Passing a flurry of industry-embracing legislation has made Wyoming a darling of the cryptocurrency industry.
But some, including one early promoter of blockchain efforts in the state, contend that holders of cryptocurrency wealth are writing a statutory paradise here with little checks from lawmakers who don’t fully understand the legislation they’re voting on.
“It seems to me the few people actually writing these laws and pushing them through have a personal financial interest in getting them passed,” Robert Jennings, a fundraiser with a history in Wyoming politics, wrote to WyoFile. “There is no dissent or questioning of the ramifications of making Wyoming a so-called ‘cryptocurrency haven.’”
Blockchain’s proponents, however, argue that the novel nature of the young industry and lack of model legislation from other states necessitates close coordination with the businesses involved.
Wyoming’s Blockchain Task Force, a Legislature-created committee that has drafted much of the new legislation, is balancing the task of attracting blockchain businesses with the state’s interests, said co-chair and Senate Minority Leader Chris Rothfuss (D-Laramie). “The difference is, are you listening or just kind of letting them write it for you?” he said. “We’ve done our best to simply listen to the industry.”
Rothfuss’ cochair, House Majority Whip Tyler Lindholm (R-Sundance), argued legislative input by the industry being regulated wasn’t unusual for Wyoming’s citizen Legislature. “It falls right in line with other legislative committees as far as industry involvement,” he said. “There’s no way that I’d be able to draft everything we’ve done by myself.”
Jennings was one of the early players in the blockchain effort. He helped found the Wyoming Blockchain Coalition, which has since been disbanded.
Jennings also helped found a company called American Certified Brands, LLC, and a subsequent brand, BeefChain, which sought to apply blockchain technology to the beef industry. Two state lawmakers, Lindholm and Senate Majority Floor Leader Ogden Driskill (R-Devil’s Tower) both subsequently joined the BeefChain.
Jennings has grown disillusioned with the blockchain effort, he told WyoFile. Good-faith efforts to develop a new technology in Wyoming have been hijacked by the personal and financial ambitions of politicians and wealthy cryptocurrency entrepreneurs, he wrote.
BeefChain is now mired in a lawsuit between Jennings and the other partners. Lindholm, Driskill and other partners filed a lawsuit accusing Jennings of trying to “expropriate” the company and the BeefChain brand. They are represented in court by Rep. Jared Olsen (R-Cheyenne), an attorney who practices estate planning and family law. Jennings has denied the allegations and says he’s disbanded the business.
Lindholm, Driskill and Olsen all sit on the Blockchain Task Force.
According to the lawsuit, Jennings threatened to go to the press and make “false and misleading allegations” about the lawmakers involved in BeefChain.
The connections between those writing blockchain bills and those engaged in the industry extend beyond the lawsuit.
Some of the industry movers helping draft the bills are investors in cryptocurrency businesses, or have accumulated significant wealth through the industry.
Caitlin Long’s efforts have been key to blockchain’s success in the state. A Wyoming native, Harvard graduate and veteran of Wall Street, Long has spent the last two years shepherding blockchain bills through the Legislature. She describes her work as a voluntary effort to help both her home state and an industry she believes in.
“My work on this very personal passion project has been as a volunteer,” Long wrote in an email to WyoFile. “I didn’t intend to take 22 months off to work as a volunteer, but I love Wyoming and believe this is a win-win for both Wyoming and the blockchain industry.”
Long also served as a member of the Blockchain Task Force, which means that while she is not a lawmaker, she had a vote on which bills passed out of the task force and into the full Legislature.
Long frequently writes columns on blockchain and cryptocurrency for Forbes. In a piece last year, she disclosed herself as an investor in the company Kraken. That cryptocurrency exchange business has become a symbol of blockchain’s economic promise for Wyoming, but is not yet a grounded business.
All about crypto?
Blockchain’s disciples tout the technology as a game changer for the financial service and banking industries. The decentralized digital ledger will disrupt a system controlled by governments and big financial companies, they say, eliminating costs and barriers of entry for consumers.
For now, however, the money is in the cryptocurrency sector. The industry gained strength with the advent of the cryptocurrency bitcoin. Buying bitcoins at low prices created fabulous wealth for early investors when the value of the digital coins shot up around 2017.
Businesses run by those who got wealthy off bitcoins have commandeered a previously broader legislative effort for blockchain, Jennings argued. “The current state of the blockchain effort in Wyoming is very specific to cryptocurrencies and challenging the federal government’s position on them,” he wrote. “This is dangerous because the Wyoming legislators are being sold on economic diversification and they are passing these very specific laws without fully understanding them or the long-term implications.”
Attracting cryptocurrency businesses was always a goal of the blockchain effort, Lindholm argued. “As far as crafting the bills and the direction this was always the talk,” he said.
Wyoming has sought to lure cryptocurrency businesses chiefly by passing a law that allows a type of crypto-friendly bank, called a Special Purpose Depository Institution, to operate in the state.
Kraken and its CEO, Jesse Powell, have been a presence in blockchain’s efforts to woo Wyoming. The company was chief sponsor for a September WyoHackathon at UW. Long described the Hackathon as a way for companies to show interest in the state.
“I’m proud of the fact that the Wyoming blockchain effort has been crowdsourced and almost entirely volunteer,” she wrote. “Many companies have asked how they can support Wyoming’s efforts, and I’ve directed them to fund UW’s WyoHackathon (a non-profit UW event).” Such efforts have raised $200,000 for UW over two years, Long wrote.
At this year’s event, Long and Lindholm taped a discussion for a podcast called “What bitcoin did.” The podcast was also sponsored by Kraken.
Lindholm and Long were joined in the discussion by Trace Mayer, a cryptocurrency evangelist who is rumored to have acquired immense bitcoin wealth. On the podcast, Mayer talked about spending hours on Christmas day in 2018 working on a piece of legislation over the phone with Long and Chris Land, at the time a Legislative Service Attorney writing the blockchain bills.
Like Long, Mayer is tied to Kraken. Crypto-industry news outlets describe Mayer as someone who scored big on bitcoin and used his wealth to fund a number of companies, including as a seed investor in Kraken.
Long is currently registered as a lobbyist for her website, caitlin-long.com according to the Secretary of State’s lobbying list. Mayer is not registered, and was not during the 2018-2019 legislative year, according to the list. Any person attempting to influence legislation must register as a lobbyist if he or she is being compensated for that effort, Wyoming laws state.
Land has moved to the Wyoming Banking Division, where he is helping to write rules and regulations for the new SPDI institutions and guiding companies through their applications for charters.
Kraken was consulted in writing the legislation, according to Powell. “Caitlin and Trace got it really far along,” he said in a September interview with Wyoming reporters. The company has yet to publicly announce it will pursue a SPDI charter. A company representative told WyoFile last week the company was still considering applying.
The CEO of another major industry player, IOHK, said Long and Lindholm’s wooing of specific companies has in fact helped Wyoming. Their outreach attracted established companies, IOHK CEO Charles Hoskinson said. It’s also helped the state avoid the smaller and potentially unpredictable entities, what Hoskinson called bitcoin’s “bat-shit crazy anarchists.”
Long told WyoFile she has never hidden her ties to the industry. “I’m a longtime investor in the blockchain sector,” she wrote. She describes her decision to push blockchain legislation as a result of her inability to donate bitcoin to UW.
“I’ve been an active supporter of UW for more than 25 years and previously served two terms on the UW Foundation board — so when I learned about the bad law, I volunteered to help Wyoming fix it,” she wrote. “That was the genesis of the Wyoming blockchain initiative and it snowballed from there as our initial supporters saw economic development opportunities and pushed for more ideas.”
He who has the gold
Mayer’s website bio begins with “Everyone knows the golden rule: He who has the gold makes the rules.” On the podcast, he described a lofty goal for Wyoming law, one that would protect crypto-wealth from all comers, including the federal government.
The state should “pass a type of law that makes any type of confiscation order from any entity beside the state of Wyoming that confiscates digital assets to be void ab initio,” Mayer said. The latin term means any such order would not be legally binding.
It is a tall protection order from the industry to Wyoming.
“The amount of liberty you get is directly proportional to the amount of protection that you can acquire for yourself,” Mayer said on the podcast.
The premise of Wyoming erecting laws to become a defender of cryptocurrency’s wealthy is what worries Jennings, he wrote. “If something goes awry and Wyoming law allows for it then it will force the Wyoming Attorney General to fight the federal regulators in court,” he wrote.
Lawmakers interviewed by WyoFile dismissed that idea. Federal laws’ preemption over state law make that an unlikely proposition, they said.
“There’s not necessarily any great risk in what we’ve passed so far,” said Rep. Mike Yin (D-Jackson). “If I did think so, I would have concerns about it and bring it to the task force.”
The industry isn’t running roughshod over lawmakers, Lindholm said. “We have rejected probably an equal number of ideas as we’ve pushed forward with,” he said.
Blockchain in Wyoming is moving into a new phase. Around five companies are in the application process for SPDI charters, according to the Wyoming Division of Banking. More might be in the pipeline. The Legislature will again face a raft of blockchain bills — the task force has voted to present eight.
In a Nov. 20 post on her website, Long wrote that she had resigned from the task force. Its end is imminent — the legislation that created the committee dissolves it in January 2020. However, the task force drafted a bill to create a more permanent “select committee” to continue writing blockchain statutes.
“I think whoever moves forward should keep their eyes on it,” Lindholm said. “We might find a legislative change no longer works or is no longer appropriate.”
A select committee would be comprised entirely of lawmakers.
“Most likely I’ll go back to working in the blockchain industry,” Long wrote.