Links I would send you if I were your lawyer #3
Legal nuggets for Fintech, Web3 and other tech founders and builders.
Hey founders et al. We’re BACK with the list of legal links you need to read if you’re building a startup (especially in the Fintech or Web3 spaces).
April 26, 2022
Resources for founders
Equity for employees. I came across this amazing guide written by Pulley founder Yin Wu. It breaks down the mechanics, decisions, and trade-offs related to issuing equity to employees. Definitely worth a look! On that same note, check out this Stock options grant checklist for startups, created by DLA Piper.
Registering in State X. If you are actively doing business (e.g. paying employees) in multiple states, you’ll need to register in those states to properly file payroll taxes. AbstractOps created a gold mine of detailed guides to register your business and pay payroll taxes in the states you operate in. They cover everything from if/when you need to register, steps to register, costs of registration, any state-wise exceptions, and more.
Good, Bad and Ugly NDAs. The folks at LawInsider tear down three non-disclosure agreements ranging from the good to straight up ugly. Topics they cover include (a) what makes a good NDA, (b) how drafters can make NDAs more usable, (c) the potential red flags to be aware of, (d) how drafters can prevent “the bad” NDA from happening, and (e) how to know if you require an NDA. All questions I get on a recurring basis.
Legal Entities and DAOs. This is an incredible breakdown of how DAOs can also be wrapped into legal entities. Authored by the creator of a DAO formed for vanlifers acquiring and maintaining camping/parking resorts, it documents the research done in order to incorporating Vanlife DAO. Useful for all who are considering creating legal entities around their DAO.
Fintech
Bad news and slightly better news. A former Square (Block?) employee downloaded the Cash App account info of 8.2M users. Bad news: The information in the reports included full name and brokerage account number, brokerage portfolio value, brokerage portfolio holdings and/or stock trading activity for one trading day. Slightly better news: The reports did not include usernames or passwords, Social Security numbers, date of birth, payment card information, addresses, bank account information, or any other personally identifiable information.
Who’s over overdraft? Over a dozen Democratic state attorneys general called on big banks to get rid of overdraft fees. All U.S. banks together make about $15 billion a year on overdraft and NSF fees. But the CFPB says about 80% of that comes from just 9% of customers who keep getting hit over and over again with upwards of 10 overdrafts a year… another shining example of the Pareto principle IRL.
Fee Shaming, CFPB’s fresh approach to regulation: The CFPB published a blog publicly shaming banks that haven’t eliminated NSF fees (Non-Sufficient Funds fees or Insufficient Funds fees). It’s a very 2022 approach to regulation. Very cancel-culture-esque.
What’s something you thought was true, but isn’t? The CFPB published an article busting the myth that student debt cannot be discharged in bankruptcy. File this fun new fact with dogs drinking with the back of their tongue.
Who here uses Zelle? I don’t… but apparently banks are thinking about it as a way to take on the likes of Visa and Mastercard.
Crypto/Web3
Forcing Utility On The SEC. CoinList CLO Carla Carriveau breaks down how the Legislative and Executive branches of the U.S. Government are forcing the SEC to prove its utility to the crypto industry. It’s a great read for anyone who’s tired of applying the Howey test over and over to crypto and NFT projects.
Tale of two regulators. The SEC has the US crypto sector up in arms for the second time in a month over what it deems an attempt at backdoor regulation. The issue is whether the SEC's definition of a stock exchange should be expanded to encompass "communications protocol systems" that "bring together buyers and sellers of securities," which many experts feel would include cryptocurrency exchanges, particularly decentralized exchanges (DEXs). The CFTC, however, continues to show a more participative approach, gaining admiration among the crypto community.
When old tech compromises new tech. Mailchimp's delayed response to a security breach led to phishing attacks on customers of a cryptocurrency wallet company, some of whom then had thousands of dollars worth of cryptocurrency stolen. This all according to a proposed class action filed Friday in California federal court.
Remember your sweepstakes rules! In the Coinbase sweepstakes case, the Plaintiff first sued Coinbase and Marden-Kane in June, saying that Coinbase didn't make it clear that consumers could enter the sweepstakes without trading dogecoin. Sweepstakes entrants argued that the event's marketing materials were designed to get users to trade dogecoin to enter, even though they could also enter by mailing an index card with their name, contact information and date of birth.
Digital wallet technology and its uses. The Congressional Research Service on Monday published an overview of digital wallet technology and its uses, as well as major policy issues. The technology's growth raises key questions around data privacy, financial inclusivity and consumer protection, and the report highlights the differences these wallets have with bank accounts - which sometimes implicate different policy questions.