Law Commons^™

Crypto-Counterfeiting, Joshua Fairfield

William & Mary Business Law Review

The current crypto winter has given rise to a range of legal challenges. One of the most important sets of legal challenges goes to the heart of cryptocurrency. Cryptocurrency was intended to be non-duplicatable at will, that is, not to be counterfeitable. Blockchain technology is supposed to prevent token counterfeiting through a combination of game theory and cryptography that prevents normal users from simply ordering the system to generate more tokens for their benefit.

The difficulty is that blockchain software is still software. People in charge can order and program the software to generate many more tokens for those individuals’ …

An Emergency Brake For The Age Of Instantaneous Bank Runs, Nicholas L. Georgakopoulos

William & Mary Business Law Review

Businesses missing payroll because some bank executives made wrong bets about interest rates is the seed of contagion that financial regulation aims to prevent. Yet, exactly that happened when Silicon Valley Bank failed in March of 2023. Future bank runs will be faster and larger. This Article proposes a regime that would prevent bank runs from hurting the nonfinancial economy. A bank experiencing a run should be allowed to delay withdrawal requests until next Monday (after its run will have been addressed by management or regulators). Exceptions should include payroll, deal closings, and individuals’ payments under the insured limit. By …

Achieving Gender Equality In Venture Capital: The Case For Federal Regulatory Intervention, Janhvi Patel

William & Mary Business Law Review

Gender inequality is a pervasive issue in venture capital financing, with studies consistently revealing the severe disadvantage female entrepreneurs face when raising private funds for their companies. Research has shown that female founders receive only a fraction of the total venture capital dollars invested each year, despite launching companies that outperform those founded by men. Gender bias among investors, a lack of diversity in decision-making teams, and regulatory inaction are major contributors to this inequality. The consequences of gender inequality in venture capital financing extend beyond the financial impact; such inequalities perpetuate systemic gender stereotypes and impede the full realization …

Defi: Shadow Banking 2.0?, Hilary J. Allen

William & Mary Law Review

The growth of so-called “shadow banking” was a significant contributor to the financial crisis of 2008, which had huge social costs that we still grapple with today. Our financial regulatory system still has not fully figured out how to address the risks of the derivatives, securitizations, and money market mutual funds that comprised Shadow Banking 1.0, but we are already facing the prospect of Shadow Banking 2.0 in the form of decentralized finance, or “DeFi.” DeFi’s proponents speak of a future where sending money is as easy as sending a photograph—but money is not the same as a photograph. The …

Regulating Crypto, On And Off The Chain, Eric D. Chason

William & Mary Law Review

Cryptocurrency had its most turbulent year in 2022. The collapse of TerraUSD ushered in a broad market decline, and the FTX debacle brought new publicity and scrutiny to crypto’s woes. Both events will likely spark new regulation and legislation.

Policymakers and regulators should regulate market structures like exchanges. While many cryptocurrencies are extremely transparent and require little if any additional disclosures, others are plagued by serious informational asymmetries. An exchange might allow participants to trade Bitcoin, and regulators need to protect investors who rely on such exchanges. Investors may face informational asymmetries regarding the operation and safety of the exchange. …

Why Comparability Is A Greater Problem Than Greenwashing In Esg Etfs, Ryan Clements

William & Mary Business Law Review

This Article argues that comparability in environmental, social, and governance (ESG) exchange traded funds (ETFs) is a much greater problem than greenwashing. Rising demand for sustainable investment products in recent years has been met with an explosion in ESG ETF varieties, and numerous ESG-themed funds have captured massive capital inflows. There is little evidence, however, that deceptive “greenwashing” is widespread in ETFs. ETF issuers face significant reputational costs from such behavior, and there are effectively no consumer switching costs for hyperliquid, easily accessible ETFs. While nondeceptive practices of asset managers are observable in the zero-sum, highly competitive, asset management game …

Fraud Against Financial Institutions: Judging Materiality Post-Escobar, Matthew A. Edwards

William & Mary Business Law Review

In Neder v. United States, 527 U.S. 1 (1999), the Supreme Court held that proof of materiality is required for convictions under the federal mail, wire and bank fraud statutes. During the past 20 years, the federal courts have endeavored to apply the complex common law concept of materiality to the federal criminal law context. The Supreme Court’s recent decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), a civil case involving the False Claims Act, provided the federal appellate courts with an ideal opportunity to reconsider materiality standards in federal fraud …

Decentralized Finance: Regulating Cryptocurrency Exchanges, Kristin N. Johnson

William & Mary Law Review

Global financial markets are in the midst of a transformative movement. The creation of Bitcoin and Facebook’s proposed distribution of Diem mark a watershed moment in the evolution of the financial markets ecosystem. Purportedly, peer-to-peer distributed digital ledger technology eliminates legacy financial market intermediaries such as investment banks, depository banks, exchanges, clearinghouses, and broker-dealers.

Yet careful examination reveals that cryptocurrency issuers and the firms that offer secondary market cryptocurrency trading services have not quite lived up to their promise. Notwithstanding cryptoenthusiasts’ calls for disintermediation, evidence reveals that platforms that facilitate cryptocurrency trading frequently employ the long-adopted intermediation practices of their …

Contractual Tax Reform, Michael Abramowicz, Andrew Blair-Stanek

William & Mary Law Review

One-size-fits-all taxation fails to accommodate diverse taxpayer circumstances. This Article proposes allowing taxpayers to contract into alternative tax regimes administered by private intermediaries. Participating taxpayers would make payments to the intermediaries pursuant to contract, and the intermediaries would be required to pay to the government at least as much as these taxpayers would have paid the government otherwise. That amount is determined based on the actual tax receipts of a control group, taxpayers who wish to contract with an intermediary but instead are chosen at random to continue under the status quo. These alternative tax regimes might better accommodate taxpayers’ …

Modernizing The Bank Charter, David Zaring

William & Mary Law Review

The banking charter—the license a bank needs to obtain before it can open—has become the centerpiece of an argument about what finance should do for the rest of the economy, both in academia and at the banking agencies. Some advocates have proposed using the charter to pursue industrial policy or to end shadow banking. Some regulators have proposed giving financial technology firms bank charters, potentially breaking down the traditionally high walls between banking and commerce. An empirical survey of chartering decisions by the Office of the Comptroller of the Currency suggests that chartering is best understood as an ultracautious licensing …

Legal Literature Review Of Social Entrepreneurship And Impact Investing (2007-2017): Doing Good By Doing Business, Deborah Burand, Anne Tucker

William & Mary Business Law Review

Although the ambition to do good by doing business is not new, the burgeoning realization of this ambition is. As the fields of social entrepreneurship and impact investing advance in size, scope and complexity, questions about the roles of corporations and capital markets in society intensify.

What is legal scholarship contributing to this discussion? This Article reviews the scholarly contributions of 260 articles written by over 150 authors about the fields of social enterprise, social finance, and impact investing. The Article maps the contributions of legal scholarship over the last decade—from 2007 (when the term “impact investing” was first coined) …

Could Distributed Ledger Shares Lead To An Increase In Stockholder-Approved Mergers And Subsequently An Increase In Exercise Of Appraisal Rights?, Alyson Brown

William & Mary Business Law Review

Blockchain, the distributed ledger technology underlying cryptocurrencies like Bitcoin, is poised to revolutionize industries and processes across disciplines. In particular, government agencies and companies are looking for ways to leverage blockchain’s efficiencies to facilitate safe record-keeping. Municipalities are employing blockchain-issued deeds to accurately record property ownership. Progressive legal professionals are employing blockchainissued “smart-contracts” to more accurately record contract terms. Intellectual property attorneys and related government agencies are researching blockchain-issued copyrights and patents.

This Note examines how utilizing blockchain technology in securities trading to maintain accurate stockholder ledgers will allow for current market forces to be reflected in stockholder voting. Further, …

Evaluating The Costs And Benefits Of A Smart Contract Blockchain Framework For Credit Default Swaps, Ryan Clements

William & Mary Business Law Review

Despite wide speculation about its use-value, there are very few large-scale Blockchain implementations, particularly in sophisticated financial applications and mature markets. The extent of Blockchain’s disruptive potential in these domains is uncertain. This Article considers Blockchain’s use-value for credit default swap contract execution, fulfillment, and post-trade processing by using, as an assessment base, a series of derivative industry whitepapers, academic and technological evaluative studies, and commentary relating to current market undertakings. In summary, when applied to credit default swaps, there are many barriers to implementation, as well as costs, fragmentation risks, technological deficiencies, and practical drawbacks. As a result, there …

Reinventing The Wheel: How Securitization Can Bolster The Market For Residential Energy Efficiency Loans, Joseph Gonyeau

William & Mary Environmental Law and Policy Review

Currently, one of society’s greatest goals is the reduction of greenhouse gases. This goal is generally accepted worldwide, as evidenced by the Paris Climate Agreement, the parties to which agreed to establish frameworks for adopting clean energy and reducing greenhouse gases. After the United States’ controversial decision to withdraw from the Paris Agreement, the federal government’s future in reducing greenhouse gases remains uncertain. Despite this setback, there are existing programs aimed at reducing greenhouse gases in the United States that the government should ensure succeed. One such program is the Warehouse for Energy Efficiency Loans (“WHEEL”).

WHEEL operates as a …

Borrowing In The Shadow Of Death: Another Look At Probate Lending, David Horton

William & Mary Law Review

“Fringe” lending has long been controversial. Three decades ago, demand for subprime credit soared, and businesses started to offer high-interest rate cash advances, such as tax refund anticipation loans, payday loans, and pension loans. These products have sparked intense debate and are subject to a maze of rules.

However, in Probate Lending, published in the Yale Law Journal, a coauthor and I examined a form of fringe lending that has gone largely unnoticed: firms that pay lump sums in return for an heir or beneficiary’s interest in a pending decedent’s estate. Capitalizing on a California law that requires …

A “Green” Approach To Hedge Fund Regulation And Reform, Matthew Keehn

William & Mary Environmental Law and Policy Review

No abstract provided.

Ecological Economics And Sport Stadium Public Financing, Christopher M. Mcleod, John T. Holden

William & Mary Environmental Law and Policy Review

Given the recent importance that sport organizations, academics, and the public have placed on environmental sustainability this Article introduces the study of ecological economics—founded upon Nicholas Georgescu-Roegen’s application of thermodynamics to economics—to legal perspectives on public financing. The authors argue that the economic growth limits implied by thermodynamic principles should be incorporated in the public financing of sport stadiums. More specifically, municipalities can require facilities receiving public financing to produce environmental cost accounting reports and to make them publically available.

Going … Going … Public? Taking A United States Professional Sports League Public, Ian A. Mclin

William & Mary Business Law Review

The four major American professional sports leagues—the MLB, NBA, NHL, and NFL—are wildly popular, but the leagues fail to capitalize fully on their success because they are organized in a largely inefficient manner. By organizing as unincorporated non-profits, leagues forgo their ability to raise capital via investors, forcing taxpayers to bear the burden of league investments such as new stadium construction. Further, the current organizational model creates a collective action problem, as self-interested team owners focus their support on actions that benefit their own franchise and leave ineffective commissioners in power.

A solution to these problems is for a professional …

Rethinking Corporate Governance For A Bondholder Financed, Systemically Risky World, Steven L. Schwarcz

William & Mary Law Review

This Article makes two arguments that, combined, demonstrate an important synergy: first, including bondholders in corporate governance could help to reduce systemic risk because bondholders are more risk averse than shareholders; second, corporate governance should include bondholders because bonds now dwarf equity as a source of corporate financing and bond prices are increasingly tied to firm performance.

You Can’T Stop What You Can’T See: Complementary Risk Mitigation Through Compensation Disclosure, Matt Reeder

William & Mary Business Law Review

Section 956 of the Dodd-Frank Act requires regulators to help prevent the next financial crisis by monitoring executive compensation arrangements to prevent them from becoming excessive or leading to “material financial loss.” A now-pending rule seeks to do just this. This Article argues that the rule is well-conceived inasmuch as it limits the total portion of compensation that can be based on risk-inducing incentives, ties incentive-based compensation to longer-term performance, places a ceiling on potential incentivebased earnings, provides for downward adjustment and clawbacks, prohibits many hedging behaviors, and institutionalizes governance mechanisms and oversight policies. But, by placing a number of …

Crash And Learn: The Inability Of Transparency Laws To Penetrate American Monetary Policy, Benjamin W. Cramer, Martin E. Halstuk

William & Mary Bill of Rights Journal

No abstract provided.

If It Looks Like A Super Pac, Acts Like A Super Pac, And Is Restricted Like A Super Pac, Then Treat It Like A Super Pac: Why Contribution Limits On A Hybrid Pac’S Independent-Expenditure Arm Are Impermissible, Jacob N. Kipp

William & Mary Bill of Rights Journal

No abstract provided.

The Volcker Rule And The Presumption Against Extraterritoriality: Utterly Incompatible, Christine P. Henry

William & Mary Business Law Review

The Volcker Rule, enacted in 2010 as part of the Dodd-Frank Wall Street Consumer Protection Act to address the “too big to fail” problem in today’s interconnected global economy, has been controversial from the outset. The deadline for banks to comply with Volcker regulations has been extended several times, with the most recent deadline set for July 21, 2016. This Note examines the impact of the Volcker Rule on foreign banks, detailing the specific effects of Volcker regulations on two prominent German banks, Deutsche Bank and Commerzbank, and analyzes the countervailing European approach to regulating proprietary trading and risky investment. …

The Global Significance Of Crowdfunding: Solving The Sme Funding Problem And Democratizing Access To Capital, Alma Pekmezovic, Gordon Walker

William & Mary Business Law Review

This Article provides a comprehensive review of the crowdfunding phenomenon. It argues that equity crowdfunding (“ECF”) and, to a lesser extent, peer-to-peer lending (“P2PL”) offer the possibility of a global solution to the small and medium-sized enterprise (“SME”) funding problem. In the United States, the SME funding problem is exacerbated by the markedly diminishing rate of startup formation, a factor that injects a degree of urgency into resolving the optimal means to implement ECF. Here, as with the “fin-tech” revolution, the law lags behind technological developments. The second main argument is that ECF enhances access to capital for SMEs globally …

The Emperor’S New Clothes: How The Judicial System And The Housing-Mortgage Market Have Turned A Blind Eye To The Destruction Of The Negotiability Of Mortgage Promissory Notes, Roy D. Oppenheim, Jacquelyn K. Trask-Rahn

William & Mary Business Law Review

This Article examines the common notions of negotiable instruments as they relate to the modern day promissory note in the context of residential mortgage lending. The Article further addresses the destruction of the negotiability of such promissory notes through various undertakings added for the benefit of the banking industry, often to the detriment of a borrower. The use of negotiable instruments commenced in the 1800s in England as a way of ensuring a fluid market between trades as there was no fiat currency system in place. The fundamental purpose behind the concept of negotiability was subsequently abrogated by the modernization …

Lending Discrimination, The Foreclosure Crisis And The Perpetuation Of Racial And Ethnic Disparities In Homeownership In The U.S., Aleatra P. Williams

William & Mary Business Law Review

For decades the agencies charged with minding the ‘fair credit and lending’ shop turned a blind eye to those (lenders) who pilfered minority homeownership (and consequently minority wealth) by extending mortgage lending products that were, in many cases, unequal to similarly situated non-minority counterparts. Since the 1950s, when the federal government endorsed homeownership policies for minorities, and the 1960s, when antidiscriminatory D9lending laws were enacted, access to fair mortgage credit has been unattainable. Unbridled lending discrimination culminated in massive foreclosures for a disproportionate number of minority homeowners during the Housing and Foreclosure Crisis. Lenders disparately foreclosed upon upper class, middle …

The Post-2008 Lending Environment And The Need For Raising The Credit Union Member Business Lending Cap, Thomas Zells

William & Mary Business Law Review

While the economy has gradually begun to improve following the 2008 Financial Crisis, “Main Street” has not played a large role in the recovery. This is atypical of most recoveries, and particularly disturbing because of the disproportionate number of jobs traditionally created by small businesses. Credit unions, but for the current statutorily imposed cap on their business lending authority, could substantially aid Main Street’s recovery. The cap currently restricts a credit union’s member business lending to 12.25 percent of its total assets and chills their ability to engage in business lending or to even invest in developing business lending programs …

The Separation Of Intelligence And Control: Retirement Savings And The Limits Of Soft Paternalism, Jacob Hale Russell

William & Mary Business Law Review

“Soft paternalism” is in vogue among academics and lawmakers, but too much is being asked of it. This Article studies soft paternalist techniques—including nudging and disclosure—which have been used in the employersponsored retirement system. Defined-contribution retirement plans represent an ideal test case for libertarian paternalism: there has been extensive experimentation, and nudge advocates have often held up such plans as successes. In particular, this Article focuses on investment allocation decisions in retirement portfolios, and suggests that we should be skeptical of the ability of soft paternalism to improve those decisions. When a domain is rife with conflicts of interest—as in …

Superior Supererogation: Why Credit Default Swaps Are Securities Under The Investment Advisers Act Of 1940, J. Tyler Kirk

William & Mary Business Law Review

No abstract provided.

The Hedge Fund Regulation Dilemma: Direct Vs. Indirect Regulation, Hossein Nabilou, Alessio M. Pacces

William & Mary Business Law Review

This Article studies regulatory strategies to address the potential systemic risk of hedge fund operation in financial markets. Due to the implications of the choice of regulatory strategies and instruments in terms of mitigating systemic risk, the Article focuses on one critical aspect of hedge fund regulation, namely the choice between direct regulation and indirect regulation. This Article defines the distinction between direct and indirect regulation, maps this distinction’s implications in terms of regulatory techniques and instruments, and analyzes the arguments for and against direct and indirect regulation of hedge funds. This Article argues that the indirect regulation of hedge …