In the hottest collaboration since Balenciaga teamed up with Kanye West to walk a mud-covered runway in Paris yesterday, Gary Gensler and Kim Kardahsian have gotten together to settle charges of an illegal crypto promotion scheme.
Kardashian has agreed to pay a $1 million fine and refrain from crypto promotions for three years after failing to disclose a $250,000 payment for promoting the crypto token EMAX — which has since lost almost all of its value — on Instagram last year, according to a press release the SEC sent out early this morning. The settlement marks the highest-profile crypto enforcement action to date.
By going after one of the country’s biggest celebrities, Gensler gets to leverage the Kardashian brand to bring attention to his crypto crackdown. Since his confirmation last April, the SEC chief has made tough crypto enforcement a top priority, while laying claim to jurisdiction over vast swaths of blockchain activity.
This has drawn sustained protests from crypto’s backers.And at first blush, today’s settlement seems like another setback for the technology, reinforcing its associations with flimsy celebrity endorsements and dodgy promotional schemes.
But there’s another way to see it — as a win-win for the industry and regulators like Gensler.
In the complicated dance between emerging Wild West industries and government authorities, high-profile regulation can help legitimize an industry by creating the perception (and, presumably, a reality) that government oversight is purging dangerous scams, and ensuring that what remains is safe and effective.
Some recognized those benefits in today’s settlement: “I think it’s great,” said Eric Soufer, a former aide to New York Attorney General Eric Schneiderman who now leads crypto work at the public affairs firm Tusk Strategies. “You’re not going to have a viable industry in five to 10 years, maybe less, if people don’t trust it.”
Just don’t hold your breath for a chorus of crypto backers to join in the praise. Blockchain technology was invented to stymie government control, so many of its staunchest advocates oppose any regulation, even if some establishment-minded firms have called for proactive government action to provide regulatory clarity.
They’re especially loath to applaud Gensler, who has relished the role of crypto’s bad cop. “Even if people respect something the SEC does,” Soufer said. “Gary Gensler is the Antichrist of the crypto universe.”
But historically, regulation has helped clean up the image not only of novel financial products but of industries like medicine, where the advent of the Food and Drug Administration in 1906 helped the pharmaceutical industry lose its association with snake oil salesmen and quackery.
In fact, in the case of today’s settlement, Byron Gilliam, markets strategist at the crypto-focused media firm Blockworks, argues that the SEC may be giving crypto tokens like EMAX too much credit by treating them as securities. “They’d be better off telling people crypto is not an investment class and trading it is more like betting on college football than investing in the stock market,” he said.
In that sense, Gilliam likened the effects of Gensler’s crypto oversight to those of an older SEC prerogative.
“It’s a lot like insider-trading laws, which I think are ineffective, but are aimed at promoting a general sense of fairness,” Gilliam said. “If people think a market is rigged, they won’t participate.”
The somewhat unsettling humanoid robot that Elon Musk introduced at this year’s Tesla AI Day inspired a predictable round of sci-fi hype and speculation, despite its apparently still limited skillset.
Although it isn’t yet available for sale, Musk said Friday that he plans to offer the robot, dubbed “Optimus,” with a sub-$20,000 price tag and a delivery timeframe of three to five years per order.
While he’s promising delivery dates, Optimus’s brain is already under scrutiny by some regulators for other reasons. Musk says Optimus will be powered by the Autopilot AI used in Tesla’s vehicles, itself still a highly developmental and contested technology. Last year the National Highway Traffic Safety Administration opened an investigation into it after a string of crashes.
So what are the safety and regulatory implications of putting it not just on the road, but on the factory floor?
Maybe a factory will be a more contained, manageable environment than the American road system.
Or maybe not.
“A warehouse or a manufacturing floor is nothing like a road,” asked David Weitzner, a business researcher who has written about the risk of rushing AI-powered consumer products, in an email. “The obstacles the AI will encounter in these environments are completely different: tighter spaces, smaller-sized obstacles, etc… Think of the safety implications of operating robots in warehouses with [Autopilot’s] perceptual failings.” — Derek Robertson
Out of all the billionaire gossip and business intrigue revealed this weekend in Elon Musk’s trove of text messages about his proposed Twitter takeover, one recurring thread was especially revealing of the role crypto and Web3 technology play in an ongoing tech-world power struggle.
Multiple people—including Musk himself, FTX co-founder Sam Bankman-Fried, and Kimbal Musk, an entrepreneur (and Musk’s brother)—bandied about the idea of either integrating blockchain into Twitter or creating a supplementary social media platform based on it.
Musk floated to Boring Company president Steve Davis that his “Plan B is a blockchain-based version of twitter, where the ‘tweets’ are embedded in the transaction as comments.” He seemed less sanguine about the prospects of integration with the platform as it currently exists, telling an associate of Bankman-Fried’s, who was eager to join Musk’s buy and help with such a project, that it was implausible for technical reasons.
In the texts, Musk and his cadre show a decided enthusiasm for blockchain’s potential as a tool for boosting transparency — exactly what they believe big tech platforms like Twitter lack. In that context, the big promises and big money behind blockchain become a clear example of a dynamic older than Silicon Valley itself: a new technology used as a wedge against the massive institutions who created the currently dominant ones. — Derek Robertson
Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Konstantin Kakaes ([email protected]); and Heidi Vogt ([email protected]). Follow us @DigitalFuture on Twitter.
Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.
If you’ve had this newsletter forwarded to you, you can sign up and read our mission statement at the links provided.