Amicus Curiae Brief — Binance, et al., Petitioners v. JD Anderson, et al.

Supreme Court briefOct 25, 2024

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Text

No. 24-336

IN THE

Supreme Court of the United States

BINANCE, ET AL.,

Petitioners,

JD ANDERSON, ET AL.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Second Circuit

BRIEF OF THE CRYPTO COUNCIL FOR

INNOVATION AS AMICUS CURIAE

IN SUPPORT OF PETITION FOR CERTIORARI

Jason P. Gottlieb

Counsel of Record

Daniel C. Isaacs

Michael Mix

Rachel Fleder

Vani Upadhyaya

MORRISON COHEN LLP

909 Third Avenue

New York, New York 10022

(212) 735-8600

jgottlieb@morrisoncohen.com

Counsel for Amicus Curiae

October 25, 2024

TABLE OF CONTENTS

Page

TABLE OF CONTENTS ........................................... i

TABLE OF AUTHORITIES .................................... ii

INTEREST OF AMICUS CURIAE ......................... 1

SUMMARY OF ARGUMENT ................................. 2

STATEMENT OF FACTS........................................ 5

HOW INTERNET TRANSACTIONS

WORK........................................................... 5

II. HOW BLOCKCHAIN TRANSACTIONS

WORK........................................................... 9

III. USE CASES OF BLOCKCHAIN

INFRASTRUCTURE ................................. 13

ARGUMENT .......................................................... 19

THE SECOND CIRCUIT’S DECISION

IS AT ODDS WITH MORRISON’’S

TEACHINGS IN THE CONTEXT OF

THE SECURITIES ACT AND

EXCHANGE ACT ...................................... 19

II. THE SECOND CIRCUIT’S DECISION

IMPLICATES ALL FEDERAL LAWS ...... 22

III. THE SECOND CIRCUIT DECISION

HAMPERS INTERNET

TRANSACTIONS GENERALLY, AND

BLOCKCHAIN TRANSACTIONS IN

PARTICULAR ............................................ 24

CONCLUSION ................................................. 29

TABLE OF AUTHORITIES

Page

CASES

Abitron Austria GmbH v. Hetronic Int’l, Inc.,

600 U.S. 412 (2023)........................................... 19

Absolute Activist Value

Master Fund Ltd. v. Ficeto,

677 F.3d 60 (2d Cir. 2012) ...........................20, 27

Cedeño v. Intech Grp., Inc.,

733 F. Supp. 2d 471 (S.D.N.Y. 2010) ............... 23

Choi v. Tower Research Cap. LLC,

890 F.3d 60 (2d Cir. 2018) ................................ 20

City of Pontiac Policemen’s & Firemen’s

Retirement Systems v. UBS AG,

752 F.3d 173 (2d Cir. 2014) .............................. 21

Fed. Hous. Fin. Agency v.

Nomura Holding Am., Inc.,

873 F.3d 85 (2d Cir. 2017) ................................ 20

Giunta v. Dingman,

893 F.3d 73 (2d Cir. 2018) ................................ 20

Hourani v. Mirtchev,

943 F. Supp. 2d 159 (D.D.C. 2013) ................... 23

IMAPizza, LLC v. At Pizza Ltd.,

334 F. Supp. 3d 95 (D.D.C. 2018),

aff’d, 965 F.3d 871 (D.C. Cir. 2020).................. 23

iii

In re Tezos Sec. Litig.,

No. 17-cv-06779-RS, 2018 WL 4293341

(N.D. Cal. Aug. 7, 2018) ............................... 27-28

Loginovskaya v. Batratchenko,

764 F.3d 266 (2d Cir. 2014) .............................. 22

Morrison v. Nat’l Australia Bank Ltd.,

561 U.S. 247 (2010).................. 2, 5, 19-24, 27, 28

Nakhid v. Am. Univ.,

No. 19-cv-3268 (APM),

2021 WL 4169355 (D.D.C. Sept. 14, 2021) ...... 24

SEC v. Balina,

No. 22-cv-00950 (DAE), 2024 WL 2332965

(W.D. Tex. May 22, 2024) ................................. 27

SEC v. Scoville,

913 F.3d 1204 (10th Cir. 2019),

cert. denied, 140 S. Ct. 483 (2019) ................... 27

Sexual Minorities Uganda v. Lively,

254 F. Supp. 3d 262 (D. Mass. 2017) ............... 23

Sonterra Capital Master Fund Ltd. v.

Credit Suisse Grp. AG,

277 F. Supp. 3d 521 (2017) ............................... 23

United States v. Vilar,

729 F.3d 62 (2d Cir. 2013) ................................ 20

Williams v. Block One,

No. 20-cv-2809 (LAK), 2022 WL 5294189

(S.D.N.Y. Aug. 15, 2022)................................... 27

STATUTES AND RULES

15 U.S.C. § 77 ......................................................... 19

15 U.S.C. § 78 ......................................................... 19

42 U.S.C. § 1981 ..................................................... 24

OTHER AUTHORITIES

Bitcoin ETFs List, VettaFi (Oct. 24, 2024),

https://etfdb.com/themes/bitcoin-etfs/ ......... 14-15

Ryan Browne, UK Confirms Plans to

Regulate Crypto Industry with Formal

Legislation, CNBC (Oct. 30, 2023),

https://www.cnbc.com/2023/10/30/ukconfirms-plans-to-regulate-cryptoindustry-with-formal-legislation.html ............. 17

Businesswire, Citi Develops New Digital

Asset Capabilities for Institutional Clients

(Sept. 18, 2023),

https://www.businesswire.com/news/home/

20230918024720/en/Citi-Develops-NewDigital-Asset-Capabilities-forInstitutional-Clients .................................... 15-16

Alfredo Collosa, How Global Tax

Administrations Are Using

Blockchain Technology, Bloomberg

Tax (Mar. 17, 2022),

https://news.bloombergtax.com/daily-taxreport-international/how-global-taxadministrations-are-using-blockchaintechnology ......................................................... 18

Brian Daigle, Data Centers Around

the World: A Quick Look, United

States International Trade

Commission (May 2021),

https://www.usitc.gov/publications/332/exe

cutive_briefings/ebot_data_centers_around

_the_world.pdf ................................................ 7, 8

Ethereum ETFs List, VettaFi,

https://etfdb.com/themes/ethereum-etfs/

(last visited Oct. 24, 2024) ........................... 14-15

Andrew Hayward, Andreessen-Backed

Helium Raises $111 Million to Grow

Crypto Wireless Network, Decrypt

(Aug. 10, 2021),

https://decrypt.co/78222/andreessenbacked-helium-raises-111-million-to-growcrypto-wireless-network ................................... 17

Ian Holtz, et al., Blockchain Node

Deployment on AWS: A Comprehensive

Guide, AWS Database Blog

(Apr. 29, 2024),

https://aws.amazon.com/blogs/

database/blockchain-node-deployment-onaws-a-comprehensive-guide/ ............................ 11

Miles Jennings, Why Decentralization

Matters, for Builders, a16zcrypto

(June 24, 2024),

https://a16zcrypto.com/posts/article/whydecentralization-matters-builders/ .................. 10

Chris Katje, AMC To Accept Bitcoin and

Crypto For Payment, Are NFT

Commemorative Tickets Next?,

yahoo!finance (Sept. 19, 2021),

https://finance.yahoo.com/news/amcaccept-bitcoin-crypto-payment205509000.html ................................................ 16

Oliver Knight, Google Partners

With Coinbase to Accept Crypto

Payments for Cloud Services,

yahoo!finance (Oct. 11, 2022),

https://ca.finance.yahoo.com/news/googlepartners-coinbase-accept-crypto121803385.html ................................................ 16

Oliver Knight, Wall Street Giant DTCC

Launches Private Blockchain in Big

Crypto-Milestone for TradFi, CoinDesk

(Aug. 22, 2022),

https://www.coindesk.com/business/2022/0

8/22/wall-streets-dtcc-launches-privateblockchain-platform-to-settle-trades ............... 15

Max (Chong) Li, Why Blockchain is

Necessary in Decentralized Clouds,

Forbes (Sept. 30, 2023),

https://www.forbes.com/sites/digitalassets/2023/09/30/why-blockchain-isnecessary-in-decentralized-clouds/ .................. 16

vii

Lyllah Ledesma, A $1.4T Financial Giant

Expands Its Money Market Fund on

Polygon, CoinDesk (Apr. 26, 2023),

https://www.coindesk.com/business/2023/0

4/26/a-14t-financial-giant-expands-itsmoney-market-fund-on-polygon ....................... 14

Darob Malek-Madani, How the Internet

Works, National Real Estate Advisors

(Jan. 2021), https://natadvisors.com/wpcontent/uploads/2019/08/How-TheInternet-Works-Whitepaper-Final.pdf .......... 5, 6

Angelica Mari, Brazil Develops Blockchain

Network to Support ID Rollout,

Forbes (Sept. 28, 2023),

https://www.forbes.com/sites/angelicamari

deoliveira/2023/09/27/brazil-developsblockchain-network-to-support-id-rollout/ ....... 18

Dillin Massand, Dubai: Launching a Crypto

Regulatory Arm to Become a Global

Financial Power, CoinDesk

(June 27, 2023),

https://www.coindesk.com/consensusmagazine/2023/06/27/dubai-launching-acrypto-regulatory-arm-to-become-a-globalfinancial-power/ ................................................ 17

Dora Mekouar, Here’s Where the Internet

Actually Lives, VOA (Feb. 17, 2020),

https://www.voanews.com/a/usa_all-aboutamerica_heres-where-internet-actuallylives/6184090.html/............................................. 8

viii

John Minnix, 115 Data Center Stats You

Should Know in 2024, Brightlio (Apr. 22,

2024), https://brightlio.com/data-centerstats/ ................................................................. 7-8

Danny Park, South Korea’s Inaugural Crypto

Law Goes Into Full Effect, The Block (July

19, 2024), https://tinyurl.com/yjrnbkpj ............ 18

Emily Parker, How Japan Is Leading the

Race to Regulate Stablecoins, CoinDesk

(Oct. 25, 2023),

https://tinyurl.com/5ev34sth ............................ 18

PayPal Users Can Now Transfer, Send, and

Receive Bitcoin, Ethereum, Bitcoin Cash,

and Litecoin, PayPal (Aug. 12, 2022),

https://newsroom.paypal-corp.com/202206-07-PayPal-Users-Can-Now-TransferSend-and-Receive-Bitcoin-EthereumBitcoin-Cash-and-Litecoin ................................ 15

Ezra Reguerra, Swiss Bank UBS Launches

Tokenized Money Market Fund on

Ethereum, Cointelegraph (Oct. 2, 2023),

https://cointelegraph.com/news/ethereumubs-tokenize-money-market-fund-launch........ 14

Katherine Ross & Jack Kubinec, Hong Kong

to Create Regulatory Regime for

Stablecoin Issuers, Blockworks (Dec. 27,

2023), https://blockworks.co/news/hongkong-stablecoin-regulation ............................... 18

Niamh Rowe, Hamilton Lane Becomes First

Asset Manager to Launch a Fund on

Solana Blockchain, yahoo!finance

(July 23, 2024),

https://ca.finance.yahoo.com/news/hamilto

n-lane-becomes-first-asset100000656.html ................................................ 15

Krisztian Sandor, BlackRock’s BUIDL

Becomes Largest Tokenized Treasury

Fund Hitting $375M, Toppling Franklin

Templeton’s, CoinDesk (Apr. 30, 2024),

https://www.coindesk.com/markets/2024/0

4/30/blackrocks-buidl-becomes-largesttokenized-treasury-fund-hitting-375mtoppling-franklin-templetons/ .......................... 14

Jack Schickler, MiCA, EU’s Comprehensive

New Crypto Regulation, Explained,

CoinDesk (Sept. 7, 2023),

https://www.coindesk.com/learn/mica-euscomprehensive-new-crypto-regulationexplained ........................................................... 17

Andrey Sergeenkov, China Bets on Massive

Blockchain Infrastructure, Forbes

(Oct. 10, 2024),

https://www.forbes.com/sites/digitalassets/2024/10/08/china-bets-on-massiveblockchain-infrastructure/ ................................ 17

Rus Shuler, How Does the Internet Work,

Pomeroy IT Solutions (2002),

https://web.stanford.edu/

class/msande91si/wwwspr04/readings/week1/

InternetWhitepaper.htm .................................... 6

Miranda S. Spivack, More Data in the Cloud

Means More Centers on the Ground to

Move It, N.Y. Times (June 27, 2023),

https://www.nytimes.com/2023/06/27/busin

ess/data-centers-internet-infrastructuredevelopment.html ........................................... 7, 8

Samyuktha Sriram, Customers Can Reload

Starbucks Card With Bitcoin and

Ethereum As Coffeehouse Explores

‘Tokenizing Stars,’ yahoo!finance

(Nov. 11, 2021),

https://finance.yahoo.com/news/customersreload-starbucks-card-bitcoin154130368.html ................................................ 16

Stanford Engineering Center for Global &

Online Education, How Does Blockchain

Work?, https://online.stanford.edu/howdoes-blockchain-work

(last visited Oct. 24, 2024) ............................. 9-11

Franklin Templeton, Franklin Templeton

Announces Availability of Peer-to-Peer

Transfers for Franklin OnChain U.S.

Government Money Fund (Apr. 25, 2024),

https://www.franklintempleton.com/pressreleases/news-room/2024/franklintempleton-announces-availability-of-peerto-peer-transfers-for-franklin-onchain-u.s.government-money-fund .................................. 14

The Value Prop, Polygon,

https://thevalueprop.io/

(last visited Oct. 24, 2024) ................................ 13

Andrew Torba, I Bought Subway with

Bitcoin and it was Awesome, Coindesk

(April 9, 2024),

https://www.coindesk.com/business/2013/1

1/22/i-bought-subway-with-bitcoin-and-itwas-awesome/ ................................................... 16

Zoltan Vardai, Ethereum Validators up 30%

in a Year, Driven by Institutional

Adoption, Cointelegraph (Oct. 16. 2024),

https://cointelegraph.com/news/ethereumvalidators-up-30-year-institutionaladoption............................................................. 11

Virtual Asset (Service Providers) Act (2022

Revision), (Jan. 31, 2022) (Cayman Is.),

https://tinyurl.com/3x7e97cb ............................ 18

xii

Sebastian Widmann, How The UAE Became a

Crypto Hub Poised for Explosive Growth,

Forbes (Nov. 16, 2023),

https://www.forbes.com/sites/digitalassets/2023/11/16/how-the-uae-became-acrypto-hub-poised-for-explosive-growth........... 17

Jeff Wilser, Zug: Where Ethereum was Born

and Crypto Goes to Grow Up, CoinDesk

(June 27, 2023),

https://tinyurl.com/yc7nemby ........................... 17

Mehnaz Yasmin and Saeed Azhar, BNY

Mellon to Offer Crypto Services in Digital

Asset Push, yahoo!finance (Oct. 11, 2022),

https://finance.yahoo.com/news/bnymellon-offer-crypto-services143413827.html ................................................ 15

INTEREST OF AMICUS CURIAE 1

__________________

The Crypto Council for Innovation (“CCI”) is the

premier global alliance of industry leaders with a

mission to communicate the opportunities presented

by blockchain technology and digital assets and

demonstrate their transformational potential.

Indeed, blockchain technology serves as the

infrastructure for a new generation of the internet.

CCI’s members, which include leading global

companies and investors in the industry, share the

goal of encouraging responsible global regulation of

blockchain technology to unlock economic potential,

improve lives, foster financial inclusion, protect

national security, and combat illicit activity. CCI

believes that achieving these goals requires

informed, evidence-based policy decisions realized

through collaborative engagement with regulators

and industry.

CCI’s particular interest in this case arises

because the Second Circuit held, in part, that

components of internet infrastructure—specifically,

servers on which transactions “matched”—were

located in the United States, factoring into making

those transactions “domestic” for purposes of

No counsel for either party authored this brief in whole or

in part, nor did any party or other person or entity other than

amicus curiae, its members, or its counsel make a monetary

contribution to the brief’s preparation or submission. Counsel

of record for all parties received notice at least ten days prior

to the due date of the intention of amicus curiae to file this

brief.

determining territoriality. Pet’r’s App. 12a. CCI

respectfully disagrees with that notion, for legal,

technological, and policy reasons. Were that Second

Circuit holding to stand, the doctrine set forth in

Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247

(2010) would be eviscerated, leading to devastating

consequences for the blockchain industry, an array

of other American businesses, and foundational

principles of comity.

SUMMARY OF ARGUMENT

The Second Circuit improperly considered the

geographical location of internet infrastructure in

its decision that certain transactions were not

sufficiently “extraterritorial” to be outside the scope

of the relevant federal statutes. In particular, the

Second Circuit held that internet transactions

allegedly passed through servers in California, and

that digital data was allegedly stored on servers in

California. Pet’r’s App. 15a. As a result, the Second

Circuit held that the extraterritoriality doctrine

voiced in Morrison was inapplicable. In doing so, the

Second Circuit erred.

For the internet to work, most of it has to be

invisible. When a user sends an email, or buys a

book from an online bookstore, or comments on a

news article, data signals sent by the user pass

through an array of internet infrastructure—local

servers, intermediary servers, remote servers,

internet service providers, routers, data centers, and

the many other pieces of internet architecture

required to make it all work. Thanks to the miracles

of modern engineering, those pieces of physical

infrastructure can be located anywhere. A user in

Washington, D.C. can place an online order for a

book from a Parisian bookstore, and that “buy”

signal may be routed through internet providers in

Virginia, Pennsylvania, and New Jersey, servers in

California, relayers in Canada, Iceland, and the

U.K., to the bookstore in France, who “settles” that

transaction on a server in Germany and on the

servers of a book-shipper in Ireland, before routing

confirmation signals back in the same way (or a

different way)—all within a few hundred

milliseconds.

Most users, most of the time, care about none of

that. Nor should they. Users have little choice what

internet infrastructure is used, or where. And a

world where users had to care about each of those

steps—and consider whether they were subjecting

themselves to the law of each of those states or

nations—would bring the world of internet

commerce to a screeching halt.

One exciting new technology revolutionizing

internet infrastructure is blockchain technology,

which has seen a meteoric rise in usage in the last

decade due to its increased cybersecurity, efficiency,

and resilience. But that technology relies on an even

more complex tangle of its own infrastructural

geography. A blockchain functions by recording

every transaction on that blockchain on every “node”

in the chain, which is the source of its increased

resilience—if one node fails, all other nodes provide

redundancy, and the chain’s records are unaffected.

A blockchain is analogous to a global public

computer and database, operated and maintained by

all of the nodes.

But those nodes, and the

“validators” who verify transactions on the

blockchain, can be located anywhere in the world.

The Ethereum blockchain (one of the largest) has

over 6,300 nodes all over the world, meaning that

any Ethereum blockchain transaction will “settle”

on servers in the U.S., Germany, Canada, the U.K.,

France, South Korea, Singapore, the Netherlands,

Australia, and many other countries.

Users do not need to care about that geographical

quirk either—as far as users are concerned, it is all

“back-office” internet infrastructure.

If the

“location” of a blockchain transaction triggered the

applicability of law and jurisdiction of any and all

countries where blockchain transactions settle, then

every user could be affected by the laws of dozens of

countries, and even different states within those

countries, for every transaction.

The Second Circuit erred in considering backoffice internet infrastructure, such as the location of

Amazon Web Services (“AWS”) servers, as a factor to

judge whether the extraterritoriality doctrine

should apply. That result, if sustained, would

seriously impair American internet infrastructure

business, causing it to move offshore (with many

attendant disadvantages for Americans and U.S.

law enforcement). It would also corrode the doctrine

of comity, placing Americans at risk of being sued in

foreign countries for using internet infrastructure

that touches foreign nations. It further would risk

foreigners suing foreign companies in U.S. courts,

causing judicial overload. Given the global primacy

of American internet infrastructure, it is rare that

internet transactions do not touch internet

infrastructure in the U.S. at some point. If that fact

potentially subjected transactions anywhere in the

world to litigation in the U.S., the result would moot

Morrison, devastate the blockchain industry,

negatively affect a host of other federal laws beyond

blockchains and digital assets, and cast shadows

over the doctrine of comity. The Second Circuit

decision

directly

challenges

this

Court’s

extraterritoriality holdings, and this Court should

grant certiorari in this clean vehicle to reverse the

Second Circuit’s decision.

STATEMENT OF FACTS

HOW INTERNET TRANSACTIONS WORK

Internet transactions transmit data through a

complex array of internet infrastructure. When a

user initiates an internet transaction, the user’s

request emanates from that user’s device, and is

broken down into smaller data packets that travel

through the user’s Internet Service Provider (“ISP”)

network. 2 The data packets then travel through the

See Darob Malek-Madani, How the Internet Works,

National Real Estate Advisors (Jan. 2021), at 4,

https://natadvisors.com/wp-content/uploads/2019/08/How-TheInternet-Works-Whitepaper-Final.pdf. ISPs are “networks

which provide users access to the broader internet.” Id. They

are “typically owned and operated by … large telecom

companies,” such as Verizon or Comcast. Id.

internet backbone—the core infrastructure of the

internet, consisting of a global system of

interconnected networks. 3 The data will eventually

reach its destination server, which will process the

request and send back its response to the user's

device. 4 Both ways, the data travels through a

complex network of several routers, servers, and

switches located in various data centers, and may

pass through firewall appliances and proxy

gateways, among other applications, many of which

can be geographically dispersed.

This underlying infrastructure is essentially

invisible to users who send emails, access websites,

and complete online purchases without any

consideration of the many components involved.

The invisibility of the internet’s complex

infrastructure is integral to its success. Users can

focus on the content of whatever web page or

application they are using without being distracted

by the complex network of cables, routers, servers,

See Rus Shuler, How Does the Internet Work, Pomeroy IT

Solutions

(2002),

https://web.stanford.edu/class/msande91si/wwwspr04/readings/week1/InternetWhitepaper.htm. A router is a

networking device, “operat[ing] as a switch at the intersections

of networks,” that directs packets of data between networks on

the way to their destination. Malek-Madani, supra at 5. A

server is a “computer which provides services to other

computers on a network,” such as a “computer where a website

is located.” Id. Servers are often housed in large data centers,

spaces “dedicated to housing computer systems or

telecommunications infrastructure.” Id.

Id. at 4.

and networks that enable their transactions.

Without having to understand the internet’s

underlying technical complexities, the internet can

be accessible to a wide audience of ages and

technical proficiencies. Internet infrastructure, at

its best, makes internet transactions seem simple,

immediate, and reliable, fostering user confidence

and encouraging widespread adoption of globally

transformative internet technologies. Ultimately,

the hidden nature of the internet’s inner workings is

crucial to its value—the ability to provide instant

and seamless access to vast amounts of information

and services worldwide, with little effort or technical

knowledge required.

For all users might know, the infrastructural

components involved in their online transactions

could be physically located anywhere in the world.

However, data is especially likely to pass through

servers in the U.S., due to the concentration of major

technology companies and infrastructure here. The

U.S. has, by far, the most data centers in the world. 5

See Brian Daigle, Data Centers Around the World: A Quick

Look, United States International Trade Commission (May

2021),

https://www.usitc.gov/publications/332/executive_briefings/eb

ot_data_centers_around_the_world.pdf (over 2,600 data

centers in the U.S. in 2021, with the U.S. housing 33% of the

world’s data centers); Miranda S. Spivack, More Data in the

Cloud Means More Centers on the Ground to Move It, N.Y.

Times

(June

27,

2023)

https://www.nytimes.com/2023/06/27/business/data-centersinternet-infrastructure-development.html (2,701 data centers

in the U.S. in 2022 with Germany in a “distant second”); John

Minnix, 115 Data Center Stats You Should Know in 2024,

Brightlio (Apr. 22, 2024, https://brightlio.com/data-center-

Many of the world’s largest “data producing and

data consuming” companies, such as Google,

Amazon, Meta, and Microsoft, are based in the U.S.

and maintain data centers here. 6 Up to 70% of the

world’s internet traffic passes through servers in

data centers in Northern Virginia, in the town of

Ashburn, in Loudoun County—referred to as “Data

Center Alley.” 7 “Pretty much any email sent or

received anywhere around the globe, comes through

this town. If you’ve got something stored in the

cloud, it’s probably in one of the 100-plus data

centers located in Loudoun County.” 8 A “similar

hub lies near Silicon Valley” in California, and

ultimately, “[a] majority of the world’s internet

traffic flows through the sites in these two regions,

which function as crucial internet conveyor belts.”9

Internet users almost never have knowledge or

control over where their data is geographically

located, or the physical locations of the servers and

routers that carry the signals they send. The

internet only works because most people don’t have

to know or care how it works.

stats/ (5,388 data centers in the U.S. in 2024 based on various

sources).

Daigle, supra.

Dora Mekouar, Here’s Where the Internet Actually Lives,

VOA (Feb. 17, 2020), https://www.voanews.com/a/usa_allabout-america_heres-where-internet-actuallylives/6184090.html/.

Id.

Spivack, supra.

II.

HOW BLOCKCHAIN TRANSACTIONS WORK

The description of the internet set forth above is

the internet commonly used today to send emails,

order books online, order food delivery, or access

social media websites. Most of the companies that

provide these services—Google for email, Amazon

for books, Seamless for food delivery, Meta or Reddit

for social media—are centralized companies that

conduct their internet transactions on servers of

their choosing. They may not choose all the routers

or servers in the network chains between the

companies and their users, but they have some

control.

Blockchain-based architecture works differently.

Blockchains are the new internet infrastructure;

they are blocks of data that are linked into a digital

chain. Each “block” is a ledger that is updated and

added to with permanently recorded data. This

information is stored in a distributed or

“decentralized” system, where each block’s data is

confirmable by every participating computer on that

blockchain network. 10

There is no centralized control over a blockchain.

Rather, copies of all information and transactions on

a blockchain are distributed across the blockchain

network. When a transaction is added to this

system, sometimes called a “distributed ledger,” it is

See Stanford Engineering Center for Global & Online

How

Does

Blockchain

Work?,

Education,

https://online.stanford.edu/how-does-blockchain-work

(last

visited Oct. 24, 2024).

synced with every node of the blockchain, regardless

of the physical geography of those nodes.11

No one entity, organization, person, or group of

persons is necessary to operate a blockchain, or to

facilitate or allow access to users interacting directly

with the blockchain. While some companies may use

private blockchains that they entirely control, most

public blockchains operate autonomously, i.e., no

people or entities need to coordinate consciously for

them to run, and “permissionlessly,” i.e., no one

needs authorization to interact with the blockchain

directly. 12

The decentralized nature of blockchain

technology also has promoted competition within the

various layers of internet infrastructure. Due to the

lower barriers to entry associated with blockchain

technology, a wider and more diverse array of

developers can build internet products and

services. 13

A blockchain has different types of “nodes,”

typically computers or devices, that participate to

perform different functions. Two common types are

“validator” or “miner” nodes, which help secure and

process the transactions on a blockchain. In a proof11

Id.

See Miles Jennings, Why Decentralization Matters, for

a16zcrypto

(June

24,

2024),

Builders,

https://a16zcrypto.com/posts/article/why-decentralizationmatters-builders/.

of-work consensus process (such as for the Bitcoin

blockchain), miners complete a mathematical

puzzle, which adds blocks to the chain and mines

new coins. In a proof-of-stake consensus mechanism

(such as for the modern Ethereum blockchain),

nodes in a blockchain network use an algorithm to

agree on the next valid block of transactions that

will be added to the blockchain. 14

A validator is a participant in a proof-of-stake

blockchain running a computer that verifies the

transactions on the network. To become a validator,

a network participant can choose to “stake” (or “put

up”) a specific amount of the network’s native token,

but no agreement or permission is required for a

participant to become a validator in a proof-of-stake

blockchain.

Blockchain networks can have

hundreds or thousands of nodes. The Ethereum

blockchain, for example, has over one million

validators. 15 The validator nodes across the full

blockchain industry span the globe, and for the most

part, they do not coordinate, work together, or even

know each other. Indeed, anyone can undertake

blockchain node deployment, on their own or

through commercially-available services. 16 The

How Does Blockchain Work?, supra.

Zoltan Vardai, Ethereum Validators up 30% in a Year,

Driven by Institutional Adoption, Cointelegraph (Oct. 16.

2024),

https://cointelegraph.com/news/ethereum-validatorsup-30-year-institutional-adoption.

See, e.g., Ian Holtz, et al., Blockchain Node Deployment on

AWS: A Comprehensive Guide, AWS Database Blog (Apr. 29,

2024),

https://aws.amazon.com/blogs/database/blockchainnode-deployment-on-aws-a-comprehensive-guide/.

widespread deployment of nodes around the world

has numerous benefits: enhancing the resiliency

and security of networks, maintaining integrity by

allowing for independent verification of blockchain

transactions, preventing a single “point of failure” in

the event of an outage in one area, and promoting

transparency because validators can verify

transactions from a node anywhere.

Due to the dispersed nature of blockchains and

the large number of nodes it takes to operate them,

knowing where all the nodes on a particular chain

are physically located is difficult, and sometimes

impossible. Most users of a blockchain network, as

well as users of applications or networks that are

built and operate on top of blockchain networks, do

not and cannot know where any given node is

located, much less all the nodes. It would be nearly

impossible to know in advance which of the

hundreds or thousands of validators on a blockchain

network would be the requisite “majority” that

validated a particular transaction at a particular

time.

Luckily, knowing where nodes are located is

irrelevant—users do not need to know or understand

where nodes are located to use or participate in a

blockchain network, much in the same way that

typical internet users do not need to know or

understand internet infrastructure, or where

servers are located, to access the internet

seamlessly. For the average user, the invisibility of

blockchain architecture resembles the invisibility of

other modern internet architecture. The fact that

users do not care about (and are unaware of) the

location of nodes underscores the error in the Second

Circuit’s decision and the dangerous consequences

resulting therefrom.

III.

USE CASES OF BLOCKCHAIN INFRASTRUCTURE

Due to the dispersed nature of the nodes that

secure a blockchain, and the distributed ledger that

records data immutably, blockchain infrastructure

carries strong advantages for cybersecurity,

transparency,

traceability,

automation,

and

recordkeeping. When hundreds or thousands of

computers across the globe are securing the data

separately, tampering with a blockchain is much

more difficult—there is no one “point of failure” that

can destroy an entire network, and by creating

records that cannot be altered (and can be

encrypted), blockchain technology can help prevent

fraud. It is no surprise that blockchain networks are

rising as back-office technology, both in “private

blockchains” (controlled entirely by one party or a

limited number of parties), or “public blockchains”

(open for anyone in the world to use without any

permission). 17

Companies and even countries around the globe

integrate and rely on blockchain infrastructure to

capitalize on the benefits of decentralization, such as

See

generally

The

Value

Prop,

Polygon,

https://thevalueprop.io/ (last visited Oct. 24, 2024).

TheValueProp is an internet database that features numerous

blockchain use cases across many verticals, including

sustainability, humanitarian work, education, and others.

the ease of access and permissionless nature of the

underlying technology.

These benefits are illustrated by the many

traditional finance companies moving into

blockchain. For example, Franklin Templeton offers

a tokenized money market fund that uses a public

blockchain to process transactions and record share

ownership, 18 and announced that shares of the fund

can be transferred on a blockchain. 19 BlackRock and

UBS offer tokenized money market funds on

Ethereum. 20 Multiple traditional finance firms offer

Bitcoin and Ethereum “exchange traded products.” 21

Lyllah Ledesma, A $1.4T Financial Giant Expands Its

Money Market Fund on Polygon, CoinDesk (Apr. 26, 2023),

https://www.coindesk.com/business/2023/04/26/a-14tfinancial-giant-expands-its-money-market-fund-on-polygon.

Franklin Templeton, Franklin Templeton Announces

Availability of Peer-to-Peer Transfers for Franklin OnChain

U.S. Government Money Fund (Apr. 25, 2024),

https://www.franklintempleton.com/press-releases/newsroom/2024/franklin-templeton-announces-availability-of-peerto-peer-transfers-for-franklin-onchain-u.s.-governmentmoney-fund.

Krisztian Sandor, BlackRock’s BUIDL Becomes Largest

Tokenized Treasury Fund Hitting $375M, Toppling Franklin

CoinDesk

(Apr.

30,

2024),

Templeton’s,

https://www.coindesk.com/markets/2024/04/30/blackrocksbuidl-becomes-largest-tokenized-treasury-fund-hitting-375mtoppling-franklin-templetons/; Ezra Reguerra, Swiss Bank

UBS Launches Tokenized Money Market Fund on Ethereum,

Cointelegraph

(Oct.

2023),

https://cointelegraph.com/news/ethereum-ubs-tokenizemoney-market-fund-launch.

Bitcoin ETFs List, VettaFi (Oct. 24, 2024),

https://etfdb.com/themes/bitcoin-etfs/; Ethereum ETFs List,

Hamilton Lane launched a private credit fund on the

Solana blockchain. 22 PayPal permits users to

transfer cryptocurrency to other users. 23 BNY

Mellon announced that it would accept

cryptocurrency deposits from retail users, just like it

accepts fiat currency. 24 Traditional finance firms

are also experimenting with private blockchains,

further cementing the practical use of blockchain

technology. 25

VettaFi, https://etfdb.com/themes/ethereum-etfs/ (last visited

Oct. 24, 2024).

Niamh Rowe, Hamilton Lane Becomes First Asset

to Launch a Fund on Solana Blockchain,

yahoo!finance

(July

23,

2024),

https://ca.finance.yahoo.com/news/hamilton-lane-becomesfirst-asset-100000656.html.

Manager

PayPal Users Can Now Transfer, Send, and Receive

Bitcoin, Ethereum, Bitcoin Cash, and Litecoin, PayPal (Aug.

12,

2022),

https://newsroom.paypal-corp.com/2022-06-07PayPal-Users-Can-Now-Transfer-Send-and-Receive-BitcoinEthereum-Bitcoin-Cash-and-Litecoin.

Mehnaz Yasmin and Saeed Azhar, BNY Mellon to Offer

Crypto Services in Digital Asset Push, yahoo!finance (Oct. 11,

2022),

https://finance.yahoo.com/news/bny-mellon-offercrypto-services-143413827.html.

See Oliver Knight, Wall Street Giant DTCC Launches

Private Blockchain in Big Crypto-Milestone for TradFi,

CoinDesk

(Aug.

22,

2022),

https://www.coindesk.com/business/2022/08/22/wall-streetsdtcc-launches-private-blockchain-platform-to-settle-trades

(DTCC is testing the use of a private blockchain for settlement

and clearing); Businesswire, Citi Develops New Digital Asset

Capabilities for Institutional Clients (Sept. 18, 2023),

https://www.businesswire.com/news/home/20230918024720/e

n/Citi-Develops-New-Digital-Asset-Capabilities-forInstitutional-Clients (Citibank is offering “blockchain and

Many non-financial companies are also using

blockchain technologies, including Google, 26 AMC

Theatres, 27 Subway, 28 and Starbucks. 29 Blockchain

infrastructure is being used to build decentralized

online cloud storage, and is considered a pivotal

network feature because servers are managed by

independent and diverse entities across the world. 30

Decentralized blockchain-based networks are using

smart contract technologies to deliver digital asset solutions for

institutional clients”).

Oliver Knight, Google Partners With Coinbase to Accept

Crypto Payments for Cloud Services, yahoo!finance (Oct. 11,

2022),

https://ca.finance.yahoo.com/news/google-partnerscoinbase-accept-crypto-121803385.html.

Chris Katje, AMC To Accept Bitcoin and Crypto For

Payment, Are NFT Commemorative Tickets Next?,

yahoo!finance

(Sept.

19,

2021),

https://finance.yahoo.com/news/amc-accept-bitcoin-cryptopayment-205509000.html.

Andrew Torba, I Bought Subway with Bitcoin and it was

Coindesk

(April

2024),

https://www.coindesk.com/business/2013/11/22/i-boughtsubway-with-bitcoin-and-it-was-awesome/.

Awesome,

Samyuktha Sriram, Customers Can Reload Starbucks

Card With Bitcoin and Ethereum As Coffeehouse Explores

‘Tokenizing Stars,’ yahoo!finance (Nov. 11, 2021),

https://finance.yahoo.com/news/customers-reload-starbuckscard-bitcoin-154130368.html.

Max (Chong) Li, Why Blockchain is Necessary in

Forbes

(Sept.

30,

2023),

Clouds,

https://www.forbes.com/sites/digital-assets/2023/09/30/whyblockchain-is-necessary-in-decentralized-clouds/.

Decentralized

nodes as hotspots to connect wireless devices to the

internet. 31

Other countries have recognized the importance

of blockchain infrastructure. 32 Many countries are

promulgating relevant regulatory frameworks,

including (among others) the European Union, the

U.K., Switzerland, the United Arab Emirates, Hong

Kong, Singapore, Japan, South Korea, the Cayman

Islands, and the British Virgin Islands. 33 Finland’s

Andrew Hayward, Andreessen-Backed Helium Raises

$111 Million to Grow Crypto Wireless Network, Decrypt (Aug.

10, 2021), https://decrypt.co/78222/andreessen-backed-heliumraises-111-million-to-grow-crypto-wireless-network.

Andrey Sergeenkov, China Bets on Massive Blockchain

Forbes

(Oct.

10,

2024),

https://www.forbes.com/sites/digital-assets/2024/10/08/chinabets-on-massive-blockchain-infrastructure/.

Infrastructure,

See Jack Schickler, MiCA, EU’s Comprehensive New

Crypto Regulation, Explained, CoinDesk (Sept. 7, 2023),

https://www.coindesk.com/learn/mica-eus-comprehensivenew-crypto-regulation-explained; Ryan Browne, UK Confirms

Plans to Regulate Crypto Industry with Formal Legislation,

CNBC (Oct. 30, 2023), https://www.cnbc.com/2023/10/30/ukconfirms-plans-to-regulate-crypto-industry-with-formallegislation.html; Jeff Wilser, Zug: Where Ethereum was Born

and Crypto Goes to Grow Up, CoinDesk (June 27, 2023),

Dubai:

https://tinyurl.com/yc7nemby;

Dillin

Massand,

Launching a Crypto Regulatory Arm to Become a Global

CoinDesk

(June

27,

2023),

Financial

Power,

https://www.coindesk.com/consensusmagazine/2023/06/27/dubai-launching-a-crypto-regulatoryarm-to-become-a-global-financial-power/; Sebastian Widmann,

How The UAE Became a Crypto Hub Poised for Explosive

Forbes

(Nov.

16,

2023),

Growth,

https://www.forbes.com/sites/digital-assets/2023/11/16/howthe-uae-became-a-crypto-hub-poised-for-explosive-growth;

tax administration has begun integrating

blockchain to track real estate transactions. 34

Brazil developed a blockchain network to increase

security around data sharing as it implements a new

national identity card. 35

These examples—particularly those using public

blockchains—demonstrate the use of blockchain

networks that automatically rely on nodes around

the globe, without any one or any company verifying

where the nodes are for the businesses or initiatives

to operate. If companies had to identify where nodes

that verify transactions are located, for the purpose

of assessing their jurisdictional reach and perhaps

even to “opt out” of specific jurisdictions’ bodies of

law—even if that were possible—it would derail not

Katherine Ross & Jack Kubinec, Hong Kong to Create

Regulatory Regime for Stablecoin Issuers, Blockworks (Dec.

27, 2023), https://blockworks.co/news/hong-kong-stablecoinregulation; Emily Parker, How Japan Is Leading the Race to

CoinDesk

(Oct.

25,

2023),

Regulate

Stablecoins,

https://tinyurl.com/5ev34sth; Danny Park, South Korea’s

Inaugural Crypto Law Goes Into Full Effect, The Block (July

19, 2024), https://tinyurl.com/yjrnbkpj; Virtual Asset (Service

Providers) Act (2022 Revision), (Jan. 31, 2022) (Cayman Is.),

https://tinyurl.com/3x7e97cb.

Alfredo Collosa, How Global Tax Administrations Are

Using Blockchain Technology, Bloomberg Tax (Mar. 17, 2022),

https://news.bloombergtax.com/daily-tax-reportinternational/how-global-tax-administrations-are-usingblockchain-technology.

Angelica Mari, Brazil Develops Blockchain Network to

Forbes

(Sept.

28,

2023),

Rollout,

https://www.forbes.com/sites/angelicamarideoliveira/2023/09/2

7/brazil-develops-blockchain-network-to-support-id-rollout/.

Support

just U.S.-based blockchain infrastructure, but entire

businesses and business initiatives.

ARGUMENT

THE SECOND CIRCUIT’S DECISION IS AT ODDS

WITH MORRISON’S TEACHINGS IN THE

CONTEXT OF THE SECURITIES ACT AND

EXCHANGE ACT

The Second Circuit’s holding in this case

implicates the Securities Act of 1933 (15 U.S.C. § 77)

and the Securities Exchange Act of 1934 (15 U.S.C.

§ 78). These statutes animated the Morrison

decision in the first place, as this Court was wary of

allowing U.S. courts to become “the Shangri-La of

class action litigation for lawyers representing those

allegedly cheated in foreign securities markets.” 561

U.S. at 270.

The Second Circuit’s decision ignores the

teaching of Morrison. Using internet infrastructure,

over which users would have no choice or control,

would reduce the doctrine of extraterritoriality to (as

this Court described it) a “muzzled Chihuahua.”

Abitron Austria GmbH v. Hetronic Int’l, Inc., 600

U.S. 412, 426 (2023).

Long gone are the days of open-outcry trading

pits on the floor of the New York Stock Exchange. In

the modern financial world, virtually all securities

transactions take place over the internet, and orders

are routed through servers, routers, and wiring

around the world.

While the Second Circuit has wrestled with

where modern securities transactions take place, it

did not previously find the location of internet

infrastructure to be relevant. Before its decision in

this case, the Second Circuit focused on where the

human beings, not computer servers, were located.

See, e.g., Choi v. Tower Research Cap. LLC, 890 F.3d

60, 67-68 (2d Cir. 2018) (irrevocable liability

attached in the U.S. because persons directed trades

to be matched through a domestic exchange); Giunta

v. Dingman, 893 F.3d 73, 80-81 (2d Cir. 2018)

(irrevocable liability occurred in New York because

parties

met

there,

one

party

received

communications there, and funds were transferred

from there); Fed. Hous. Fin. Agency v. Nomura

Holding Am., Inc., 873 F.3d 85, 156–58 (2d Cir. 2017)

(irrevocable liability attached in D.C. and Virginia

because agency employees worked there and

received emailed offer materials there); United

States v. Vilar, 729 F.3d 62, 76–78 (2d Cir. 2013)

(irrevocable liability hinged on location where party

executed documents, and location from where money

was sent); Absolute Activist Value Master Fund Ltd.

v. Ficeto, 677 F.3d 60, 62 (2d Cir. 2012) (parties who

never resided in the U.S. and transactions not

alleged to have occurred in the U.S. not sufficiently

alleged to be domestic).

If the location of internet infrastructure were

relevant, virtually any court examining Morrison

could conclude the transaction was domestic, for the

simple fact that the U.S. is far and away the world

leader in internet infrastructure.

Securities

transactions, even between non-U.S. parties, may

easily use American internet infrastructure, without

either party even knowing it. Morrison would be

greatly diminished if “lawyers representing those

allegedly cheated in foreign securities markets”

were able to point to these intermediary

infrastructural touchpoints as grounds for the

“domesticity” of a transaction. Morrison, 561 U.S. at

270. If “the mere placement of a buy order in the

United States for the purchase of foreign securities

on a foreign exchange” was insufficient to allege that

a purchaser incurred irrevocable liability in the

U.S., City of Pontiac Policemen’s & Firemen’s

Retirement Systems v. UBS AG, 752 F.3d 173, 181

(2d Cir. 2014), then the incidental fact that the buy

order settled on a server in the U.S., unbeknownst

to that buyer, could not possibly suffice. Yet here,

the Second Circuit concluded otherwise.

This issue becomes more acute in the blockchain

transaction world, where internet infrastructure,

such as the machine where orders are matched, is

not even necessarily housed on one machine in one

location—but instead, is located on every server

node on the blockchain, everywhere around the

world. If the location of “settlement” on a blockchain

were relevant, then Morrison retreats to its kennel,

a craven watchdog, as virtually every blockchain

transaction could be said to have settled, at least in

part, on nodes located in the U.S.

Morrison

rejected the notion that all

transactions should or can feasibly be subject to

litigation in the U.S. The Second Circuit’s decision

would result in exactly that, providing a basis to

subject all securities transactions (and other conduct

potentially subject to U.S. law, see infra at Section

II) to litigation in the U.S.—a result that could

overwhelm the judicial system and undermine the

presumption against extraterritorial application of

U.S. law.

II.

THE SECOND CIRCUIT’S DECISION IMPLICATES

ALL FEDERAL LAWS

As Morrison makes clear, the doctrine of

extraterritoriality is broader than just the Securities

Act and the Exchange Act. It applies to all

“legislation of Congress.” 561 U.S. at 255 (citations

omitted). The Second Circuit improperly looked to

the location of internet infrastructure to conclude

that Morrison did not bar claims under the

Securities Act and the Exchange Act. But the

Second Circuit rule, if allowed to stand, would apply

to all federal statutes, leading to an evisceration of

the Morrison doctrine in many areas of federal law.

Internet usage is now universal, constant, and often

international, and thus is implicated in many cases,

under many different federal statutes, that might

have come out differently under the Second Circuit

rule. For example:

– In Loginovskaya v. Batratchenko, 764 F.3d

266, 271–74 (2d Cir. 2014), the Second Circuit

upheld the dismissal of a case brought under the

Commodities Exchange Act because it was based on

extraterritorial commodities transactions where the

plaintiff wired funds to a bank in New York,

necessarily implicating the banks’ internet

infrastructure in the U.S.

– In Sexual Minorities Uganda v. Lively, 254 F.

Supp. 3d 262, 268 (D. Mass. 2017), the court

dismissed a case brought under the Alien Tort

Statute on extraterritoriality grounds where the

defendant resided in the U.S. and sent emails

originating from the U.S. in connection with crimes

in Uganda. The use of internet infrastructure was

insufficient to invoke domesticity.

– In IMAPizza, LLC v. At Pizza Ltd., 334 F. Supp.

3d 95, 118 (D.D.C. 2018), aff’d 965 F.3d 871, 879

(D.C. Cir. 2020), defendant’s travel to the U.S.,

taking pictures during those visits, and downloading

“copyrighted pictures from U.S. servers” was not

sufficiently domestic activity to constitute a

violation of the Copyright Act.

– In Hourani v. Mirtchev, 943 F. Supp. 2d 159,

167 (D.D.C. 2013), Cedeño v. Intech Grp., Inc., 733

F. Supp. 2d 471, 473 (S.D.N.Y. 2010), courts

dismissed cases where money laundering through

domestic banks—necessarily implicating the banks’

internet infrastructure in the U.S.—was insufficient

to justify extraterritorial applications of the

Racketeer Influenced and Corrupt Organizations

Act (“RICO”). Similarly, in Sonterra Capital Master

Fund Ltd. v. Credit Suisse Grp. AG, 277 F. Supp. 3d

521, 581 (2017), a RICO claim was dismissed on

Morrison grounds, even though defendants

purportedly caused manipulated interest rate

information “to be published to servers in the United

States and used United States wires to memorialize

trades affected by that rate.”

– In Nakhid v. Am. Univ., No. 19-cv-3268 (APM),

2021 WL 4169355, at *6 (D.D.C. Sept. 14, 2021), the

court dismissed claims under the Civil Rights Act of

1964 and 42 U.S.C. § 1981 for being impermissibly

non-domestic, even though job descriptions were

posted online for an American University coaching

position.

As a result, the implications of the Second

Circuit’s decision are far greater than just securities

laws. The Second Circuit’s decision, if left to stand,

could be cited in cases brought under any federal

statute.

And

given

the

international

interconnectedness of internet infrastructure, with

much of it located in the U.S., Morrison would be

eviscerated.

III.

THE SECOND CIRCUIT DECISION HAMPERS

INTERNET TRANSACTIONS GENERALLY, AND

BLOCKCHAIN TRANSACTIONS IN PARTICULAR

If using U.S. internet infrastructure implicated

U.S. jurisdiction for any federal laws, beyond just

running afoul of Morrison, multiple harms would

result.

First, foreign companies, across industries,

would terminate use of U.S. internet infrastructure.

If a foreign company knew that using an American

component of internet infrastructure were sufficient

grounds to be sued in the U.S., under U.S. laws, they

would grow far more cautious about ensuring that

any internet traffic they routed, or servers they

used, were outside the U.S. American data center

companies, such as AWS, Microsoft, Google, Meta,

and many others, would lose significant business to

non-American providers (such as the U.K.’s Equinix

or Digital Realty, Japan’s NTT, China’s GDS

Holdings, or Europe’s Telehouse), as companies

outside the U.S. seek to ensure that their data never

touched the U.S. in any way. Worse, there would be

a “network effect,” as other infrastructure

companies that exclusively connect through these

American giants would have to find alternative,

foreign, providers. These impacts would severely

diminish American leadership in the internet

world—including, for example, shifting more

internet activity offshore, making it more difficult

for U.S. law enforcement to halt illicit finance and

protect American consumers.

Second, the principles of comity in the internet

era would be eroded, and U.S. citizens would be in

greater danger of being haled into foreign courts,

and subject to foreign law, because of the

happenstance of the internet infrastructure used in

their transactions. If foreign companies could be

sued in the U.S. (and under U.S. laws) just for using

American internet infrastructure, other countries

may adopt the same principles. An American

violating a Chinese law against certain types of

political speech, where that comment was housed on

a Chinese server, could be sued in China for that

action—even if the user had absolutely no idea that

the comment touched any Chinese internet

infrastructure.

The Second Circuit sought to avoid this parade of

horribles with an “exception” tailor-made to

distinguish this particular case. It reasoned that

Binance “notoriously denies the applicability of any

other country’s securities regulation regime,” so

there was no need to show comity to another

country. Pet’r’s App. 17a. The Second Circuit

allowed that its “conclusion might be different were

we faced with plaintiffs seeking to apply U.S.

securities laws based on the happenstance that a

transaction was initially processed through servers

located in the U.S. despite all parties to the

transaction understanding that they were

conducting business on a foreign-registered

exchange.” Pet’r’s App. 16a-17a.

That “exception” is not workable in typical

internet transactions, and impossible in blockchain

transactions. In a typical internet transaction, “all

parties to the transaction” would not necessarily

have any idea that they are “conducting business on

a foreign-registered exchange” (or other business).

As illustrated above, most users have little idea

where their data passes through, nor should they.

An allegation that some back-office processing

equipment happened to be in the U.S. should not be

sufficient to drag the entire matter into U.S. court

under U.S. law. After all, the relevant portion of the

Second Circuit’s decision did not focus on Binance’s

alleged conduct, so much as the geographical

location of a third party, AWS. Cf. Pet’r’s Br. 20-21.

To go a step further, any transaction processed

on a digital asset exchange is, at heart, a blockchain

transaction. Any blockchain transaction would be

processed on all of the nodes on that chain, all over

the world. Binance allegedly “matched” orders on

AWS, but to publish that transaction onto the

blockchain requires a worldwide network of

transactions, in geographic locations that would be

impossible for users to know about. If the U.S. could

exercise jurisdiction over a digital assets exchange

for using AWS, then any country in the world using

the same rule could exercise jurisdiction over an

American for using any public blockchain. Such a

rule would be offensive to comity, and destructive of

the advantages that a worldwide internet, and

worldwide blockchain accessibility, can provide. It

would risk splintering the next iterations of the

internet into national fortresses, to the poverty of

the world.

Variants of the Second Circuit’s reasoning have

already appeared in lower courts across the country.

See, e.g., SEC v. Scoville, 913 F.3d 1204, 1219 (10th

Cir. 2019), cert denied, 140 S. Ct. 483 (2019) (“We

add that the servers housing the Traffic Monsoon

website were physically located in the United

States.”); SEC v. Balina, No. 22-cv-00950 (DAE),

2024 WL 2332965, at *8 (W.D. Tex. May 22, 2024)

(use of U.S.-based social media platforms

constituted sufficient U.S. activity); Williams v.

Block One, No. 20-cv-2809 (LAK), 2022 WL 5294189,

at *7 (S.D.N.Y. Aug. 15, 2022) (“the location of the

node that verified the specific transaction at issue

should control in this circuit under Morrison’s

second prong as construed in Absolute Activist.”); In

re Tezos Sec. Litig., No. 17-cv-06779-RS, 2018 WL

4293341, at *8 (N.D. Cal. Aug. 7, 2018) (use of server

in Arizona was a factor to defeat extraterritoriality).

These cases, improperly pointing to the use of U.S.

internet infrastructure to exercise jurisdiction, will

continue to put Morrison back in its kennel, unless

stopped. 36

This case presents a remarkably clean vehicle for

the Supreme Court to put an end to the lower courts’

erosion of the Morrison doctrine, and to pave the

digital roads of the future. CCI stands for the

promotion of blockchain technology in the U.S. and

around the world. The Second Circuit’s decision

risks splintering the global nature of the internet,

and more acutely, hampering the development of the

next generation of internet-based technologies, in

turn devastating entire industries.

This issue goes beyond court decisions. Administrative

agencies use judicial precedents, especially circuit court

precedents, as leverage to negotiate settlements. Given that

far more agency actions are settled than litigated, and agencies

can bring tremendous pressure to settle, it is even more critical

to correct the Second Circuit’s error.

CONCLUSION

For the foregoing reasons, the Court should grant

the petition.

Respectfully submitted,

Jason P. Gottlieb

Counsel of Record

Daniel C. Isaacs

Michael Mix

Rachel Fleder

Vani Upadhyaya

MORRISON COHEN LLP

909 Third Avenue

New York, New York 10022

(212) 735-8600

jgottlieb@morrisoncohen.com

Counsel for Amicus Curiae

The Crypto Council for

Innovation

October 25, 2024

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.