The U.S. Supreme Court is currently chewing over a case that could open a Pandora’s box for the crypto industry. Nvidia Corporation is knee-deep in this, and now they’ve got the Digital Chamber (TDC), with an amicus brief that says the case could hurt the crypto industry.
The case revolves around how the Ninth Circuit handled the Private Securities Litigation Reform Act (PSLRA), especially regarding claims of scienter—fancy legal talk for knowing you’re doing something wrong—and whether or not the company’s internal documents need to be thrown into the mix to prove it.
Now, the legal eagles are zeroing in on two big questions. First off, do plaintiffs really have to dig up the dirt from internal company documents to show scienter? And secondly, can they just roll in with some expert opinions and call it a day, ditching the need for hard facts?
The stakes for crypto companies
Let’s not forget why the PSLRA was put on the books in the first place. Back in the day, emerging tech companies were getting hammered by a flood of lawsuits. The PSLRA was Congress’s way of telling those tech-hungry lawyers to chill out.
They wanted to give companies in high-growth sectors, like crypto today, some breathing room. Because, let’s face it, the crypto market is as volatile as a toddler on a sugar high.
These companies are already walking a tightrope, and the last thing they need is a bunch of lawsuits dragging them down.
They need to show that the defendant was practically twirling a mustache while committing fraud. But the Ninth Circuit decided to take a more lenient approach. They’re letting plaintiffs skate by with what critics call “speculative allegations.”
This could mean that instead of solid evidence, plaintiffs might just need to weave a good enough story. That’s a slippery slope, especially for the crypto industry, where a lot of projects are already seen as risky bets.
The problem with expert opinions
One of the big points in this case is whether expert opinions can replace those specific factual allegations. The folks backing Nvidia are raising the alarm on this one. Why? Because those so-called experts might be working off assumptions rather than hard evidence.
And let’s be real, the crypto industry is already under enough scrutiny. If the court says it’s cool to replace hard facts with expert guesses, it’s game over.
We’ll see opportunistic lawsuits popping up like weeds, with lawyers armed with expert testimonies that are more speculation than reality.
This could bog down the industry in endless legal battles, slowing down innovation and scaring off investors who don’t want to touch a company in a legal quagmire.
Perianne Boring, the founder and CEO of TDC, said they felt “compelled to weigh in” because of the “grave risks” this ruling could bring to the industry.
In her view, letting expert opinions replace real evidence in court is like handing the keys to the asylum over to the inmates. It’s going to lead to a surge in lawsuits based on nothing but “unfounded negative perceptions” about crypto.
