays a huge deal. I mean, from my seat, you know, if you're a buyer and you're doing a quality of earnings report on a company, whether it's crypto or not, I don't know how you can rely on the quality of earnings where we have unpredictable tariffs and international trade is kind of upside down. But from, from the, from the DAP perspective, from the digital asset treasury perspective, we're probably going to see a lot of stuff come out in the, in the days following today, following this episode, because of what happened today with the crash in prices. But one of the reasons why we always favor Delaware is because they give deference to people who act in good faith.

Kyle Lawrence [00:38:41]:
The business judgment rule. A law school again, second time on the show. If the board.

Moish Peltz [00:38:46]:
Tell me more about what, what does that mean? What's the Business judgment rule as applied to an M and a transaction like the Strive similar. And how do courts think about is it just, well, you made a good business judgment in acquiring this company, so go for it and does it? Well, it's a scary crypto company kind of play into that?

Kyle Lawrence [00:39:05]:
Well, in effect what they're looking at is the process. Did you just wake up one day and decide that your company was going to be a digital asset treasury or did you run a good faith analysis over what your company was going to do? Did you act in the best interest of your shareholders? Did you honor your fiduciary duties? If you ran an analysis and you had a board of directors vote and you excluded disinterested interested directors and you opened it up to the shareholders and everybody got a chance to comment and vote and explain their position and your decision may not have worked out, but if in the moment you were operating in good faith and you had information, it wasn't just a willy nilly let's, you know, throw this against the dartboard and see what sticks. If you do that, the courts are going to not throw the book at you. That's the simplest way to explain the business judgment rule as Delaware has enforced it over the centuries. Not every state has that. So if you're one of these companies that says I want to go to Wyoming because Wyoming is cool and Wyoming has, you know, Dow LLCs and all these things, you need to be really careful because Wyoming doesn't have that body of law behind it. And if you are going to be taking the crunch into plunge into crypto and you have investors who, hey, guess what? Investors, they may be your friends and maybe you gave them some disclosures and some materials, but at the end of the day, if you lose their money, that ship has sailed. They will come after you.

Kyle Lawrence [00:40:36]:
And if you're in Wyoming, who doesn't have the business judgment rule and doesn't have the Court of Chancery and doesn't have the rocket docket, you could be left holding the bag. So we don't give legal advice here on block and order, but just be careful. You know, Wyoming is great until it's not.

Moish Peltz [00:40:51]:
All right, awesome, awesome input. And that, that made me think of. There was another, you know, Core Scientific terminated its merger agreement with Core Weave, but for, for basically the, the opposite reason, which I wonder now if they're reevaluating again the crash. But the idea that we're so valuable with on our own, given the asset prices, that merging seems like a less of a good deal. Now.

Kyle Lawrence [00:41:19]:
Yeah.

Moish Peltz [00:41:20]:
And so that. That was. That was interesting too.

Kyle Lawrence [00:41:23]:
All right, Moish, we've done it. It's time for the lightning round.

Moish Peltz [00:41:28]:
First in the lightning round, Bitcoin to buy coffee. So the company Square has announced Square Bitcoin, a fully integrated bitcoin payments and wallet suite. That alert allows merchants to accept lightning power Bitcoin at the point of sale with zero processing fees. So there's a native wallet that allows this to happen. US rollout beginning November 10th, but not to New York customers at launch. And then customers can pay from any wallet using Bitcoin. So there we go. We're going to see mainstream retail use of Bitcoin for coffee.

Moish Peltz [00:41:58]:
What do you think?

Kyle Lawrence [00:41:58]:
I feel like, haven't I. We've seen this before. I feel like we've seen this in other places. Maybe not as large of a rollout.

Moish Peltz [00:42:06]:
Not. Not with like, Square, which is in, like every system. And it's like, okay, anyone can use Bitcoin now. So I think this is the mainstreaming part of the journey where all this technology has been available to niche audiences and people have been doing it. But the point where you can just take any wallet with lightning compatible bitcoin and any point of sale system is going to be compatible and accept it instantaneously. I guess people are going to have to opt into this, I assume. Sounds like it'd be pretty cool if this would become mainstream.

Kyle Lawrence [00:42:45]:
Yeah. I love coffee and I love bitcoin. What's not to love?

Moish Peltz [00:42:49]:
I like keeping my bitcoin, sending it on coffee, even if it's like $4.

Kyle Lawrence [00:42:53]:
You know, it's funny, I had that discussion. I was at the Bitcoin Financial Services Summit in Denver a couple weeks ago, and I had that same discussion with somebody who. They were selling wine and you could pay for the wine with bitcoin. And I was like, well, that's awesome, but can I just pay with my credit card and pay with cash? And they were like, well, no, you pay with Bitcoin and then you would immediately just replace the bitco coin that you just used. And I was like, that's just robbing Peter to pay Paul. I get it. But all that does is get you bitcoin.

Moish Peltz [00:43:21]:
Well, that's. That's the name of the game, I.

Kyle Lawrence [00:43:23]:
Guess you could just buy with the buddy I give you. Next up, Roger Ver, the bitcoin Jesus, reached a deferred prosecution agreement with the Department of justice, paying nearly 50 million in back taxes, penalties and interest tied to willfully underreporting his bitcoin holdings related to his 2014 expatriation. Prosecutors have moved to dismiss the 2024 indictment. Although he's no longer a U.S. citizen, he was still required to report and pay tax on the exit tax in certain distributions from U.S. corporations. Under the deal, the charges will be dropped if he complies with the agreement's terms. I'm surprised he doesn't just get a, you know.

Moish Peltz [00:44:02]:
I don't know. This seems like about as good of a free pass as you can get. It seemed like he was going to be raked over the coals and they just said, hey, pay your, your back taxes and you'll be on your way. So it seems like a win for him. I know we had discussed this previously on the show when it first came up, and, and the idea was, right, that when you leave, he was originally United States citizen, then he expatriated himself. And when you do so, you got to make sure you comply with all the, the rules of doing so. And I think he said that he had then the Department of Justice took the other position there. So here we go.

Moish Peltz [00:44:40]:
Ultimately settling those charges.

Kyle Lawrence [00:44:42]:
I would think a lot of people muck that up.

Moish Peltz [00:44:44]:
Yeah, I mean, I, I think that's the, that's the pun. I mean, it's, it's, you just got to do it right. And he would probably say he did. So it's just like you're doing it right is just super complicated, especially at that scale. Right. So think about it before you make, make, you know, hundreds of millions of dollars in Bitcoin, dear tax planning, before you make it big. And we would be remiss to not mention on our show the president pardoning finance founder Changping Zhao or cz erasing his 2023 Bank Secrecy act conviction, which was after he pled guilty and served four months in, in, in prison. So the move drew bipartisan criticism and ethics concerns as Trump downplayed even knowing CZ in a recent interview.

Moish Peltz [00:45:39]:
So it's interesting because this pardon now eases potentially Binance's path back to operating in full in the US and potentially restoring CZ's ability to do business as part of that expanded business in the United States. So, Kyle, I don't know what else there's to say here. The pardon happened, finance is back. It, it probably isn't a good look for people both in and outside the industry from a, you know, I think there's some aspect of pay to play here that people are concerned about. The optics are probably not good. And there's allegations of of some quid pro quo. But, you know, here we are, it's happened, it's in the past. Yeah.

Kyle Lawrence [00:46:22]:
We don't need to, you know, harp on the, the, the commercial underpinnings of what triggered this pardon and the fact that Trump said he didn't even know who CZ was. There's been plenty of literature. You can go look that up. It's great that Binance will come back to the US it probably won't come to New York, which stinks, but, you know, we'll get there one day. For me, the biggest issue, and I've joked about the pardons in the past on prior episodes, at some point, all the pardons and all the hands off is going to, I think almost have a, it will have a negative impact because if the whole, if the unfounded criticism of crypto is, oh, you're just using crypto to buy drugs on Silk Road, which we know is nonsense, but if you keep pardoning these guys and you do so because of the commercial arrangements that you have with them and it's going to at some point delegitimize what we're trying to build here, I, I, I do honestly fear that's going to happen. And, and this to me is the biggest example of that.

Moish Peltz [00:47:22]:
Yeah, I, I think I agree, you know, I agree with you. I think the biggest concern is just the optics around people feeling that there's a different set of rules for very wealthy people or very wealthy people in crypto and that whatever happens reputationally sets back the industry, even if it's a short term victory for, you know, CZ or Binance or whatever other player that may have been pardoned or, or benefiting from the current administration. So like, look, you got, you got to take the, the, you got to make the, make lemonade with the lemons here. But I, I do think reputationally people should be thinking about, you know, what is the state of the industry and how much is too much. Where it's going to cause a, a reputational counter reaction.

Kyle Lawrence [00:48:15]:
Yeah.

Moish Peltz [00:48:15]:
And at some point, right, there will be, you know, other people in power and is that going to cause a big swing back because there's this perception of unfairness.

Kyle Lawrence [00:48:27]:
Yeah. We don't want an over correction. Midterms are coming up. Well, that wraps up episode 45. Thank you so much for joining us on the special episode of Block and Order. Please don't forget to like and subscribe to our channel. Don't forget to follow us on all of our socials. Links can be found down below in the show notes, of course.

Kyle Lawrence [00:48:44]:
If there's anything you would like us to cover in Block and order, please leave a comment down below. We do take comments very seriously, except the ones where people just leave their seed phrases.

Moish Peltz [00:48:51]:
Come on now, gamers can get lost. Everyone else, right?

Kyle Lawrence [00:48:56]:
We love all comments except those. Block and Order is meant for informational and entertainment purposes only. Nothing that we say is meant to be construed as legal advice except what I said before. Please hire your own representatives if you're going to take the plunge. Neither the discussion of nor the fact that Moishe and I may own any of the assets we discuss on the show is meant in any way to serve as an endorsement of such assets. A very special thank you to the man himself, Producer Moish pulling double duty yet again. So on behalf of Moishe, I'm Kyle Lawrence. Take care everybody.

Moish Peltz [00:49:28]:
See you next time.