Topic: Legal Advice / Answering Legal Questions - page 2. (Read 4149 times)

Well as of right now, I see nothing illegal about the existence and use of bitcoins.  (It goes without saying that illegal acts can be engaged in with them, such as buying/selling on silkroad, using it as a way to launder other currencies, or failing to pay taxes on gains.  It is after all an asset.)  

The federal government may disagree with my analysis that I do not view anything illegal with the existence and use of bitcoins.  They clearly did with Liberty Dollars and would almost certainly attempt to make the same arguments against bitcoins if they chose to do so.  The problem is, that a bitcoin's very existence is so different in nature from that of a Liberty Dollar (which was usually an actual coin or printed paper currency).  Plus it was a whole lot easier for the feds to get to liberty dollars as they were primarily locally used and not as "virtual" as bitcoins.  The feds would not be able to disrupt bitcoins without substantial investment and effort.  

The more complicated question is could the US deem it illegal to use?  This goes into serious question of Constitutional Law.  Sure, the Congress could pass a bill that makes it illegal to trade something of value for bitcoins.  The President could then sign this bill, thus atleast temporarily making bitcoins illegal.  But, this law would (hopefully) be challenged in the courts.  This is when the real constitutional challenge would come into play.  Unfortunately, I just don't have the expertise in this area to give a full analysis of what the courts might do.  (And I'm not sure anyone does, to be honest since there is just so little precedent on the issue.)

The Securities and Exchange Commission already has a little bit of authority to make the transfer of bitcoins illegal, but as of yet, have failed to do so.  They could merely classify bitcoins as a security rather than a currency, and it would then fall squarely within their jurisdiction to regulate.  For example, they may require that only those with proper licenses could sell them.  This would almost certainly be challenged as well.

So the bottom line is: Are they illegal?  I don't think so, but the fed might.  If they are currently legal, then the government could make it illegal.  Would they?  I don't know.  Probably not until they consider it a competitive threat to the US Dollar.  If they did, would it survive a constitutional challenge?  I don't know and I don't think anyone fully does.    

Haha, a higher class of criminal!

Here's a question for you:  What's your take on the legality of Bitcoin as a currency?  Could the US deem it illegal to use (even though they couldn't stop people from using it) as they did with other alternative currencies, like eGold and Liberty Dollars, etc?

True.  I might be dealing with a slightly more intelligent crowd then I'm used to in my practice as well lol.  Typically the criminal questions I get are along the lines of "Yeah I did it, but what legal grounds can I use to get off."  That's mostly what I do in criminal cases.  Just poke holes in the prosecution's argument. 

The law surrounding bitcoin usage is definitely intriguing though.  It basically requires the application of hundred(s) year old law to cutting edge modern technological and security issues.  And you nailed it.  There is about 0 actual case law on the subject.  So I can't wait until someone actually brings some of these issues to trial. 

I think the criminal law is more cut-and-dry, so fewer questions about it.  People buying drugs on silk road know it is illegal - what questions would they have?  I am sure there are some, but I can't think of any myself at the moment.

People are more interested in questions regarding the economics and usage of Bitcoin itself... questions that haven't yet had the opportunity of being specifically answered in a courtroom yet.  I think that's why you get more of them based around security law / civil law instead of criminal law.

Well it was meant to be offensive apparently, but I didn't really understand it either lol.  No harm no foul I guess.

What does that even mean?

You don´t see the community spirit and, am afraid, don´t really want to be part of it.

Ciao

Been a few days...just bumping the thread.  I'm kind of surprised all of my questions have been serious security law / civil law type questions.  I really thought most of them would be of a criminal nature around here  

Sounds like you handled the issue appropriately then.  That's pretty much the same thing the Better Business Bureau does (although I'm not sure if the substance of their complaints become public, they just give the other side the opportunity to respond.)  Even without Section 230 you would only be liable for defamation if you knew or reasonably should have known the statement was false and defamatory.  So based on what you've told me you have absolutely no liability. 

Sure, that makes sense.  I just had a case on a rating site of mine (not bitcoin feedback) where the business owner threatened to sue me if I didn't remove particular statements about her business.  I did some quick research, and told her why I could not be sued over it, and that shut her up, but I wanted to be sure I was in the right about that!

EDIT:  And to be clear, it was a "he said, she said" sort of thing... no way for me to know if it was false or defamatory or not.  I felt like it was prudent to keep the feedback posted, and offered the business owner the opportunity to respond to the accusations.

I believe that's correct according to Zeran v. America Online, Inc. 129 F.3d 327 (4th Cir. 1997)

"[L]awsuits seeking to hold a service liable for its exercise of a publisher's traditional editorial functions – such as deciding whether to publish, withdraw, postpone or alter content – are barred. The purpose of this statutory immunity is not difficult to discern. Congress recognized the threat that tort-based lawsuits pose to freedom of speech in the new and burgeoning Internet medium.  Section 230 was enacted, in part, to maintain the robust nature of Internet communication."

This case is still good law, and the United States Supreme Court denied cert to hear the case. 

But doing what is legal, isn't necessarily doing what is "right".  So I still would advise clearly defamatory statements to be taken down, but it is not something a website operator should fear will lead to lawsuits. 

Does this mean that website operators do not have to remove defamatory statements even if they know it is defamatory?

Absolutely! I've been looking for the answer to this question on and off for a few months, so thank you.

Thank you! Happy to help! 

Great question.  Fortunately, to help us answer this question there is a huge amount of litigation over this exact issue regarding newspapers/libraries/television/etc. 

What you refer to are "republishers".

Here's the common law on republishers:
One who repeats, or republishes, a defamatory statement is liable to the same extent as the "primary" publisher.  Furthermore, the liability of the "primary" publisher may increase where republication is either intended by him or is reasonably foreseeable.  Those who disseminate material containing defamatory statements (i.e., "secondary" publishers such as libraries, bookstores, and magazine vendors) are subject to liability only if they knew or should have known of the defamatory character of the material. 

The part in bold is the applicable law to message boards such as this one.  Basically, your responsibility would be to take down posts immediately once you have knowledge of (or if a reasonable person under the same circumstances should have knowledge of) the fact that the post is not true.  If you do this simple step you should be pretty well protected from liability for defamation.  If the same person persists in posting defamatory information, then you might have a higher duty to take additional steps such as banning the individual. 

But there is also a law that Congress passed that specifically protects individuals that run such sites and internet service providers.  Under Section 230 of the Communications Decency Act, ISPs and website operators cannot be held liable for defamation for publishing statements that are were posted by someone else.

Hope this helps! 

I certainly hope people appreciate the service your are providing Nolo. I have been keeping up on your posts and they have been very informative and accurate from what I can tell. Thanks for spending some of your free time answering these questions.

Back on the subject of defamation, what are the legal liabilities/responsibilities of the operator(s) of a website when someone who is not related to the operator(s) posts a defamatory message on their site (i.e. a forum)?

The answer is, it depends.  Betsofbitco.in, from what I can see, operates on the exact same model as the famous prediction market intrade.com.  

Intrade.com is base in Ireland.  It is legal under Ireland laws.  Intrade offers the following disclaimer:

.in is a domain name from India.  Pretty safe to say I have no clue on what the laws are in India.  It appears from a quick Google search though, that India is becoming more relaxed in their "gambling" laws.  So it may very well be legal in India.  

What may not be legal, is for you, an individual in another country, to use the site.  That would be up to your individual state/country.  

What falls under illegal wagering/bookmaking?  Would Betsofbitco.in be in violation of it?  Would users of Betsofbitco.in be in violation of it?  If I write a post on the forum, telling people I will bet that Matthew won't pay anyone, and people take me up on it, does that make me in violation of it?

Everything I said in my prior post was correct, I just didn't elaborate like I usually do.  Mostly because I qualified that response with  lol


As far as the securities issue, I discussed that in a prior post.  We're not even sure at this point if bitcoins are considered securities by the SEC under the Securities Act of 1933.  Also, this is such a novel area of the law, there could be other political factors at play out there that we simply aren't aware of.  The federal government could feel that intervention on behalf of the SEC to protect bitcoin investors might even "legitimize" bitcoins in the eyes of the public, and therefore they are refusing to classify them as securities for this very purpose.

Illegal wagering/bookmaking and selling insurance without a license are state law issues and are criminal offenses.  Every state is different, every jurisdiction has different penalties.  Sure they are being sold across state lines.  And that's where the whole federal enforcement can come into play.  Possibly they could be investigated for the racketeering charges I discussed in a prior post.  (Mail fraud, wire fraud, conspiracy, etc.)

Plus all of the above primarily deals with the criminal liability of a party.  It is the civil liability that I feel most investors that have lost out on would be interested in.  Sure there could be some civil action against them for breach of these criminal statutes as well, but I feel recovery would be pretty limited there for several reasons.  1) They likely have already disposed of the money and don't have significant enough assets to make it worth while to even sue them, except maybe as part of a larger plan to go after the big fish pirate.  2) Litigation would be extremely expensive.  Sure this could be classified as a Rule 23 Class Action lawsuit, but there would be so many plaintiffs and so little money, the attorney would be the only one that actually recovers any material amount.  3) Once again, you probably can't even sue a "bookmaker".  What theory are you going to sue them on?  You made an illegal bet and they didn't pay when you won?  That's the equivalent of suing a crack dealer, because he gave you substandard crack.  Courts will not enforce illegal contracts.

It seems you have some legal experience, so I think you'll be able to see where the PA Supreme Court was going in its analysis of criminal conflict of laws rule in Commonwealth v. Eichinger, 915 A.2d 1122 (2007):


Conflict of Laws rules are used in criminal contexts just like they are in civil.  Typically a substantive v. procedural issue.  But basically I was just pointing out in my prior post, that we have no idea how these conflicts might come into play.  We don't even know where these people are located and for that matter, exactly what they could be charged with anyway.  All I am able to do at this point is guess and theorize about what possible rights and remedies the players will all have.  But beyond that, in a criminal or civil context, we're likely dealing with international law as well. Treaties between the United States and whatever nation the would be defendant is in.  Can the US extradite him for a criminal case?  For a civil case, can a United States court assert personal jurisdiction over him?  Can the US court even seize any of his assets if they did?  Remember, in a civil context, a judgment without any assets to collect is only worth the paper it is written on.  Without assets to collect, why sue?