Welcome to Degen Lawyer's Newsletter, where we bring you your weekly dose of legal insights, and regulatory updates in the emerging tech and law space. Our expert lawyers serve up curated analysis, hot takes, and expert commentary, sprinkled with a healthy dose of the wacky and meme-worthy content. Enjoy!

In this week’s edition:

News in short:

1. President Biden signs sweeping executive order on AI regulation✍️

   On October 30, 2023, President Biden signed an executive order aimed at enhancing AI safety, security, equity, and innovation. It requires AI developers to share safety test results, imposes notification obligations on high-risk models, and seeks to establish labeling standards for AI-generated content, but questions remain about its impact on the private sector's AI landscape. Is this executive order a significant step toward AI responsibility or just a narrow government directive in a rapidly evolving field?

2. Greece foraying into AI regulation ⚖

   Greece's new high-level advisory committee for artificial intelligence is charting a path to national AI development, focusing on legal regulations, economic sector impact assessments, risk mitigation, talent growth, and attracting global AI talent. As they navigate this journey, the influence of the EU AI Act could be a game-changer for Greek AI policy. The Greek connection to AI is as old as its mythology itself, like the myth of Talos, a giant bronze automation created by Hephaestus to protect the island of Crete. It will be interesting observe developments in Greece.

3. UK Unveils Crypto Sector Regulations 🪙

   The UK Government has said that it would legislate to implement its first set of rules regulating crypto sector, requiring firms undertaking crypto asset activities to be authorized by the Financial Conduct Authority. The rules cover the offering of a crypto asset, operating a trading platform, swapping crypto assets for currencies such as sterling, arranging investments and lending in crypto assets, and safekeeping or custody. The rules will be brought under market law, rather than as a standalone regime. The UK Government plans to propose legislation on fiat-backed stablecoins by early 2024. The influence of the EU regulations and the lessons from the collapse of the crypto exchange FTX is likely to play out in these regulations.

Article of the week

Essentials of Founder’s Agreement

Not having a Founders Agreement remains a key legal pitfall for startups. According to Y Combinator co-founder Paul Graham, a poorly constructed agreement is one of the most fatal mistakes that kill startups. To avoid this pitfall, let's delve into the essentials of Founders Agreement

Key Areas of Founder's Agreement:

1. Roles & Responsibilities;

2. Rights;

3. Rewards;

4. Commitments; &

5. Contingencies

1. Roles & Responsibilities:

Defining who's in charge of what is fundamental. Clearly outline titles (CEO, CFO etc.) and functions to mitigate future conflicts. Ensure that skillsets align with the roles and responsibilities. This will pave the way for smoother growth.

2.Rights:

Decide final decision-making authority upfront on different aspects of business (sometimes perspectives/ objectives don’t align). Many founders make the mistake of creating a 1:1 correlation between equity and decision rights. Decision making and equity need not match. Address vital issues such as key hires, equity grants, removal of employees even founders and more. What happens if founders disagree? Avoid pitfalls by crafting a deadlock mechanism.

3.Rewards:

Compensation, packages, ownership for efforts should all be carved out over time. 73% of founding teams split equity within a month of founding, but when crafting a founder’s agreement, equity is the last item that one should discuss.

4.Commitments:

• Time & Interest: Specify how much time each founder commits, avoiding future resentment due to imbalanced efforts. For instance, retaining a rule in another company minimizes the risk of that Co-founder. Ask, questions like how much time is full time?

• Intellectual Property (IP): Secure your IP through proper assignment provisions, safeguarding the company's future.

• Network: Discuss sharing networks and connections to maximize opportunities without misunderstandings.

• Capital & Confidentiality: Lay down terms for capital usage and incorporate confidentiality clauses.

5.Contingencies:

Plan for the unexpected. Establish a vesting schedule. Instead of receiving equity rights instantly, vesting defines criteria co -founders must meet to earn their equity. This ensures dedication to the startup's growth.

In brief a well-crafted Founders’ Agreement:

• Sets roles & expectations

• Defines decision rights

• Outlines commitments

• Prepares for contingencies

Here are a few mistakes to avoid:

• Undivided duties

• Lack of decision-making thresholds

• Assuming implicit understanding

In conclusion

Remember, there's no one-size-fits-all formula. While conflict is inevitable, a strong framework empowers you to navigate challenges!

Bet You Didn’t Know!

Yes, you read that right! BlueDot, an AI platform in Canada, identified the emergence of COVID-19 in Wuhan, China, nine days before the World Health Organization's official alert. It utilized big data, natural language processing, and machine learning to process data from various sources, assisting a team of experts in early detection and understanding the potential global impact of infectious diseases. The AI's future use includes continuous monitoring of outbreaks, providing an advantage in tracking and responding to health threats worldwide.

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