![]() And, this standard is frequently exacerbated by a lack of appellate case law. In many jurisdictions, courts have held that AGs bringing UDAP claims do not have to prove actual harm to consumers, or reliance on the communications at issue, or knowledge or intent by defendants. In October, California became the first state to apply UDAP laws to cryptocurrency exchanges when its Department of Financial Protection issued a desist and refrain regulatory order against GMO Global, an organization operating cryptocurrency exchange websites. ![]() While UDAP statutes vary from state to state, they tend to share one feature: a relaxed standard of proof for State AGs to establish violations of the law. State AGs’ powers are supercharged when they pursue consumer-protection complaints. UDAP Statutes Give State AGs a Formidable Weapon It is important that crypto companies understand the unique features and liabilities of state UDAP claims. Given the ubiquity of cryptocurrency investment opportunities and the onslaught of advertising for cryptocurrency products, we expect State AG enforcement to significantly ramp up this year. State Attorneys General have broad authority to investigate or sue companies for violations of state “UDAP” laws, which prohibit unfair, deceptive, or abusive acts and practices. In recent months, both New York State Attorney General Letitia James and California Attorney General Rob Bonta have issued strong warnings to consumers who are considering investing in cryptocurrency markets, and they have encouraged people to come forward to report any company wrongdoing.Īttention from State AGs exposes cryptocurrency companies to the risk of massive penalties. Now, after a wave of celebrity endorsements and a steep market downturn, cryptocurrency is very much on the radar of State AGs, who have taken a fresh interest in protecting consumers from alleged deceptive practices. ![]() In years past, State Attorneys General have largely taken a hands-off approach to policing cryptocurrency investing, viewing it as an exotic venture undertaken by sophisticated actors.
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