Matthew G. Lindenbaum leads the Boston litigation team for Nelson Mullins, co-chairs the firm’s securities practice and its sanctions practice. He can be reached at [email protected].
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The acclaimed HBO series “Deadwood,” set in the 1870s South Dakota frontier-town of the same name, explores the evolution of a gold mining camp into a functioning American town. Based on the Wild West history of this same town, and following real-life Deadwood residents such as Seth Bullock and Al Swearengen, and western legends like Wild Bill Hickock and Calamity Jane, “Deadwood” tracks the birth and development of a new community as its residents build new businesses, seek their fortunes, and occasionally get into deadly confrontations.
In many ways, the story of Deadwood’s rise mirrors the rise of crypto-currency—a new frontier of innovation, fortune and opportunity—with its own share of confrontation.
In “Deadwood,” the residents are drawn to the camp for the opportunity to mine gold, and businesses develop around the mined commodity. That sure sounds similar to the world of crypto, where people mine Bitcoin and other digital assets, and other businesses have grown up around these crypto commodities. In “Deadwood,” as in crypto, fortunes are made and lost, but all the while the town and industry continue to grow.
The most interesting parallel between these two stories for me, however, is how the residents of “Deadwood”—like the innovators in the crypto space—at first seek to avoid government intervention or involvement.
They want to be left alone to mine or pan for gold, build their businesses, grow them, and without the meddling bureaucrats and legislatures. In “Deadwood,” the government, however, is a looming presence—with the Army occasionally marching through town, and government officials or their “bag men” coming to look in on the town’s progress and growth.
Over time, the town’s prominent citizens begin to see the value of government and seek to slowly introduce it into Deadwood, realizing that without the government’s validation, none of their claims to property, business, or otherwise will be secure. They need government recognition of what they have built and accomplished—thus they appoint a sheriff, begin reaching out to members of the legislature, organizing their own local elections and positions to enter respectability and legitimacy.
After years of either avoidance of government or active hostility to it, the moment has come where crypto—like the citizens of “Deadwood”—is pivoting toward an embrace of government involvement, in the hopes of legitimizing the industry and further embedding crypto in the United States’ and world economies. The U.S. government too, for the first time, seems ready to embrace crypto, abandoning a previously hostile attitude.
Crypto first began to really step out of the shadows and attract the attention of the government and the public at large during the first Trump administration—just eight years following the invention of Bitcoin in 2008.
While it might be hard to square with the radically different approach of the second Trump administration, the first administration was not particularly friendly toward the industry. The SEC’s public statements, such as the SEC Staff’s 2017 report on DAO Tokens, declared U.S. securities laws could apply to all offers, sales, and trading in crypto assets. And the Staff followed this up by opening investigations into initial coin offerings (ICOs) and digital trading exchanges.
The Staff’s 2019 “Framework for ‘Investment Contract’ Analysis of Digital Assets,” did not do the industry any favors either. Nor did the first Trump administration provide any pathway or guidance for crypto to operate lawfully—instead it just pointed to the Supreme Court’s 1940s Howey test and said there was no need to update the law or legal framework to adapt to a 21st century innovative industry.
This less than friendly approach of the first Trump administration became full of hostility during the Biden administration, with its Executive Order on Digital Assets promising stringent oversight and enforcement, but little cooperation or innovation.
Both the SEC and the FBI added dedicated resources to policing crypto. SEC Commissioner Allison Herren Lee even put lawyers for crypto companies on notice.
The DOJ and the SEC brought actions against major players in the industry, including digital-asset exchanges like Coinbase and Ripple, and pursued headline-grabbing settlements with celebrities who had endorsed crypto products, such as the Kardashians and Paul Pierce. When crypto innovators came out with new products, such as crypto lending, the SEC could not move faster to try to shut them down.
But now, like the city fathers of “Deadwood,” and the territorial South Dakota government, crypto and the U.S. federal government appear ready to turn the page and embark on a more collaborative than combative relationship. The DOJ and SEC have abandoned suits and enforcement actions, or entered into industry-friendly settlements. Government officials have changed their tone about the industry and have suggested new regulatory frameworks rather than reliance on a 79 year-old Supreme Court precedent.
Switching from government foes to advocates can get tricky. In the TV show, Deadwood leaders seeking favor from the territorial legislature put together a “bribe sheet” in preparation to pay off the individual legislators.
In real life, no one needs to break the law to get the attention of lawmakers, all of whom need money to mount their election campaigns. During the 2024 election, the crypto industry was the single largest corporate donor to candidates in that election cycle. Crypto accounted for nearly half of all corporate money donated during the 2024 election, according to Public Citizen.
Regardless of how we got here, like the citizens of “Deadwood,” we have arrived at the time for rational, reasonable government regulation for crypto. The industry should seek appropriate guardrails, standards, and rules that balance the goal of promoting innovation with the need to protect customers.
If FinTech leaders and the crypto industry work together with the federal government to design regulations that benefit all, then crypto can become a more permanent part of the American economy, and the global economy and can leave behind its Wild West beginnings.
