Will crypto markets be regulated like traditional markets? An NFT lawyer speaks out

Will crypto markets be regulated like traditional markets? An NFT lawyer speaks out

"They [consumers] should be able to trust that the market is working and not being pitted against them," NFT and Web 3 attorney Moish Peltz said on CoinDesk TV's "First Mover."

The U.S. Department of Justice's (DOJ) first crypto insider trading case raises questions about whether crypto markets are policed in the same way as traditional markets and what constitutes a security, according to an attorney specializing in non-fungible tokens (NFTs) and Web 3.

The DOJ's lawsuit accusing Nathaniel Chastain, a former product manager at online NFT marketplace OpenSea, of engaging in NFT insider trading for his own benefit may be the U.S. government's first attempt to clarify its role as a regulator, according to Moish Peltz, a New York-based NFT attorney and partner at law firm Falcon Rappaport & Berkman PLLC.

Chastain is charged with fraud and money laundering, which carries a maximum penalty of 40 years in prison, for allegedly advancing $60,000 in NFTs.

"The government's position here is that these are big marketplaces. There's a lot of money at stake," Peltz said on CoinDesk TV's "First Mover." "There are a lot of consumers who come here, whether it's to collect or to make money or for some other reason, and they should be able to trust that the marketplace is working and not stacked against them."

Chastain, who was once the public face of OpenSea, the largest online marketplace for buying and selling NFTs, was charged in an indictment released Wednesday. The Justice Department accuses him of violating an employment contract in which he used confidential business information to buy NFTs before they could appear on the marketplace's homepage. The indictment further states that Chastain was responsible for selecting the NFTs on the homepage as part of his job.

According to Peltz, DOJ may seek to make an example of Chastain. "If you were using inside information to your advantage, that could be a criminal violation," he said.

If those allegations are true, consumers could be the real victims, not OpenSea, Peltz said.

"It's one thing to know that these [NFTs] are very volatile and speculative and you can lose all your money. It's another thing to have inside information and use it to exploit buyers in this market," Peltz said. "Then the government can also play a role in this market."

Peltz added that a possible government role raises questions for companies that operate in this space and have employees who have access to confidential information that could move crypto markets.

"Whether it's marijuana assets, altcoins or NFTs," he said, "you should be asking, 'What's going on here?' Do we have an obligation as a company to have policies and procedures to talk to our employees, educate them [and] make sure they know what the ground rules are?"