Legal Research

[LegalEagle]

Hi everyone.  I originally posted this in the Newbie forum, but now that I'm free of that, I can post it here:

I am a law student in the United States, and I work on my school's Law Review, which is an academic legal publication.  We are required to write an article on an unresolved legal issue, and BitCoin seems like it could possibly present some novel legal issues.

It turns out someone has already written on the general legality of BitCoin (which is questionable).  If anyone is interested in that, the following link has a copy of the article:

http://hstlj.org/articles/bitcoin-an-innovative-alternative-digital-currency/2/

I was wondering if anyone is curious about any other legal issues that BitCoin presents.  It would help me with my article, and I would provide the BitCoin community with thorough, well-researched legal information.  Naturally I will post a copy of the article on this website when it's written.

Keep in mind that I'm restricted to writing about US law.  Any and all suggestions/comments are appreciated.

So if anyone is curious about any specific legal issues that BitCoin presents (aside from general legality, which is covered in the above-linked article), please suggest them here.

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[JDBound]

I made a similar request a little over a year ago. I ultimately decided to focus on anonymity. See: https://bitcointalk.org/index.php?topic=40783.0

[Insu Dra]

I would love some good research about stock/bond exchanges using btc.

I'm most interested in people listing assets on and those running the exchange. The contracts used on existing exchanges seem very fussy and incomplete. A lack of research and clear laws on the mater are probably a major reasons for that.

https://glbse.com/
https://cryptostocks.com/
https://www.litecoinglobal.com/

Broad request and I'm not sure if this falls under your requirements but there must be some new legal issues to be found related to those.

If not, maybe p2p exchanges based on the bitcoin protocol where there is no regulator or exchange manager but just issuers. Colored coins is probably closed description atm:
https://bitcointalk.org/index.php?topic=106449.0
https://bitcointalk.org/index.php?topic=106373.0

Edit: exciting -> existing, reading my own quote ugh ...

[Martin666]

@Insu Dra

I just wanted to post the same...
You could do some more research about GLBSE and aspects of fundraising for startups with bitcoins

Good luck !

[LegalEagle]

I made a similar request a little over a year ago. I ultimately decided to focus on anonymity. See: https://bitcointalk.org/index.php?topic=40783.0

I'm surprised that article didn't turn up in my preemption checks.  Did you publish the paper?

I would love some good research about stock/bond exchanges using btc.

I'm most interested in people listing assets on and those running the exchange. The contracts used on exciting exchanges seem very fussy and incomplete. A lack of research and clear laws on the mater is probably a major reason for that.

https://glbse.com/
https://cryptostocks.com/
https://www.litecoinglobal.com/

Broad request and I'm not sure if this falls under your requirements but there must be some new legal issues to be found in those.

If not, maybe p2p exchanges based on the bitcoin protocol where there is no regulator or exchange manager but just issuers. Colored coins is probably closed description atm:
https://bitcointalk.org/index.php?topic=106449.0
https://bitcointalk.org/index.php?topic=106373.0

Very interesting.  I will definitely look into this.

Please keep suggestions/comments coming if you guys have them.

[Stephen Gornick]

I was wondering if anyone is curious about any other legal issues that BitCoin presents.

Let's say ordering online I get a Bitcoin address and send payment there.   Then the merchant claims no order existed, they received no payment, and the address wasn't theirs.

If I am buying something that gets shipped to me, the merchant can only get away with this for a few days before their reputation is tarnished.

Let's say instead this was a prepayment for an ASIC device.  Or a deposit at an exchange.  Or an investment.    The organization could probably get away with quite a haul doing this as there is a large span of time between when the payments were sent and when the funds "vaporized".

So there are suggestions as to how this might be remedied, including using cryptographically signed invoices from the merchant, and then the blockchain would prove that the payment to the requested address was indeed made.  

 - http://bitcointalk.org/index.php?topic=107180.0
 - http://sourceforge.net/mailarchive/message.php?msg_id=29914146

My question is, would a GPG signed invoice be something legally recognized as proof that the merchant engaged in the contract?  How do I prove the public key used to confirm really was from the merchant?   Would a payment to that address existing in the blockchain be legally recognized as proof that payment was made?  How would the  customer / sender prove they were the sender of the funds, if challenged as to whether or not they have justification to pursue a case?

So this is the topic of anonymous payments, and likely one that has not received enough attention from a legal standpoint yet.

Another topic that might be interesting .. the finances for an unincorporated voluntary association.  This is what most GLBSE securities would be considered.   This issue must already have been addressed.  Consider the situation where a bunch of hunting buddies pitch in a few thousand dollars of "investment" in their buddy's design on a new deer stand.  And then the buddy sells the stands and earns profits.  They never incorporated,  Are they entitled to a proportionate share of the profits?   Can the investors be sued if the tree stand wasn't safe and someone sues after being injured?

[Bitcoin Oz]

If bitcoin can include a way to issue and exchange assets and US citizens can purchase bitcoins does that make bitcoin itself subject to the SEC ?

[sunnankar]

It turns out someone has already written on the general legality of BitCoin (which is questionable).

......

So if anyone is curious about any specific legal issues that BitCoin presents (aside from general legality, which is covered in the above-linked article), please suggest them here.

The article you cite conflates way too many issues, is completely unorganized and does not succinctly frame a proper issue. Sure, it appears to be fairly well researched at the start but getting into section VI it begins to show serious flaws such as with the Liberty Dollar case and misstated the law (it is legal to issue private currencies such as frequent flier miles or Chuckie Cheese tokens or Disney Dollars; just don't make them confusingly similar to legal tender, which is the advice Dr. Vieira gave von Nothaus which was ignored by the idiot to his peril!). But beyond that its organization is like some hornbook vomited all over the screen. Then the persuasive as opposed to objective approach is a huge error.

Next, the Constitution does not need to say anything about private parties creating money (which is different from currency in legal status, duh!). Article I Section 8 Clause 5, Article I Section 10 Clause 1 and 10th Amendment says everything that is needed and why private currencies are clearly legal. For the Stamp Act stuff just go read the relevant chapters in Dr. Vieira's Pieces of Eight. He is the recognized legal expert in this topic of jurisprudence.

BITCOINS ARE CLEARLY LEGAL
Under current United States Code Bitcoin is clearly legal, likely protected non-commercial free speech and there are no reasonable legal arguments for illegality.

For example, it asserts that Bitcoin ' is a digital, decentralized, partially anonymous currency' but provides absolutely rules, with citations, or any analysis. Under 31 USC 5103 The article has assumed a fact not in evidence and then built straw-man arguments around that premise. Bitcoins are more like air guitars than currency so asserting that Bitcoin is a currency without any authority or analysis is a huge fail.

As applied:

Prosecutor to Defendant: In Exhibit A (a blockchain transaction) we see that a currency transaction of 6 bitcoins were made from Wallet A to Wallet B. Did you transfer 6 bitcoins from Wallet A to Wallet B?
Defense Counsel: Objection; assuming a fact not in evidence, ambiguous, unintelligible and vague.
Judge: Sustained.

WHAT I WOULD LIKE TO SEE
I would like to see a well researched objective legal article addressing an extremely basic issue: Whether 'bitcoins', the unit of account in the open source software governed under the MIT license, constitute property?

And my current research and analysis tends towards this being suspect.

Perhaps a follow up question: If 'bitcoins' constitute property then what property right(s), if any, attach and who owns those rights?

Of course, digging into these two simple issues raise some extremely thorny issues which is probably beyond your competence. But it would be an interesting research project and probably be pretty fun.

The bottom line is that Bitcoin does not fit nicely into any current legislation or case law and if legislation were fashioned then it would likely fail for being overly broad or void for vagueness. Additionally, I have not seen any proper legal research on what Bitcoin is.

As Charlie Shrem observed, "My take away from this last session was the revelation that Bitcoin eviscerates entire statutes of law. Bitcoin will result in a number of “legal impotencies,” while simultaneously offering an alternative to the business and money that is being stifled by these same laws in the normal economy."

[Martin666]

@Stephen Gornick

Could you not just make a screen shot, when you receive the bill with the bitcoin address ?
Adding blockchain to this procedure and you can prove, that it was not a"typing error" 

[Stephen Gornick]

@Stephen Gornick

Could you not just make a screen shot, when you receive the bill with the bitcoin address ?

umm ...

Fake screenshot without using photoshop

This guide will teach you to create Fake screenshot without using any professional softwares like Photoshop or paintshop

With this trick, you will be able to Alter/modify virtually any text based web pages

You can easily:
 - Show high Paypal Balance
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 - Show more jobs in microworkers
 - show high rates in microworkers

 - http://bhurtel.co.uk/fake-screenshot-without-using-photoshop/

[marcus_of_augustus]

Perhaps a follow up question: If 'bitcoins' constitute property then what property right(s), if any, attach and who owns those rights?

So when you say 'bitcoins' constitute a property, are you referring to the private keys that enable the user to transfer amounts in the public database, or the numeric representation of value in the database, all of these objects taken in total, or something different again?

I.e. what items of the technology have you used as your legal definition of 'bitcoins', the chattels that are able to be possessed, here?

[pc]

I've got a couple thoughts of things you could look into:

• How do inheritance laws work with bitcoin? Can I ensure that my bitcoins are properly put into a trust for my children, for example?
• Crossing borders: If I have memorized a brainwallet key, do I have to declare how much money I'm "moving" when I exit or enter the country? How about if it's just keys on my laptop, or on a sheet of paper, or on Casascius coins? Is this similar to memorizing the card number or transporting a more traditional gift card?
• Taxes: Do I pay capital gains taxes when I sell bitcoins for USD? Are bitcoins indistinguishable from each other, or do I track the actual transaction price between when I bought and when I sold? How about if I "bought" them via performing services or selling extra stuff I had around the house, as opposed to on an exchange? How about if I "sell" them by buying goods or services?
• Is revealing my bitcoin private key to law enforcement protected by the 5th amendment? Does it matter if it's a memorized key, written down on paper in a safe, or on my cell phone?
• If somebody is in a dispute about bitcoins owed, can a court compel a party to send the owed bitcoins to the wronged party? Can the court compel the owing party to purchase bitcoins on an exchange if they don't have any?

[LegalEagle]

It turns out someone has already written on the general legality of BitCoin (which is questionable).

......

So if anyone is curious about any specific legal issues that BitCoin presents (aside from general legality, which is covered in the above-linked article), please suggest them here.

The article you cite conflates way too many issues, is completely unorganized and does not succinctly frame a proper issue. Sure, it appears to be fairly well researched at the start but getting into section VI it begins to show serious flaws such as with the Liberty Dollar case and misstated the law (it is legal to issue private currencies such as frequent flier miles or Chuckie Cheese tokens or Disney Dollars; just don't make them confusingly similar to legal tender, which is the advice Dr. Vieira gave von Nothaus which was ignored by the idiot to his peril!). But beyond that its organization is like some hornbook vomited all over the screen. Then the persuasive as opposed to objective approach is a huge error.

I'm not quite sure which of my points you're taking issue with.  I don't make any representations regarding that particular article, I just linked it in case anyone was interested.  I'm concerned you didn't read the article, because he agrees with pretty much everything you just said.  He's just pointing out some potential unresolved legal issues that may arise with respect to BitCoin.  Since they're unresolved, the legal treatment of them is uncertain.

Next, the Constitution does not need to say anything about private parties creating money (which is different from currency in legal status, duh!). Article I Section 8 Clause 5, Article I Section 10 Clause 1 and 10th Amendment says everything that is needed and why private currencies are clearly legal. For the Stamp Act stuff just go read the relevant chapters in Dr. Vieira's Pieces of Eight. He is the recognized legal expert in this topic of jurisprudence.

The article recognizes this.

BITCOINS ARE CLEARLY LEGAL

This question has not been definitively answered by the court system.  As such, the legal outcome is uncertain.

Under current United States Code Bitcoin is clearly legal, likely protected non-commercial free speech and there are no reasonable legal arguments for illegality.

Constitutionally protected as a matter of free speech?  I have not researched it thoroughly, but I'm going to go ahead and say 'No'.

For example, it asserts that Bitcoin ' is a digital, decentralized, partially anonymous currency' but provides absolutely rules, with citations, or any analysis. Under 31 USC 5103 The article has assumed a fact not in evidence and then built straw-man arguments around that premise. Bitcoins are more like air guitars than currency so asserting that Bitcoin is a currency without any authority or analysis is a huge fail.

Yes, there's debate as to whether BitCoin is even a currency.  But if it's some kind of security, you've got even more regulatory issues.  And if it just some kind of asset, then bitcoin itself might be safe, but all of the trading exchanges that actually give the coins value could be in trouble.  

As applied:

Prosecutor to Defendant: In Exhibit A (a blockchain transaction) we see that a currency transaction of 6 bitcoins were made from Wallet A to Wallet B. Did you transfer 6 bitcoins from Wallet A to Wallet B?
Defense Counsel: Objection; assuming a fact not in evidence, ambiguous, unintelligible and vague.
Judge: Sustained.

What's your point?

WHAT I WOULD LIKE TO SEE
I would like to see a well researched objective legal article addressing an extremely basic issue: Whether 'bitcoins', the unit of account in the open source software governed under the MIT license, constitute property?

And my current research and analysis tends towards this being suspect.

Perhaps a follow up question: If 'bitcoins' constitute property then what property right(s), if any, attach and who owns those rights?

I'll look into it.

Of course, digging into these two simple issues raise some extremely thorny issues which is probably beyond your competence. But it would be an interesting research project and probably be pretty fun.

I resent that.

[sunnankar]

BITCOINS ARE CLEARLY LEGAL

This question has not been definitively answered by the court system.  As such, the legal outcome is uncertain.

Fail. Nulla poena sine lege and nullum crimen, nulla poena sine praevia lege poenali. Article 1 Section 9 Clause 3.

In one instance, performing accounting is legal. Even tax law requires accounting to be done. On one level, Bitcoin is software that merely performs accounting.

A problem is you are conflating many different levels of abstraction from Bitcoin, perhaps you need more Intellectual Property law understanding when dealing with levels of abstraction?, and potential uses of Bitcoin. Many issues you raise come into play when determining how one use's Bitcoin; which happens at different layers of the abstraction.

Under current United States Code Bitcoin is clearly legal, likely protected non-commercial free speech and there are no reasonable legal arguments for illegality.

Constitutionally protected as a matter of free speech?  I have not researched it thoroughly, but I'm going to go ahead and say 'No'.

Fail. Refer to the section later regarding your incompetence.

Yes, there's debate as to whether BitCoin is even a currency.  But if it's some kind of security, you've got even more regulatory issues.  And if it just some kind of asset, then bitcoin itself might be safe, but all of the trading exchanges that actually give the coins value could be in trouble.

There is debate as to whether Bitcoin or bitcoins are even property. Even if established as property that could be individually owned there is an issue as to whether they are currency. They are clearly not a security. The exchanges have different issues, which really do not need to be conflated with these issues because these are antecedent, than the underlying protocol.

What's your point?

Once again, refer to the section later regarding your incompetence.

I'll look into it.

Of course, digging into these two simple issues raise some extremely thorny issues which is probably beyond your competence. But it would be an interesting research project and probably be pretty fun.

I resent that.

Get over it.

I doubt Bitcoin and the potential legal issues it will raise are within any single person's competence. Not only is the underlying subject matter of Bitcoin extremely complicated but then there are serious Constitutional level issues which will likely be able to be raised in areas where legal scholars have spent entire careers specializing such as free speech, due process, 4th and 5th Amendments and intellectual property to name only a few.

[sunnankar]

Perhaps a follow up question: If 'bitcoins' constitute property then what property right(s), if any, attach and who owns those rights?

So when you say 'bitcoins' constitute a property, are you referring to the private keys that enable the user to transfer amounts in the public database, or the numeric representation of value in the database, all of these objects taken in total, or something different again?

I.e. what items of the technology have you used as your legal definition of 'bitcoins', the chattels that are able to be possessed, here?

I would like to see a well researched objective legal article addressing an extremely basic issue: Whether 'bitcoins', the unit of account in the open source software governed under the MIT license, constitute property?

And my current research and analysis tends towards this being suspect.

marcus_of_augustus, you are poking into some of the intricate technology facts when deciding on how to even frame the issue. In case I was not clear earlier. I am not asserting or advocating that 'bitcoins' even constitute property. But then how I would advocate depends on the needs of whom I am advocating for. In this discussion, I am attempting to look at it objectively and not via advocation.

And establishing that 'bitcoins' are property that can be individually owned is antecedent to so many issues.

For example, how can someone steal what is not property?

By analogy as applied to your example, can someone steal '2+4=6'? All the private key allows one to do is perform math more easily than someone who has only the public key. A private key is not like a bank account which is titled as property in someone's name. And even if '4' is property then it is still governed under the MIT license!

Are the Bitcoinica plaintiff's going to get dismissed for failing to state facts sufficient to raise a cause of action?

[dentldir]

The question "Are Bitcoins Legal?" should be replaced with "What Are Bitcoins, Legally?".

Technically, a Bitcoin address is a public expression of a private key.  The private key infers a right to "spend" on the Bitcoin network which keeps a public chain of transactions.

Are the private keys speech?  
Is a private key protected by copyright law?  
Do the DMCA anti-circumvention provisions apply?
Are the rights to "spend" private intellectual property?
Are block chain entries public intellectual property?
Is a right to "spend" transfer from one address to another a private intellectual property transfer recorded in a public instrument?

Clearly you can see my bias in this line of thinking.  But hopefully it's helpful.

[marcus_of_augustus]

Perhaps a follow up question: If 'bitcoins' constitute property then what property right(s), if any, attach and who owns those rights?

So when you say 'bitcoins' constitute a property, are you referring to the private keys that enable the user to transfer amounts in the public database, or the numeric representation of value in the database, all of these objects taken in total, or something different again?

I.e. what items of the technology have you used as your legal definition of 'bitcoins', the chattels that are able to be possessed, here?

I would like to see a well researched objective legal article addressing an extremely basic issue: Whether 'bitcoins', the unit of account in the open source software governed under the MIT license, constitute property?

And my current research and analysis tends towards this being suspect.

marcus_of_augustus, you are poking into some of the intricate technology facts when deciding on how to even frame the issue. In case I was not clear earlier. I am not asserting or advocating that 'bitcoins' even constitute property. But then how I would advocate depends on the needs of whom I am advocating for. In this discussion, I am attempting to look at it objectively and not via advocation.

And establishing that 'bitcoins' are property that can be individually owned is antecedent to so many issues.

For example, how can someone steal what is not property?

By analogy as applied to your example, can someone steal '2+4=6'? All the private key allows one to do is perform math more easily than someone who has only the public key. A private key is not like a bank account which is titled as property in someone's name. And even if '4' is property then it is still governed under the MIT license!

Are the Bitcoinica plaintiff's going to get dismissed for failing to state facts sufficient to raise a cause of action?

Okay, nice side-step, I like the way you argue. I appreciate that it depends on whether you are advocating or delivering an objective analysis.

The ability to steal seems to point towards an underlying 'property' somewhere. But isn't this the same as stealing someone's password to their on-line bank account login? Being able to possess the on-line banking password does not necessarily mean that the numerical representation of money in the banks database constitute a property though, does it?

In fact, it raises the whole thorny issue surrounding whether the current system of digital money representations in banking databases are even a valid objective representation of property. In that, those electronic numbers cannot be physically possessed, although they can supposedly be redeemed for physical legal tender notes (but simple mathematics says it is impossible for all those numerical money representations to be redeemed as physical notes simultaneously). So what is it about numbers in database that make them property at all? E.g. if the electricity for the database were to be turned off and back-ups lost then that property would cease to exist would question whether it ever existed as objective property at all.

[LegalEagle]

Every time I stop being involved in internet communities for a while, I forget how completely ridiculously insulting people are online.  Then a forum and get called incompetent for posting an article that someone else wrote.  People like whoever this "sunnankar" guy is are completely immature.  Get a life.

How can you call me incompetent?  All you know about me is that I write for a law review, which means I'm at the top of my class.

I'm trying to make a contribution to this community.  Get a grip and stop being so hostile.

Nulla poena sine lege and nullum crimen, nulla poena sine praevia lege poenali. Article 1 Section 9 Clause 3.

Non stercus.

In one instance, performing accounting is legal. Even tax law requires accounting to be done. On one level, Bitcoin is software that merely performs accounting.

Fail.  Both accounting and taxes are subject to a large amount of regulation.  The failure to comply with this regulation can land you in jail.

I can't think of a more horrible example to illustrate your "point". 

A problem is you are conflating many different levels of abstraction from Bitcoin, perhaps you need more Intellectual Property law understanding when dealing with levels of abstraction?, and potential uses of Bitcoin. Many issues you raise come into play when determining how one use's Bitcoin; which happens at different layers of the abstraction.

What issues am I raising, exactly?  All I'm saying is that there is some uncertainty as to the legal treatment of BitCoin and certain BitCoin-related activities.  For example, I haven't looked into it, but I don't see any reason why BitCoin exchanges shouldn't be subject to to Forex regulations--especially those that deal in multiple fiat currencies! 

If you practice law and refuse to acknowledge these concerns... you're terribly incompetent and should not be allowed to practice.  If you don't practice law, you really need to take your wikipedia knowledge somewhere else.

[odolvlobo]

Fail.
Fail.
...

Asshole. Someone is trying to contribute and provide a benefit to the community, and you see fit to take a big shit on them and stand back and proudly exclaim "I'm so awesome! Look at that awesome pile of shit I just made!". I don't care if you are right or wrong here. All I see is your pile of shit and it stinks so bad that I don't care what's in it.

[Insu Dra]

Every time I stop being involved in internet communities for a while, I forget how completely ridiculously insulting people are online. 

Welcome back to world of ignorance and and bloated ego's. Don't let them get to you, just ignore em ... people that are worth it usually see that there points are invalid anyway ...