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5 The Journal of Robotics, Artificial Intelligence & Law (Fastcase) 97 (2022)
Crypto Yield Products in the Crosshairs

handle is hein.journals/rail5 and id is 100 raw text is: Crypto Yield Products in the Crosshairs J. Ashley Ebersole and Brett R. Orren* The authors of this article discuss concerns arising after a major U.S. cryptocurrency exchange's receipt of a Wells Notice from the Securities and Exchange Commission, which threatened charges for violating Section 5 of the Securities Act in connection with the planned launch of a yield farm- ing product. A major U.S. cryptocurrency exchange recently disclosed its receipt of a Wells Notice from the Securities and Exchange Com- mission (SEC), which threatened charges for violating Section 5 of the Securities Act in connection with the planned launch of a yield farming product (Yield Product). These products allow users to deposit their crypto and earn a yield, which is generated by the wallet, custodian, or platform's lending that deposited crypto out to others (similar to fiat currency or securities lending). Because Section 5 broadly prohibits offering any security absent SEC registration, the Wells Notice has raised questions and con- cerns about the legal status of the myriad existing Yield Products across the cryptosphere. These concerns are exacerbated by the dearth of information from the SEC regarding the Wells Notice (and, by the exchange's account, the SEC staff's refusal to share the analysis or reasoning that underlie the claimed violations). Law That May Be in Play The question has been asked how can lending be a security? Given the different varieties of securities and the SEC's history in this space, it is perhaps more pertinent to ask whether lending can be an investment contract or a note (which are the contexts for the SEC's principal analyses of what constitutes a security). While we cannot claim to be privy to the SEC's thoughts or reasoning here, history and interactions with the agency and its digital asset/crypto activities lead us to think its position here may be similar to that Robotics, Artificial Intelligence & Law / March-Apri1 2022, Vol. 5, No. 2, pp. 97-102. © 2022 Full Court Press. All rights reserved. ISSN 2575-5633 (print) /ISSN 2575-5617 (online)

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