Digital Commons Network^™

After Ftx: Can The Original Bitcoin Use Case Be Saved?, Mark Burge

Faculty Scholarship

Bitcoin and the other cryptocurrencies spawned by the innovation of blockchain programming have exploded in prominence, both in gains of massive market value and in dramatic market losses, the latter most notably seen in connection with the failure of the FTX cryptocurrency exchange in November 2022. After years of investment and speculation, however, something crucial has faded: the original use case for Bitcoin as a system of payment. Can cryptocurrency-as-a-payment-system be saved, or are day traders and speculators the actual cryptocurrency future? This article suggests that cryptocurrency has been hobbled by a lack of foundational commercial and consumer-protection law that …

Confidentiality Clauses In Settlement Agreements After The Consumer Review Fairness Act, Wayne Barnes

Faculty Scholarship

Online commerce has skyrocketed in recent years, and shoppers are purchasing goods or services online in greater numbers every year. The COVID-19 pandemic has only hastened the trend. One significant aspect of online shopping is the presence of consumer reviews posted by prior purchasers of goods or services, describing their experience with the products, the services and/or the selling merchant. A vast majority of online shoppers say that they rely on these reviews to help inform their purchasing decisions. Positive reviews can be tremendously beneficial to a business’ profitability, whereas negative reviews can be equally detrimental. Users of the internet …

Gamestopped: How Robinhood’S Gamestop Trading Halt Reveals The Complexities Of Retail Investor Protection, Neal Newman

Faculty Scholarship

Should brokers have the unfettered right to restrict investor trading? GameStop, a brick-and-mortar video game retailer, had been experiencing declining revenues since 2016. However, GameStop saw its share price climb almost 1000 percent in the span of a one- week period from January 21, 2021 to January 27, 2021 due to retail investors buying significant amounts of GameStop shares during that period. Melvin Capital, a hedge fund, ended up losing billions as they were betting that GameStop shares would lose value instead of increase—a practice referred to as short selling. On January 28, 2021, brokers inexplicably halted trading on GameStop …

The Failure Of Market Efficiency, William Magnuson

Faculty Scholarship

Recent years have witnessed the near total triumph of market efficiency as a regulatory goal. Policymakers regularly proclaim their devotion to ensuring efficient capital markets. Courts use market efficiency as a guiding light for crafting legal doctrine. And scholars have explored in great depth the mechanisms of market efficiency and the role of law in promoting it. There is strong evidence that, at least on some metrics, our capital markets are indeed more efficient than they have ever been. But the pursuit of efficiency has come at a cost. By focusing our attention narrowly on economic efficiency concerns—such as competition, …

Achieving Law Reform Sometimes Requires A Strong Defense, William H. Henning

Faculty Scholarship

In 2019, a joint drafting committee authorized by the Uniform Law Commission and the American Law Institute began work on a sweeping set of amendments to the official text of the Uniform Commercial Code (UCC) that address issues arising from emerging technologies. The amendments were approved by the sponsoring organizations at their 2022 annual meetings, and efforts are already underway to gain uniform nationwide enactment by state legislatures. The most significant changes to the UCC consist of a new Article 12 dealing with digital assets and amendments to Article 9 that facilitate the leveraging of these assets. Also in 2019, …

The Private Law Of Stablecoins, Kara J. Bruce, Christopher K. Odinet, Andrea Tosato

Faculty Scholarship

Stablecoins are one of the cornerstones of the crypto world. They’ve attracted significant attention over the past few years, ranging from Wall Street to kitchen table investors, and even the White House. As a less volatile alternative to crypto-assets like bitcoin, stablecoins have the potential to change the way we make payments, unlock the groundwork needed for more blockchain-based applications, and even reorient the economy toward private money. But how stable are these stablecoins, really? Can they be relied upon in the way their many proponents claim? And how much of the popular beliefs about stablecoins match their realities? That’s …

The Uniform Commercial Code Survey: Introduction, Jennifer S. Martin, Colin P. Marks, Wayne Barnes

Faculty Scholarship

The survey that follows highlights the most important developments of 2021 dealing with domestic and international sales of goods, personal property leases, payments, letters of credit, documents of title, investment securities, and secured transactions.

A Proposed Sec Cyber Data Disclosure Advisory Commission, Lawrence J. Trautman, Neal Newman

Faculty Scholarship

Constant cyber threats result in: intellectual property loss; data disruption; ransomware attacks; theft of valuable company intellectual property and sensitive customer information. During March 2022, The Securities and Exchange Commission (SEC) issued a proposed rule addressing Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, which requires: 1. Current reporting about material cybersecurity incidents; 2. Periodic disclosures about a registrant’s policies and procedures to identify and manage cybersecurity risks; 3. Management’s role in implementing cybersecurity policies and procedures; 4. Board of directors’ cybersecurity expertise, if any, and its oversight of cybersecurity risk; 5. Registrants to provide updates about previously reported cybersecurity …

10 Things Judges Should Know About Cryptocurrency, Lee Reiners

Faculty Scholarship

No abstract provided.

The Uniform Commercial Code Survey: Introduction, Jennifer S. Martin, Colin P. Marks, Wayne Barnes

Faculty Scholarship

The survey that follows highlights the most important developments of 2020 dealing with domestic and international sales of goods, personal property leases, payments, letters of credit, documents of title. investment securities, and secured transactions.

Predatory Fintech And The Politics Of Banking, Christopher K. Odinet

Faculty Scholarship

With American families living on the financial edge and seeking out high-cost loans even before COVID-19, the term financial technology or “fintech” has been used like an incantation aimed at remedying everything that’s wrong with America’s financial system. Scholars and supporters from both the public and private sector proclaim that innovations in financial technology will “bank the unbanked” and open new channels to affordable credit. This exuberance for all things tech in finance has led to a quiet yet aggressive deregulatory agenda, including, as of late, a federal assault via rulemaking on the ability of states to police the cost …

The Contract Interpretation Policy Debate: A Primer, Joshua M. Silverstein

Faculty Scholarship

Contract interpretation is one of the most significant areas of commercial law. As a result, there is an extensive academic and judicial debate over the optimal method for construing agreements. Throughout this exchange, scholars and courts have advanced a wide array of conceptual, theoretical, and empirical arguments in support of the two primary schools of interpretation— textualism and contextualism—as well as various hybrid positions. This Essay is intended to serve as a primer on those arguments.

Symposium Introduction: A Tribute To Roberta Karmel, James Fanto

Faculty Scholarship

No abstract provided.

Delaware's Global Competitiveness, William J. Moon

Faculty Scholarship

For about a hundred years, Delaware has been the leading jurisdiction for corporate law in the United States. The state, which deliberately embarked on a mission to build a haven for corporate law in the early twentieth century, now supplies corporate charters to over two thirds of Fortune 500 companies and a growing share of closely held companies. But Delaware’s domestic dominance masks the important and yet underexamined issue of whether Delaware maintains its competitive edge globally.

This Article examines Delaware’s global competitiveness, documenting Delaware’s surprising weakness competing in the emerging international market for corporate charters. It does so principally …

The Easterbrook Theorem: An Application To Digital Markets, Joshua D. Wright, Murat C. Mungan

Faculty Scholarship

The rise of large firms in the digital economy, including Amazon, Apple, Facebook, and Google, has rekindled the debate about monopolization law. There are proposals to make finding liability easier against alleged digital monopolists by relaxing substantive standards; to flip burdens of proof; and to overturn broad swaths of existing Supreme Court precedent, and even to condemn a law review article. Frank Easterbrook’s seminal 1984 article, The Limits of Antitrust, theorizes that Type I error costs are greater than Type II error costs in the antitrust context, a proposition that has been woven deeply into antitrust law by the Supreme …

An Efficiency Analysis Of Defensive Tactics, Ronald J. Gilson, Alan Schwartz

Faculty Scholarship

For thirty five years, courts and scholars have divided over the effects of defensive tactics in the market for corporate control. Strong defensive tactics locate authority to accept a hostile bid in the target’s board. The board can bargain for a higher takeover price than uncoordinated shareholders could realize but high takeover prices may reduce shareholder returns by reducing the likelihood of receiving a bid. The Delaware Courts themselves disagree. The Delaware Chancery Court would locate ultimate decision authority in the target’s shareholders, while the Supreme Court, by permitting strong defensive tactics, allocates extensive power to the target’s board. Though …

Should Human Rights Practice Be Rights-Based?, Sarah Knuckey, Margaret Satterthwaite

Faculty Scholarship

Human rights scholars and organizations often call on governments to adopt ‘human rights-based approaches’ (HRBAs) to many policy areas, from climate change to health policy. HRBAs identify rights and obligations, and advance the principles of participation, accountability, equality, and non-discrimination. This chapter argues that HRBAs have been exported to many fields without ever being sufficiently integrated within human rights advocacy. We find that NGOs often fail to adhere to foundational human rights principles in their own work, reproducing unjust power hierarchies, objectifying victims, and disempowering rights-holders. Were HRBAs adopted by more human rights organizations, the face of human rights advocacy …

Securitizing Digital Debts, Christopher K. Odinet

Faculty Scholarship

The promise of financial technology (“fintech”) and artificial intelligence (“AI”) in broadening access to financial products and services continues to capture the imagination of policymakers, Wall Street, and the public. This has been particularly true in the realm of fintech credit where platform companies increasingly provide online loans to consumers, students, and small businesses by harnessing AI underwriting and alternative data. In 2019 alone fintech lenders represented nearly 50% of total non-credit card, unsecured consumer loan balances in the United States. One of the most prevalent ways fintech credit firms operate is by securitizing the online loans they help originate. …

More Meaningful Ethics, Veronica Root Martinez

Faculty Scholarship

Firms have exponentially increased their investment in the creation and implementation of ethics and compliance programs over the past fifteen years. The convergence of more robust corporate enforcement actions and more sophisticated industry standards and practices surrounding compliance efforts has created a booming compliance industry with commonly accepted standards and responsibilities. Within these efforts is a formal acknowledgment by the government, industry leaders, and academics that ethics has a role to play in helping to prevent misconduct within firms and that compliance without concern for ethics is insufficient. The reality, however, is that within firms’ efforts to implement effective ethics …

Fossil Fortunes: Regulating Commercial Paleontology & Incentivizing Fossil Discovery, Ashlee A. Paxton-Turner

Faculty Scholarship

No abstract provided.

The Law Of Corporate Investigations And The Global Expansion Of Corporate Criminal Enforcement, Jennifer Arlen, Samuel W. Buell

Faculty Scholarship

The United States model of corporate crime control, developed over the last two decades, couples a broad rule of corporate criminal liability with a practice of reducing sanctions, and often withholding conviction, for firms that assist enforcement authorities by detecting, reporting, and helping prove criminal violations. This model, while subject to skepticism and critiques, has attracted interest among reformers in overseas nations that have sought to increase the frequency and size of their enforcement actions. In both the U.S. and abroad, insufficient attention has been paid to how laws controlling the conduct of corporate investigations are critical to regimes of …

Contract Interpretation And The Parol Evidence Rule: Toward Conceptual Clarification, Joshua M. Silverstein

Faculty Scholarship

Contract interpretation is one of the most important topics in commercial law. Unfortunately, the law of interpretation is extraordinarily convoluted. In essentially every American state, the jurisprudence is riddled with inconsistency and ambiguity. This causes multiple problems. Contracting parties are forced to expend additional resources when negotiating and drafting agreements. Disputes over contractual meaning are more likely to end up in litigation. And courts make a greater number of errors in the interpretive process. Together, these impacts result in significant unfairness and undermine economic efficiency. Efforts to remedy the doctrinal incoherence are thus warranted.

The goal of this Article is …

Declining Corporate Prosecutions, Brandon L. Garrett

Faculty Scholarship

In the aftermath of the Global Financial Crisis, people across the United States protested that "too big to jail" banks were not held accountable after the financial crisis. Little has changed. Newly collected data concerning enforcement during the Trump Administration has made it possible to assess what impact a se­ries of new policies has had on corporate enforcement. To provide a snapshot comparison, in its last twenty months, the Obama Administration levied $I4.15 billion in total corporate penalties by prosecuting seventy-one financial institu­tions and thirty-four public companies. During the first twenty months of the Trump Administration, corporate penalties declined to …

The Paradox Of Contracting In Markets, Robert E. Scott

Faculty Scholarship

Traditional economic analysis distinguishes economic organization along three dimensions: firm, contract, and market. This categorization is misleading in any number of respects, but none more so than the assumption that contract and market are separate modes of exchange. In fact, other than barter, which is almost unknown in contemporary commercial transactions, every market transaction is implemented by contract. Thus, in markets the two modes of exchange are inextricably combined. Moreover, the vast majority of contract activity occurs in some form of market, so it does not require much loss of generalization to say that not only are contracts in all …

Driver For Contactless Payments, Ronald J. Mann

Faculty Scholarship

As a consumer, my primary experience with cash before the virus was standing in checkout lines observing the sluggish pace of cash transactions in front of me. Like so many things in our lives, the advent of the virus has changed the situation markedly. From the earliest days of infection, it has been far more unsettling to observe cash transactions knowing that the virus persists on paper and metal surfaces for days.

The dynamic that has driven the choices merchants offer in face-to-face retail transactions will change as well. Driven by the private exigencies of the retail environment, the last …

The New Data Of Student Debt, Christopher K. Odinet

Faculty Scholarship

Where you go to college and what you choose to study has always been important, but, with the help of data science, it may now determine whether you get a student loan. Silicon Valley is increasingly setting its sights on student lending. Financial technology (“fintech”) firms such as SoFi, CommonBond, and Upstart are ever-expanding their online lending activities to help students finance or refinance educational expenses. These online companies are using a wide array of alternative, education-based data points—ranging from applicants’ chosen majors, assessment scores, the college or university they attend, job history, and cohort default rates—to determine creditworthiness. Fintech …

Empowering The Poor: Turning De Facto Rights Into Collateralized Credit, Steven L. Schwarcz

Faculty Scholarship

The shrinking middle class and the widening gap between the rich and the poor constitute significant threats to social and financial stability. One of the main impediments to upward mobility is the inability of economically disadvantaged people to use their property — in which they sometimes hold only de facto, not de jure, rights — as collateral to obtain credit. This Article argues that commercial law should recognize those de facto rights, enabling the poor to borrow to start businesses or otherwise create wealth. Recognition not only would provide benefits that exceed its costs; it also would be consistent with, …

Soft And Hard Strategies: The Role Of Business In The Crafting Of International Commercial Law, Susan Block-Lieb

Faculty Scholarship

Part I returns to the classic definition of hard international law initially put forward by Kenneth Abbott and Duncan Snidal and related IR scholars and analyzes existing commercial law treaties in light of this definition. It concludes that virtually none of these commercial law treaties constitute “hard” international law because nearly all commercial law treaties rely on national courts for enforcement. But Abbott and Snidal’s focus on the extent to which international law is legalized—and especially the extent to which it is enforced by international actors—may matter less with commercial than other more public international lawmaking. This is because the …

China As A "National Strategic Buyer": Toward A Multilateral Regime For Cross-Border M&A, Jeffrey N. Gordon, Curtis J. Milhaupt

Faculty Scholarship

Unlike the case of cross-border trade, there is no explicit international governance regime for cross-border M&A; rather, there is a shared understanding that publicly traded companies are generally for purchase by any bidder – domestic or foreign – willing to offer a sufficiently large premium over a target’s stock market price. The unspoken premise that undergirds the system is that the prospective buyer is motivated by private economic gain-seeking.

The entry of China into the global M&A market threatens the fundamental assumptions of the current permissive international regime. China has become a significant player in the cross-border M&A market, particularly …

Consumer Bitcredit And Fintech Lending, Christopher K. Odinet

Faculty Scholarship

The digital economy is changing everything, including how we borrow money. In the wake of the 2008 crisis, banks pulled back in their lending and, as a result, many consumers and small businesses found themselves unable to access credit. A wave of online firms called fintech lenders have filled the space left vacant by traditional financial institutions. These platforms are fast making antiques out of many mainstream lending practices, such as long paper applications and face-to-face meetings. Instead, through underwriting by automation — utilizing big data (including social media data) and machine learning — loan processing that once took days …