Crypto Lawyers Dispute Prometheum’s Aaron Kaplan’s Claims

Joe Hall and Zach Zweihorn, partners at Davis Polk, echo the crypto community’s sentiment that Kaplan “has a license, not a business.”

In this episode of Unchained Premium, Joe Hall and Zach Zweihorn, partners at Davis Polk, said Aaron Kaplan either didn’t understand the law or made misstatements in his recent comments on Unchained.

Kaplan claimed that his company has found a compliant path forward for crypto in the United States, a sentiment that has been challenged at large by the crypto community.

Joe and Zach disagreed that when it comes to listing tokens, an ATS can just update its “Form ATS,”  as Kaplan had asserted, and that if FINRA doesn’t object for 20 days, it’s fine to support those tokens. 

Joe also explained what a token sale process looks like, and why a simple check box on Form D does not translate into admitting that a token is a security. They agreed with Rodrigo Seira, Kaplan’s debate partner, that assuming that the subject of a Form D filing is in itself an investment contract would be like saying the oranges in the Howey case that serves as a litmus test for securities are also securities in themselves.  

In regards to Kaplan’s claim that tokens that are part of a Form D filing can be traded after a year-long freeze period of tokens, they say that won’t work since it would impact the network development. Plus, at least for Ethereum-based tokens, it’s technically not possible to separate out the tokens included in a Form D filing from those released in an airdrop as part of the regular emission of the network.

Despite Prometheum boasting of having solved these issues, Joe and Zach are skeptical and highlight the need for robust, tailor-made rules. 

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What is a behind-the-scenes interview?

Behind-the-scenes interviews have long been part of my journalistic process. With only 100 episodes of Unchained slots per year, it's impossible to fit every project, creator, or builder into the editorial calendar. However, I love to learn about the latest developments in crypto, so I usually conduct a few such interviews per month with projects who I might want to have on an episode.

These chats usually last 30 minutes and I rarely do much research or write questions for them -- so get ready for tons of straightforward questions and more banter than you might find in an Unchained episode.

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