Crypto and the ‘Law of the Horse’

In the mid-1990s, around the time that former Grateful Dead lyricist John Perry Barlow was toying around with the idea that cyberspace could be a place independent of any nation, lawyers were growing concerned that this emerging technology would put them out of a job.

The world wide web was collapsing boundaries between people, between countries and allowing for the wide dissemination of all information. Could copyrights, for instance, survive online? Or would there need to be an entirely new category of law, applicable to and designed for this new digital age?

Judge Frank H. Easterbrook, of the United States Court of Appeals for the Seventh Circuit and lecturer at the University of Chicago Law School, was tapped to discuss just this issue at a legal conference. His non-binding ruling? There is no such thing as “internet law” or “computer law,” just as there is no legal code constituting “horse law.”

“Only by putting the law of the horse in the context of broader rules about commercial endeavors could one really understand the law about horses,” Easterbrook said in his memorable speech, ”Cyberspace and the Law of the Horse.”

Today, many of the same questions that were asked about the legal circumstances of the internet are being raised again by cryptocurrencies. It’s not uncommon to hear from users, builders or salespeople of crypto projects that the legal picture remains uncertain. Or that there’s a lack of clarity.

Despite not being a unified theory, “crypto law” has steadily emerged as an area of professional focus. There are in-house lawyers at decentralized autonomous organizations (DAO), litigators who know the ins and outs of decentralized finance (DeFi) and a growing number of consumer advocates.

Universities, too, looking to differentiate themselves or appeal to their students’ interests are adding courses, modules or tracks dedicated to blockchain law. Students are eager to build their expertise in a rapidly growing sector, and professors are struggling about what to say about a field where so many legal questions remain unanswered.

“A lot of law schools are trying to find ways to make their programs stand out from the crowd, and are hiring people that can teach in this unique focused area,” Christa Laser, an assistant professor of law at Ohio State University, said in an interview. “They’re learning to teach in a way that can keep students engaged and [prepared] for jobs with higher income potential.”

Crypto, like the world of Big Tech that came before it, often offers young lawyers greater opportunity and higher paychecks than they would otherwise have access to, Laser said. It is a point echoed by Brian Frye, an artist and lawyer who has taught courses touching on crypto at a number of universities over the years.

“You’re always training people for the market,” Frye, now at the University of Kentucky, said in an interview. And the market is always changing. For most of the 20th century, law students were primarily prepped to either go into individual practice or work for major legal firms.

That started shifting with the advent of the internet and rise of the tech industry, where it became more common for major firms to hire legal experts and keep them in-house. “A lot of these people essentially created the jobs for themselves,” Frye said, mentioning corporations like Google and Coinbase that have robust legal teams.

This trend has continued in crypto. Kraken, the U.S.-based crypto exchange, has, for instance built a robust legal operation led by crypto lawyer Marco Santori, the firm’s incoming CEO, Dave Ripley, said in a recent CoinDesk TV interview.

“We’ve also built out a policy team recently [and] this group works out the forward-looking engagement with both regulators and lawmakers and that team is now 10+. Marco’s team overall is 50+,” Ripley said. He added Kraken has another 300 legal experts working “in and around compliance.”

“The key thing is to approach [crypto law] entrepreneurially,” Frye said. “Engage in the job that they want to have, figure out who’s offering that position and explain to a company why they need to hire you specifically.”

Laser struck a more conciliatory note, noting that a few people could likely build a career practicing a niche area of law, but the field could quickly become oversaturated.

“I would say it’s helpful for law schools to add a course on crypto because it’s sexy to students,” she said. “But in terms of whether it actually would help those students in the long run …

“It’s going to depend upon how big of an industry it becomes. At this point, we just don’t know how much of an impact crypto is going to have on day-to-day business in high revenue industries,” she added, mentioning consumer electronics and banking as examples.

Chris Odinet, a professor of law at University of Iowa, also had his doubts about “crypto law” as a legal profession or topic of study.

“Transactions involving crypto companies and crypto assets intersect with and are involved and impacted by lots of different areas of the law  – but there’s no ‘crypto law’ per se,” Odinet said. “There’s property law, contract law, securities law, commercial law, but there’s no such thing as crypto law. It’s not its own self-contained thing.”

There’s no law of the horse.

Some people in crypto today, like Barlow before, even go so far as saying that code is law. Or that smart contracts (applications that run blockchain-based programs) obviate the need for human contracts.

Chairman of the U.S. Securities and Exchange Commission Gary Gensler has pushed back on this concept. In a recent spate of media engagements, Gensler has argued that there is no need for bespoke regulations for the cryptocurrency industry. The vast majority of cryptocurrencies and tokens, he said, are clearly securities according to existing standards.

But even Easterbrook realized that the law is not always “optimal.” Further, he said, the arrival of new technologies or practices could be a change to update the legal code. “Why seventeen years for patents, a lifetime plus some for copyrights, and forever for trademarks?” he asked.

Even if there is no unified “crypto law,” could these new tools that offer new ways of owning and sharing digital property push the U.S. legal system forward?

Frye said non-fungible tokens (NFTs) in particular are raising interesting questions about copyright. “Freedom of speech and copyright have always been in tension,” he said. “We pretend [copyright] is just about economics, and not about policing the content of speech,” but what happens when a new tool like [non-fungible tokens] comes around and allows people to monetize other people’s speech.

Whether a term like “crypto law” makes sense, or whether it’s a fit subject to study in school, is almost besides the point. As long as there are unanswered legal questions, lawyers will be needed.

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