Morrison Cohen Files Amicus Brief on Behalf of Clients Blockchain Association and DeFi Education Fund Outlining Concerns with the CAT Database
On August 22, 2024, Morrison Cohen, on behalf of clients Blockchain Association and DeFi Education Fund, filed a proposed amicus brief in a litigation brought by Erik Davidson, John Restivo and National Center for Public Policy Research against the SEC, its Chairman Gary Gensler and Consolidated Audit Trail, LLC. The underlying lawsuit challenges the legality and constitutionality of the Consolidated Audit Trail (“CAT”), an SEC-mandated database intended to keep detailed records of every securities transaction.
The proposed amicus focuses on the detrimental effect that the CAT will have on the digital assets industry. In particular, the CAT “interacts with blockchain data in a way that exposes a vast amount of personal financial data to the federal government, far beyond the securities transactions that the CAT was intended to capture.” Given that the SEC believes that many digital assets market participants are “exchanges,” “brokers” and/or “dealers,” those entities will have to report blockchain information to the CAT.
The amicus further cautions that not only would the CAT “provide unparalleled and unprecedented insight – to the government and to a slew of private parties – into everyday Americans’ everyday blockchain transactions,” but it would also be “a honeypot for hackers and other bad actors – a risk exacerbated by the linkage of wallet addresses or blockchain transaction information to individual user information in the CAT.”
The amicus concludes: “The CAT unacceptably undermines privacy and personal freedom. It is particularly dangerous to a society that is more and more ‘online,’ and that increasingly relies on blockchain technology in everyday activities. The threat to personal privacy posed by the CAT – far beyond the mere monitoring of securities transactions as it was intended – is extreme.”
Jason Gottlieb, Michael Mix and Emma McGrath drafted the amicus brief.
Contacts
- Jason P. Gottlieb Partner & Chair, Digital Assets; Chair, White Collar and Regulatory Enforcement
- jgottlieb@morrisoncohen.com
- Michael Mix Partner
- mmix@morrisoncohen.com
- Emma E. McGrath Associate
- emcgrath@morrisoncohen.com
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