The crypto industry and regulators are engaged in a heated debate over whether a protocol’s code should be considered free speech and the implications for liability. Lawmakers have accused the crypto industry of facilitating illicit activities, resulting in court cases, arrests, and incarcerations. Recent high-profile examples include the arrests of developers of Tornado Cash and Samurai Wallet, as well as the planned enforcement action against Uniswap by the US Securities and Exchange Commission (SEC). These cases have raised questions about the liability of developers for the actions of others using their code, leading some to argue it is an attack on free speech.
However, the question of whether code is truly free speech is up for debate. The Electronic Frontier Foundation (EFF) played a crucial role in establishing legal precedent for code as free speech in the 1993 Bernstein vs. Department of Justice case before the US Supreme Court. While some argue that code should be treated as a thing rather than speech, the crypto community believes it should be protected as free speech. Nevertheless, there is a consensus in the industry that code should not only be considered free speech but should also provide immunity.
The boundaries of code as free speech are defined by the First Amendment of the US Constitution, which protects the freedom of religion, press, assembly, and speech. Code is seen as a form of expression that should be protected under the First Amendment. However, it is important to consider the intentions of the code’s creator. If the code is created solely for illegal purposes, freedom of speech cannot be invoked. Developers should not be held responsible for the misuse of their code if it has both positive and negative use cases. However, developers who claim to have a positive use case while hiding illicit use cases will not be able to defend themselves using freedom of speech.
Regulators’ actions against crypto developers have had a chilling effect on legitimate open-source projects. It is important for regulators to create a safe space for collaboration and participation in these projects. Going after developers for the actions of others using their code is akin to prosecuting a hammer for being used as a weapon. While financial regulators have the power to curtail certain types of speech, they should be cautious not to infringe upon academic and scientific inquiry in the crypto sector. Laws around speech must be narrowly tailored to avoid unintended consequences.
The targeting of developers by regulators has had consequences beyond the crypto space. Academic exploration and investor confidence have been affected. Legal actions introduce uncertainties that can deter investment in US-based tech companies. Investors may seek jurisdictions with clearer regulatory frameworks to avoid potential hurdles. While code has been established as free speech, its status is not set in stone. Regulators need to justify their actions and ensure they align with the goals of the First Amendment. The ongoing cases of Tornado Cash, Samurai Wallet, and Uniswap will test the boundaries of freedom of speech in code.