Sebastian Sinclair

Looking to the future, policymakers in Arizona referred an <a href="https://www.azleg.gov/legtext/56leg/1R/bills/SCR1007P.pdf" target="_blank" rel="noreferrer noopener">amendment</a> to the state constitution in the Arizona State Legislature last week, seeking to exempt digital assets from property taxation.



Following its second reading on Jan. 23, the resolution now has a small shot of making it to a ballot initiative. If approved by a majority vote in the legislature and subsequently passed by voters, the amendment would make crypto tax-exempt at the state level.



It would also make it one of the more favorable states for tax purposes, alongside Wyoming, which passed a law <a href="https://blockworks.co/news/daos-favor-classic-tax-havens-passing-up-crypto-friendly-us-states">recognizing a DAO’s legal status</a> as akin to a limited liability company. 



Arizona had originally toyed with the idea of making <a href="https://blockworks.co/news/arizona-considers-making-bitcoin-legal-tender">bitcoin legal tender</a> early last year, but that bill was subsequently <a href="https://legiscan.com/AZ/text/SB1341/2022" target="_blank" rel="noreferrer noopener">shelved</a> shortly after being introduced.



On a federal level, all individuals are required to pay income and capital gains taxes, but individual US states approach taxation differently, with some eschewing the concept of capital gains or personal income tax altogether at the state level.



Income tax at the state level is triggered when a user produces additional income deriving from mining, staking or airdrops, while capital gains (or losses) are triggered when a cryptoasset is disposed of on the basis of its cost basis and sale price.



Aside from Arizona, here are four other “friendly” states based on regulatory and tax advantages ahead of the federal tax filing deadline come April 18.



<h3>Wyoming</h3>



Wyoming, long-viewed as one of the country’s most progressive crypto regions, does not collect personal or corporate income tax. The state also began regulating the industry early on by introducing a financial <a href="https://wyomingbankingdivision.wyo.gov/banks-and-trust-companies/financial-technology-sandbox" target="_blank" rel="noreferrer noopener">technology sandbox</a> for testing financial products and services.



As mentioned, it formally legalized DAOs in 2019, allowing for clearer guidelines on how those entities would be taxed. Typically, LLCs don’t pay taxes on business incomes, but instead, members are required to pay taxes on their share of the LLC&#8217;s profits.



The state also passed its <a href="https://blockworks.co/news/legal-expert-avanti-may-face-uphill-battle-getting-fed-payment-access">charter for banks</a> dealing in digital assets back in 2019 making it possible for crypto firms to both hold customer cash deposits and custody crypto — later able to be traded on exchanges.



High electricity prices have caused some crypto miners to balk at setting up shop in the state, though Wyoming has recently attempted to tackle the issue by introducing two bills that may result in bitcoin <a href="https://blockworks.co/news/pro-crypto-wyoming-not-yet-pro-enough-to-attract-bitcoin-miners">miners paying less</a>.



<h3>Texas</h3>



Like Wyoming, Texas allowed for <a href="https://www.dob.texas.gov/sites/default/files/files/news/Industrynotices/in2021-03.pdf" target="_blank" rel="noreferrer noopener">chartered banks</a> to custody digital assets in June 2021, which was viewed at the time as a way to tap into the state&#8217;s booming domestic crypto market. 



Coinciding with its cheap electricity — beneficial to crypto mining activity two years ago — the state also features no income tax.&nbsp; Still, Texas does not recognize crypto as legal money and instead is concerned with the asset class as a taxable commodity on a transactional basis.



The state does not require firms, such as exchanges, to obtain a money transmitter’s license. It also passed its <a href="https://freemanlaw.com/cryptocurrency/texas/" target="_blank" rel="noreferrer noopener">Texas Virtual Currency Bill</a> in 2021 which provides a legal definition of digital assets. There is no income tax in the state.



Miners too benefit from a favorable framework that was put in place for firms to profit from 10-year tax abatements and tax credits, alongside additional state training for their workforce.&nbsp;



<h3>Florida</h3>



Florida, like Wyoming and Texas, does not feature a state income tax.&nbsp;



The state has a number of high-profile politicians opting for local crypto and blockchain regulation, including Miami Mayor Francis Suarez, who previously pushed for city residents to <a href="https://www.newsweek.com/miami-passes-resolution-allow-paying-city-workers-bitcoin-attempt-woo-big-tech-1568784" target="_blank" rel="noreferrer noopener">receive their paychecks</a> and pay for their property taxes in bitcoin.



While the state’s governor <a href="https://blockworks.co/news/desantis-says-florida-should-be-willing-to-accept-taxes-in-crypto">Ron DeSantis floated the idea</a> of allowing businesses to pay taxes using crypto to Florida’s Legislature’s 2022 session, his proposed measures failed to pass. 



As such, the state currently does not address the sales and use tax treatment of transactions involving crypto though, like Wyoming, a money transmission license is not required courtesy of changes made to <a href="https://www.flsenate.gov/Session/Bill/2022/273" target="_blank" rel="noreferrer noopener">House Bill 273</a>.



<h3>Colorado</h3>



Colorado, unlike other states listed, does tax income at 4.55% including wages and salaries deriving from crypto activity.&nbsp;



The outlier here is that Colorado is attempting to position itself as a crypto-friendly state by ensuring broader digital asset use cases for tax purposes.



In September of last year, Colorado’s Department of Revenue <a href="https://blockworks.co/news/colorado-residents-can-now-pay-state-taxes-with-crypto-for-a-fee">began accepting crypto as an additional form of payment</a> for all resident taxpayers, becoming the first US state to do so.&nbsp;



That includes individual income tax, business income tax, sales and use tax, withholding tax, severance tax and excise fuel tax.



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These 5 Crypto-friendly US States Show Initiative on Tax Laws

<div id="highlights-block_623a77ce9696f" class="highlights">
 <ul>
 <li>Florida Gov. Ron DeSantis said he is working with state agencies to figure out means for businesses to pay tax in crypto</li>
 <li>Fellow Floridian politician Miami Mayor Francis Suarez pushed for city residents to receive their paychecks and pay for their property taxes in bitcoin</li>
 </ul>
 
</div>



Ron DeSantis, Florida&#8217;s 46th governor, <a href="https://www.youtube.com/watch?v=epihxImrhbU&amp;t=89s&amp;ab_channel=ABCActionNews" target="_blank" rel="noreferrer noopener">said Tuesday</a> his office is working to allow businesses to pay taxes using cryptocurrency.



DeSantis, who has been serving as governor since 2019, said he is working with state agencies to figure out the logistics of businesses paying taxes with crypto, indicating the tax strategy was something Florida could adopt.



The governor responded to questions from the media following his signing of a bill that requires financial literacy classes for high school students.



<blockquote class="wp-block-quote">&#8220;Clearly something like a bitcoin and other cryptocurrencies — that&#8217;s something we should be willing to accept,&#8221; he said in relation to tax payments.</blockquote>



It&#8217;s not the first time DeSantis has floated the idea of allowing Floridians to utilize crypto as a form of state payment. Last year, DeSantis proposed measures in the 2022-23 budget that sought to enable businesses to pay state fees in crypto.



He also proposed leveraging blockchain technology for use in pilot programs to govern certain backend functions within the Florida Highway Safety and Motor Vehicles and Medicaid payments, among other areas.



&#8220;I actually had some money in the budget the legislature didn&#8217;t pick up to try to do some experiment with blockchain technology on some of the state functions,&#8221; DeSantis said Tuesday. The proposed measures failed to pass into law via the&nbsp;<a href="https://www.flsenate.gov/session" target="_blank" rel="noreferrer noopener">Florida Legislature’s 2022 session,</a>&nbsp;which ended on March 14 with bipartisan approval of a $112 billion budget.



Florida possesses a number of high-profile politicians opting for local crypto and blockchain regulation, including Miami Mayor Francis Suarez who previously pushed for city residents to <a href="https://www.newsweek.com/miami-passes-resolution-allow-paying-city-workers-bitcoin-attempt-woo-big-tech-1568784" target="_blank" rel="noreferrer noopener">receive their paychecks</a> and pay for their property taxes in bitcoin.



Crypto proponents view the city, as well as the state, as forward-looking for the industry often criticized by other policymakers for facilitating money laundering.



The governor, who has for some time pushed bitcoin adoption alongside Suarez, also noted the difference between cryptos that were decentralized versus that of a centrally issued digital dollar, which he said presents &#8220;a lot of hazards&#8221; when it&#8217;s &#8220;centrally controlled.&#8221;



&#8220;I worry about the amount of power that would give someone — an essential authority — to basically be able to shut off access to purchasing certain goods,&#8221; DeSantis said. &#8220;We&#8217;d be in uncharted territories.&#8221;



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DeSantis Says Florida ‘Should Be Willing’ To Accept Taxes in Crypto

Morgan Chittum

<div id="highlights-block_620a991ad3971" class="highlights">
 <ul>
 <li>The NFT sale could “turn into a standard in the [real estate] industry,” according to a blockchain startup executive</li>
 <li>The NFT can now be used as collateral for crypto borrowers and lenders</li>
 </ul>
 
</div>



A Florida home was auctioned off as an NFT (non-fungible token) — a potential first for both real estate and cryptocurrency.



The Gulfport four-bedroom house sold for $653,163 of ether, and the winning bidder now holds the NFT, signifying ownership on-chain.



Propy, a blockchain real estate startup, hosted and facilitated the sale.



“This is just the first seller in our pipeline and we&#8217;re seeing a lot of demand,” Natalia Karayaneva, chief executive of Propy, said in a statement.



The home’s property rights were minted as an NFT, Karayaneva said, which cuts down on closing time. The NFT holder will own the property via a limited liability company (LLC) that houses the crypto asset.



The real estate-backed token can be used as collateral for crypto borrowers and lenders.



Roughly 50 people <a href="https://fortune.com/2022/02/12/nft-florida-home-sale-ether-crypto/" target="_blank" rel="noreferrer noopener">signed up</a> to bid in the auction — verifying their identities per the platform’s requirements. However, only two people actively bid in the sale.



Propy previously <a href="https://www.businesswire.com/news/home/20210525005839/en/Propy-Auctions-World%E2%80%99s-First-Real-Estate-NFT-with-Ownership-Transfer" target="_blank" rel="noreferrer noopener">sold</a> TechCrunch founder Michael Arrington’s studio apartment in Ukraine for roughly $113,176 of ether last year.



The NFT sale could “turn into a standard in the [real estate] industry,” Karayaneva said. “NFT sales reached $4 billion in December 2021, and real-world assets will soon represent a significant portion of that market.”



Former Commodity Futures Trading Commission (CFTC) enforcement attorney Braden Perry <a href="https://cms.blockworks.co/nft-home-sale-has-1500-bidders-lining-up/" target="_blank" rel="noreferrer noopener">told Blockworks</a> that real estate has a “huge upside potential” when it comes to NFTs and blockchain technology at-large.



But the US regulatory environment, Perry said, “lags innovation” to adapt to it.&nbsp;



“The [real estate] title process is ideally suited for streamlined and protected recordings on a blockchain,” he said. “But the regulatory system is still new, and there are a lot of questions regarding the government’s role in crypto.”



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A Real Estate-Backed NFT Sold For $653,000

Macauley Peterson

<div id="highlights-block_61a416f02d14a" class="highlights">
 <ul>
 <li>Wright’s defense team declared victory, as their client avoided the worst outcomes</li>
 <li>The jury was initially unable to reach agreement last week but were instructed by the judge to keep trying</li>
 </ul>
 
</div>



Jurors in the Florida trial of Craig Wright, an Australian computer scientist who claims to have invented Bitcoin, were deadlocked as recently as last Wednesday, after several days of deliberations. The judge in the case, US District Judge Beth Bloom, issued what’s known as an <a href="https://www.law.cornell.edu/wex/allen_charge" target="_blank" rel="noreferrer noopener">Allen charge</a>, instructing them to “carefully reexamine and reconsider all the evidence” in an attempt to reach an agreement. Now they have.



On Monday, the jury found Wright liable on one of the plaintiff’s claims, that of conversion — unauthorized possession of personal property,&nbsp; in this case intellectual property — and awarded $100 million in damages, according to <a href="https://storage.courtlistener.com/recap/gov.uscourts.flsd.521536/gov.uscourts.flsd.521536.812.0_1.pdf" target="_blank" rel="noreferrer noopener">court documents</a>. Notably, no bitcoin was directly ordered to be paid.



Wright <a href="https://cms.blockworks.co/craig-wright-trial-goes-to-florida-jury-which-could-award-as-much-as-189b/" target="_blank" rel="noreferrer noopener">could have been found liable</a> for a range of behavior including fraud, theft, breach of fiduciary duty, with damages potentially reaching into the billions, therefore he and his legal team see the outcome as a victory.&nbsp;



“This has been a remarkably good outcome — I feel completely vindicated,” Wright told his supporters in a <a href="https://twitter.com/JimmyWinSV/status/1467910308953997314?s=20" target="_blank" rel="noreferrer noopener">recorded video message</a>.



The jury rejected plaintiff Ira Kleiman’s claim that his deceased brother David was a business partner of Wright’s, and decided that Wright would owe nothing to the David Kleiman estate. Instead, the sole monetary award went to W&amp;K Info Defense Research LLC, a company for which Ira Kleiman is now the only registered director, but that was once a joint venture between Wright, his wife at the time Lynn Wright, and David Kleiman.



In <a href="https://cryptopotato.com/wp-content/uploads/2020/08/lynn-wright-ira-kleiman-petition-071620.pdf" target="_blank" rel="noreferrer noopener">a separate legal maneuver</a>, the ownership of the company is an ongoing matter of dispute, and Lynn Wright contends that Ira Kleiman was “not authorized to act on behalf of W&amp;K Info Defense.”



Lawyers for Ira Kleiman, see the jury award as a win for their client, even if it falls far short of what they claimed:



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Kleiman v. Wright update: We are incredibly gratified the jury found Craig Wright has to pay our client, W&amp;K, $100,000,000 for the bitcoin-related assets he stole. This is a great win for our client and for justice!&mdash; Vel Freedman (@VelvelFreedman) <a href="https://twitter.com/VelvelFreedman/status/1467923812075421701?ref_src=twsrc%5Etfw">December 6, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3>Satoshi Nakamoto’s bitcoin stash</h3>



The identity of Satoshi Nakamoto was not a subject of this case. It was simply assumed that Wright had access to Satoshi&#8217;s 1.1 million bitcoins, which could have been awarded as damages. The jury elected not to award any bitcoins, opting instead to levy money damages in dollars.



For Ira Kleiman to collect on the $100 million from Wright due to <meta charset="utf-8">W&amp;K Info Defense Research, he will first have to resolve the dispute over the company’s ownership. If he does retain control, and successfully turns the jury award into a definitive money judgment that Wright must pay, the question remains, where will the money come from?



Earlier in the trial, the initial judge, Judge Reinhart, <a href="https://www.govinfo.gov/content/pkg/USCOURTS-flsd-9_18-cv-80176/pdf/USCOURTS-flsd-9_18-cv-80176-9.pdf" target="_blank" rel="noreferrer noopener">found</a> that Wright submitted forged documents and offered perjured testimony related to the production of a list of bitcoin addresses under his (supposedly Satoshi’s) control.



Wright has so far failed to prove that he is in possession of, or has access to, the private keys needed to move those early Satoshi-mined bitcoins. Absent such proof, he is unlikely to persuade <a href="https://bitcoinmagazine.com/business/op-ed-how-many-wrongs-make-wright" target="_blank" rel="noreferrer noopener">skeptics</a> that he is in fact Satoshi.



Wright disputes the consensus view of what bitcoin even is. In 2018, Wright’s <a href="https://www.gemini.com/cryptopedia/bsv-what-is-bitcoin-sv" target="_blank" rel="noreferrer noopener">preferred bitcoin, BSV</a>, which stands for “Bitcoin Satoshi’s Vision”, forked from the Bitcoin Cash (BCH) blockchain, which itself forked from the original BTC chain in 2017.



Speculators evidently view the trial outcome as beneficial for the prospects of the bitcoin fork — BSV has surged 34% in the past 24 hours and now as a market cap of just under $3 billion. That remains a far cry from the market cap of BCH at about $9 billion, much less the BTC market cap of $962 billion.




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<hr class="wp-block-separator"/>

Verdict in Craig Wright Civil Trial: $100M  Award for Plaintiff; No Punitive Damages

<div id="highlights-block_61a416f02d14a" class="highlights">
 <ul>
 <li>Wright’s defense team’s Motion for Judgment as a Matter of Law was denied on November 22, ensuring a jury decision</li>
 <li>Seven counts, including Civil Theft and Fraud, are now in a jury’s hands</li>
 </ul>
 
</div>



He claims to be the inventor of Bitcoin and the author of the original 2008 <a href="https://bitcoin.org/bitcoin.pdf">Bitc</a><a href="https://bitcoin.org/bitcoin.pdf" target="_blank" rel="noreferrer noopener">o</a><a href="https://bitcoin.org/bitcoin.pdf">in white paper</a>, under the pseudonym Satoshi Nakamoto. But the ultimate outcome of the civil trial of Dr. Craig Steven Wright, an Australian computer scientist, is unlikely to settle that mystery.



The United States District Court for the Southern District of Florida, however, accepts it as a given, by granting the plaintiff in the case standing to sue Wright in the first place. Although the prevailing view among Bitcoin proponents is that Wright’s assertion <a href="https://bitcoinmagazine.com/business/op-ed-how-many-wrongs-make-wright" target="_blank" rel="noreferrer noopener">is specious</a>, as far as Judge Beth Francine Bloom is concerned, Wright has 1.1 million bitcoins.



The jurors, slated to resume deliberations on Monday after a Thanksgiving break, are tasked with passing judgment on a more limited question: whether Wright is guilty of fraud, theft, breach of fiduciary duty, and a handful of other counts that could leave him liable for half of the bitcoin stash that he may have mined in Bitcoin’s early days.&nbsp;



The plaintiff in the case, Ira Kleiman, says that the <a href="https://cms.blockworks.co/bubbles-bitcoin-and-whats-next/" target="_blank" rel="noreferrer noopener">bitcoin,</a> while ostensibly Wright’s, rightfully belongs to the estate of Kleiman’s deceased brother David, a friend and alleged business partner of Wright’s. David Kleiman died in April 2013 at the age of 46, without ever laying hands on the fortune his brother now says should be his.



Ira Kleiman initially sued Wright in February 2018, claiming that Wright schemed to steal both the 1.1 million bitcoins and the intellectual property connected with Bitcoin’s open-source code that David Kleiman may have helped develop. At the time of the original suit, the quantity of bitcoin at issue was valued at just over $10 billion. The stakes are somewhat higher now — that much bitcoin is worth some $60 billion dollars today.



If the jury of three men and seven women finds that Wright had a partnership with David Kleiman to mine those coins, assuming they are in fact under Wright’s control, they will have to determine the value owed to Kleiman’s estate, plus any punitive damages — and the plaintiffs&#8217; lawyers have asked for plenty — bringing the total claims and damages to $189 billion. (For comparison, the world’s richest person, Amazon founder Jeff Bezos, is worth $177 billion and just the $30 billion in bitcoin alone would put Ira Kleiman among the top 50 richest people in the world, <a href="https://davidgerard.co.uk/blockchain/2021/11/13/news-craig-wright-in-court-mt-gox-settlement-bitcoin-futures-etf-reddit-community-points-miners-still-cant-sell-their-bitcoins/" target="_blank" rel="noreferrer noopener">according to Forbes</a>.)



Ira Kleiman <a href="https://www.law360.com/articles/1438959" target="_blank" rel="noreferrer noopener">has testified</a> that Wright and his brother created a company in Florida in 2011 — W&amp;K Info Defense Research LLC — which is how the Australian has ended up spending time in and out of a Miami courtroom <a href="https://news.bitcoin.com/judge-orders-craig-wright-to-physically-appear-in-florida-lawsuit/" target="_blank" rel="noreferrer noopener">since 2019</a>.



Wright denies the allegations, and says Kleiman merely helped him temporarily transfer control of the bitcoin — which <a href="https://www.law360.com/fintech/articles/1439426/bitcoin-inventor-accused-at-trial-of-lying-about-trust" target="_blank" rel="noreferrer noopener">he says</a> was purchased in 2011 from a &#8220;dodgy&#8221; Russian exchange — to keep it out of reach of Australian tax authorities.



<h3>A last-ditch effort to avoid a jury verdict</h3>



Shortly before closing arguments last week, Wright’s legal team filed a Motion for Judgement as a Matter of Law — basically an appeal to the judge that the plaintiffs haven’t presented sufficient evidence. Such a preemption by the judge is only an option if there “is no legally sufficient evidentiary basis for a reasonable jury to find for the non-moving party.” According to <a href="https://www.govinfo.gov/content/pkg/USCOURTS-flsd-9_18-cv-80176/pdf/USCOURTS-flsd-9_18-cv-80176-25.pdf" target="_blank" rel="noreferrer noopener">court documents</a>, there is, and the motion was denied.



The court previously <a href="https://www.govinfo.gov/content/pkg/USCOURTS-flsd-9_18-cv-80176/pdf/USCOURTS-flsd-9_18-cv-80176-23.pdf" target="_blank" rel="noreferrer noopener">denied a motion</a> from the defense for Summary Judgement, which uses a similar legal standard, so this last legal maneuver was a long shot.



Among the Wright team’s arguments was that the market value of the bitcoins at issue could not be used as the basis for the jury judgment under a Florida precedent known as the “Blockage Discount Theory” —&nbsp; that the bitcoin could not be sold without substantially adversely affecting the price. The judge disagreed.



<h3>To be or not to be Satoshi Nakamoto</h3>



Wright has never been able to prove that he is Satoshi Nakamoto by either signing a message using the PGP key for Satoshi’s encrypted emails, or moving any of the early Satoshi-mined bitcoin he presumably should control.



The case has yielded more sordid details of Wright’s behavior. In March 2020, a previous judge in the case, Judge Bruce E. Reinhart, <a href="https://storage.courtlistener.com/recap/gov.uscourts.flsd.521536/gov.uscourts.flsd.521536.420.0.pdf" target="_blank" rel="noreferrer noopener">reprimanded Wright</a> for forging documents and giving perjured testimony.



Gavin Andresen, who once claimed that he was personally convinced Wright was indeed Satoshi, expressed doubts on that view in <a href="https://storage.courtlistener.com/recap/gov.uscourts.flsd.521536/gov.uscourts.flsd.521536.589.3.pdf" target="_blank" rel="noreferrer noopener">a sworn deposition</a> during the trial, referring in particular to supposed proof proffered by Wright:



<blockquote class="wp-block-quote">“That gobbledygook proof that he published was certainly, deception, if not an outright lie. So at the very least, that, I consider, you know, that — he bamboozled me there.”</blockquote>



When Wright set a date to prove his claims — by transferring bitcoin known to belong to Satoshi Nakamoto to Andresen — he failed to deliver. On the day that he was due to transfer the bitcoin — May 4th, 2016 — Andresen says he was told Wright attempted suicide and was taken to the hospital.



Wright is now in a precarious position. If the jury finds in Kleiman’s favor, it is unlikely that Wright will be able to access the half a million in bitcoin — whether or not he is Satoshi — for one simple reason: It’s almost inconceivable that he would not already have done so. Satoshi’s coins have not moved for over a decade, even as the price of 1 bitcoin has gone from less than a penny to $68,521. That’s the clearest indication that Satoshi is either dead, or has lost the keys.



As <a href="https://davidgerard.co.uk/blockchain/2021/11/13/news-craig-wright-in-court-mt-gox-settlement-bitcoin-futures-etf-reddit-community-points-miners-still-cant-sell-their-bitcoins/" target="_blank" rel="noreferrer noopener">David Gerard put it</a>, “Wright could end up owing half a million bitcoins he doesn’t control to the estate of the guy he didn’t invent Bitcoin with, just because he wouldn’t admit he wasn’t really Satoshi.”



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