Degen Lawyer's Newsletter - EU fines Tik Tok, EU to give AI access to Supercomputers & More!

GM. 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. Enjoy!

In this week’s edition:

1. EU Fines Tiktok € 345 Million to ‘Protect the Children’:

   The slap on the wrist was administered by Irelands’ Data Protection Commission (DPC). Specifically, the issue was regarding the content policy of minors. The Chinese app set content posted by minors to ‘public’ viewing by default and also had features which made it easy for adults to DM kids over 16 (yikes, the creeps must have had a field day). Tiktok has been instructed to bring their policy in line with the EU Data Privacy laws within 3 months. While TikTok has faced fines before the scale of this one has made everyone sit up. (Nothing quite grabs a good headline like protect the children).

2. Startups in Japan can now raise funds in Crypto:

   In a massive boost to both Crypto and the Japanese economy, startups will be allowed to offer crypto tokens when receiving investment, making it easier for businesses to raise funds. Japan boasts possibly the most advanced crypto ecosystem in the world. It was one of the first countries to come up with regulations surrounding digital assets. Other countries will surely be monitoring how this plays out. The shift from equity-based fundraising to legally compliant ICO cannot be understated, it’s a fundamentally different approach to raising capital.

3. South Korea inching closer to a regulated crypto landscape:

   The Asian gaming & AI powerhouse is looking to dominate the crypto market too. The first phase of a crypto bill has been successfully passed. The Bill makes certain disclosures compulsory and also tackles false promotions and price manipulation. S. Korea is aiming to restore its image in global circles particularly after the disastrous Terra Luna collapse.

4. Indian Court holds that AI cannot rival human intelligence:

   The observations were made in trademark suit brought by Christian Louboutin against a counterfeit company. The counsel for the matter when making submissions on the ‘reputation’ of the luxury manufacturer used the responses of ChatGPT. In response, the court stated that the AI tool often had many inaccuracies and that such tools can not substitute human intelligence nor the humane element in the adjudicatory process. Lawyer’s need to tread particularly carefully when using AI!!

5. EU to allow AI Companies Access to Supercomputers:

   The EU has decided that it will allow certain ‘responsible AI start ups’ access to their supercomputers. This comes in the backdrop of finalising negotiations to adopt a multi-tiered risk-based legislation to ensure regulation of AI across the Bloc. Interestingly, the EU President stated that the existential threat of AI cannot be underplayed. Supercomputers, AI and Existential threats to humanity, what can possibly go wrong? Does anyone else think the EU President needs to binge the Terminator movies ASAP?

   

Courtroom Watch - SEC takes on Stoner Cats:

Mila Kunis’ NFT collection Stoner Cats was rudely shaken from the Bear Market Slumber by the Securities and Exchange Commission.

For the uninitiated, the talented Kunis started this series in which the adorable Cats (who loved to toke) were sold as NFT’s. 10,420 NFTs were created based on the characters in the show which sold for around $ 8 Million.

Using the proceeds from these NFTs, Kunis’ production company made 6 episodes of an animated show. Using blockchain technology at its innovative best, these episodes were only accessible to the holders of the NFT. Kunis voiced one of the cats, as did her husband Ashton Kutcher and other notable celebrities like comedian Chris Rock, actress Jane Fonda, “Family Guy” creator Seth McFarlane, and even included Ethereum founder and ‘decentralisation’ poster boy Vitalik Buterin.

She went on to promote it on various social media and even on talk shows.mThe creators also took a cut from the over $20 million worth of secondary market sales.

However, the SEC wasn’t too happy about the whole situation and decided to charge the series with selling ‘unregistered securities’. Dang that pesky Gensler. 

The charges alleged that the public was made to believe that there existed specific benefits to owning the NFTs, including the option to resell on the secondary market. Further, emphasis was placed on the production team which constituted Hollywood producers, crypto experts, and actors, thus investors could expect profits from the Project.

The Production Company decided to settle without admitting wrongdoing. The company also agreed to destroy all remaining NFTs with the team, assist in distributing the $ 1 Million settlement and no longer engage in the trading of the NFTs.

This brings back the question of clearly defining securities laws, something that regulators have refused to do. Every NFT has founders hype the mint, over promise and underdeliver on their roadmap. In this case it just happened to be celebrities and they did manage to deliver a product. Yet again, regulation by enforcement prevailed. Given the recent Ripple Judgement, if this had gone to trial the conclusion may have been quite different, but for now virtually all NFT companies need to check their strategy.

Weekly Explainer

Decentralised Exchanges

In last week’s edition we covered Centralised Exchanges. This week we break down its decentralised counterpart.

A decentralized exchange (better known as a DEX) is a peer-to-peer marketplace where transactions occur directly between crypto traders, thus these financial transactions aren’t officiated by any intermediaries such as banks, brokers, payment processors, or any centralised entity.

Decentralized exchanges, on the other hand, are simply a set of smart contracts. They establish the prices of various cryptocurrencies against each algorithmically and use “liquidity pools” — in which investors lock funds in exchange for interest-like rewards — to facilitate trades.

To learn more about such concepts, visit our resource page linked below:

Crazy Crypto News - Mark Cuban Got Hacked!

The Billionaire Mark Cuban was hacked for $870,000. The scam was first discovered by blockchain sleuth WazzCrypto, who noticed suspicious activity in Cuban's wallet. Cuban was able to move some of his assets to safety, but lost a number of stablecoins, Lido staked ETH, SuperRare, and Ethereum Name Service (ENS) domains. The cause was most likely a fake copy of the popular browser-based wallet - MetaMask.

Cuban has been a vocal supporter of cryptocurrencies and NFTs, but this hack shows that even the most experienced investors and tech geeks can be vulnerable to scams.

No one is safe out there, so remember to use 2FA and Cold Wallets. Stay vigilant, stay secure.

Thank you for reading!

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