Legal Council about BTS and No-action
Name/bfid 201802-legal-bts
Category Legal
Freelancer BitShares Blockchain Foundation - BitShares Blockchain Foundation
Total $350,000
Duration 2018/02/15 - 2018/07/30 (6 months)
Worker ID 1.14.80
Accounting & Reporting


With this worker, we would like to fund this project to seek legal clarity and presentation for BTS holders and regulators.

Throughout the last couple months, we have been repeatedly approach about core aspects of BitShares and its governance token BTS that have been presented publicly in an inaccurate and unfavorable manner. This often resulted in ambiguity and uncertainty that has held back some businesses from working with or on the BitShares Blockchain and could well have been a reason for lack of ecosystem growth throughout the last years.

Additionally to an opinion letter of a prestigious legal council, we also seek a non-action letter by the United States Securities and Exchange Commission (SEC), the prototype for many regulators in the world.

Legal Council

We quote Mr. David Hernand from Paul Hastings LLP to the matter of the procedure:

This is among the replies we have received from them and that they approved us to publish:

If I understand your request correctly, you seek (i) some form of legal opinion, memo or letter sufficient to convince Bittrex to re-list BTS on its exchange (which opinion, memo and letter might also be used for the same purpose with other exchanges), and (ii) a no-action letter from the SEC, presumably confirming its view that BTS is not a security. Both of these should be achievable, depending on understanding better the facts and circumstances applicable to BTS. We are doing similar work on behalf of other cryptocurrencies.

The amount of work involved to prepare a form of legal confirmation for Bittrex will depend on what Bittrex tells you it needs. Law firms routinely prepare formal “legal opinions” – which are opinions regarding legal matters that are quite formalistic in nature, can be quite definitive or more “reasoned” depending on what recipients of opinions are requesting, and are the type of legal documents that law firms are most reluctant to give unless they are quite confident in the conclusion – due to liability concerns. Other forms of confirmation take the form of a memo summarizing legal issues, which might present both sides of an issue and then reach a conclusion as to what result is probable or possible, or a shorter form, informal confirmation letter. Thus far, I have heard and seen examples of different types of legal confirmations being requested by exchanges with respect to cryptocurrencies. To this end, it would be quite helpful if you could forward whatever email or other correspondence you received from Bittrex describing the form of legal confirmation it seeks.

The process for seeking SEC no-action relief can take six or months to achieve, and it’s not certain you will be able to convince the SEC to provide the relief requested. The approach we would take is to prepare a draft letter and consult with the SEC to get its feedback before formally submitting the letter, so that you only end up formally submitting the letter if we are confident the SEC will provide the desired relief.

Mr. Hernand however came across the same incorrect information that caused us already so much trouble. Here is what he has to say about that:

As to whether BTS is a security for U.S. securities law purposes, there appear to be very good arguments to make that a cryptocurrency with a substantial volume of coins in circulation and substantial daily volume of trades – indicia of having a true market value that is independent of the efforts of a group of employees or founders – is not a security. The fact that you never did an ICO for BTS is a very positive fact.

Unfortunately, some of the statements in your white paper and on websites describing BTS make the analysis more murky, or at least have the potential to confuse the SEC. For instance, the BitShares 2.0 General Overview includes these statements in the description of the BTS token:

“In contrast to most crypto-currencies, BitShares does not claim to be a currency but rather an equity in a decentral autonomous company (DAC). As a result, the market valuation of BitShares is free floating and may be as volatile as any other equity (e.g. of traditional companies).”

This statement, comparing BTS to “equity”, certainly will not help in convincing the SEC or other securities regulators to view BTS as a currency and not a security. Similarly, many of the websites I reviewed go to great lengths to describe BitShares as a platform or technology that can be used for all kinds of purposes, which likely will be confusing to securities regulators as they try to get their heads around BitShares as a currency. (I appreciate that BitShares as a platform is different than BTS as a specific currency.) I think it will be important for us to understand how BTS is used and how it is dissimilar from other cryptocurrencies. Understanding these details will be the first part of the work we undertake.

As reported the Bitshares Blockchain Foundation already announced as the new official information channel disclaiming all other information. We will need to undertake this fast as it is a primary requirement. We already as we speak face the very same issues with other exchanges where we discuss listing BTS. It is holding our growth back in a mayor way.

Of course we discussed cost. Kindly, Mr. Hernand has offered to get in touch with the legal council of Bittrex Inc. on our behalf to find out what would be required exactly (apart from the new website information) to lift the freeze on trade. That influences the price of the work of course a lot We however go from a worse case scenario. Again quoting Mr. Hernand:

With these issues in mind, I think we can help with the situation with Bittrex (and other exchanges) and pursuing an SEC no-action letter. I expect the cost to learn about BTS and provide a legal confirmation for Bittrex would be US$75-100K (with the possibility of it being lower if Bittrex merely seeks an informal letter) and the cost for the SEC no-action process would be $200K. To get started, we would need you to confirm which legal entity would be our client and arrange for a wire transfer of a $50K retainer (which would remain outstanding during our engagement and be returned to you if not needed to cover unpaid invoices). I expect we could complete the legal confirmation within 10 days of being retained.

We as customer, are new to Paul Hastings, which requires a retainer to be paid upfront. Besides that, we know they are swamped with crypto demand, so they make sure whoever they do take on, at least pay the bills. We agreed that the termination of the agreement would be applicable at all times (provided invoices are paid of course ). It is a hell of a lot of money, we know. However, very well spend. Our opinion is we stand a fair chance with the SEC. BitShares Blockchain and BTS would be the first or one of the first ones to achieve a no-action letter in crypto-country. The credibility , trustworthiness and marketing out of that alone is worth it. We can only achieve results with a well informed litigation team at a reputable firm that knows how to do this kind of thing. Provided the community empowers this and fund it, we are prepared to be the signatory legal entity taking the responsibility. That in itself we feel is is a unique thing that characterizes our community in its essence.


Has can be seen from the paragraph above, this worker proposal has a need for

  • $75-100K for a legal opinion letter for BTS
  • $200K for a no-action process with the SEC
  • Plus hours that need to be provided in order to offer accurate consultation to Paul Hastings with respect to the BitShares Blockchain as well as to the BTS token.

Of course all invoices (also those received by Paul Hastings LLC) will be made public and we will make sure that we agree with Paul Hastings LLC on that.

The results will be published on the page


  1. Ensure Paul Hastings LLC understands BitShares and BTS
  2. Obtain a legal opinion letter that accurately presents the BTS token to exchanges
  3. Coordinate a letter for the SEC to apply for a no-action process
  4. Obtain a letter from the SEC approving no-action
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