Emerging Tech Law Issue #2
WeRide or Die ... NFT bubble shockingly attracts fraudsters ... Short-term prognosis on gene therapy gets grimmer ... and more
Welcome to the second issue of Emerging Tech Law — a slightly irreverent view of regulatory developments (and other interesting stuff) relating to emerging technologies including AI, IoT, robotics, blockchain/crypto, 5G, artificial/virtual/extended reality, biotech and quantum computing.
Author’s Note: A common thread in each of the featured stories this week is that emerging technologies, such as autonomous vehicles, blockchain tech and gene therapies, offer great promise in the long run to improve our lives, but pose new risks in the near term. The key questions are: Are we willing to take those risks for long-term good? Do we need government to step in?
In this issue:
· WeRide “safety driver” catches some 💤’s
· Would you believe? NFT “get rich quick” fervor attracts crypto fraud.
· Another setback for gene therapy.
Quote of the week:
“I hope I never recover from this. I hope that I can maintain what I feel now. I don’t want to lose it.”
-William Shatner, after returning from his Blue Origin Flight and at age 90 becoming the oldest person to travel to space.
WeRide or die? The “safety driver” of an autonomous WeRide robotaxi in the Bay Area was apparently caught napping while the car continued at highway speeds on busy SR85. Fortunately, the car managed to maneuver safely, and the driver apparently woke up before a collision occurred.
The incident, however, highlights one of the risks of relying on humans as “monitors” of autonomous driving systems. Ultimately, autonomously driven vehicles could save thousands of lives. Even now, Tesla claims a significantly lower accident rate when its cars’ Auto Pilot features are activated than when they are not. The AI-based self-driving systems, however, have not progressed to the point where vehicles can be operated without close monitoring by a human driver, and unfortunately, humans (even if they aren’t sleeping) are ridiculously bad at taking control of a vehicle that has been in an automated mode.
After an accident in which an Uber safety driver may have been watching “The Voice” on her phone when the autonomously driven vehicle that she should have been monitoring struck a woman crossing a road, the National Transportation Safety Board recommended that safety drivers be monitored. One way to do this is to have a second person in the vehicle keeping an eye on the safety driver; another way is to have a camera pointed at the driver to monitor the driver’s awareness and provide an alert if the driver is inattentive. Shockingly, WeRide was less than forthcoming in response to a Forbes reporter’s questions about what system was in place to monitor its sleeping driver.
The technology to avoid an issue like this one is widely available, though. Even a lowly Subaru Legacy, driven by the author recently as a loaner and equipped with the company’s Eye Sight system, could accelerate, brake, hold its lane on a highway and (to the point of this article) prompt the driver with an alert if the driver’s eyes were diverted by the fine lines of the car’s handsome interior and not focused on the road. Since the technology is available, the question is why wouldn’t WeRide have been using it.
There oughta be a law?: After an early surge in 2021 and then fading faster than the value of your grandma’s Beanie Baby collection, non-fungible tokens (NFTs) have reemerged like a new bud from a hardy Dutch tulip bulb. Global NFT sales hit about $255 million in May 2021 and then dropped off before surging with around a $1 billion in sales in August. Now, everyone has jumped into NFTs. American football star Tom Brady is launching an NFT platform called Autograph and the list of (has-been) celebrities who have joined the NFT game reads like the guests of honor at MTV’s 1999 Video Music Awards, including Lindsay Lohan, Paris Hilton and Tony Hawk.
Big $: In case you missed it, NFTs are unique digital files generated on a blockchain platform that represent IRL assets like art or music. In March, artist Beeple’s Everydays: The First 5,000 Days sold for $69.3 million through Christie’s auction house.
Considering the surge in prices of NFTs, it’s not surprising that fraud and theft have been rampant. Artists are discovering their artwork for sale on NFT sites without their permission; buyers are falling for fake projects; and collectors have had their works stolen. An executive of OpenSea.io, one of the primary auction houses/exchanges for NFTs stepped down last month amid allegations that he was trading on inside information to buy NFTs for his personal account before they were hyped on the front page of OpenSea.
“This sort of activity is going to, unfortunately, lead people to be less trusting of the crypto markets and give regulators more ammunition to want to regulate.” —Robert G. Heim, a NY crypto lawyer and master of the obvious (if not the universe) told The Intelligencer.
There are a few ways NFTs may be regulated in the U.S.:
1. Regulating NFTs as commodities. The fine folks at the U.S. Commodity Futures Trading Commission (CFTC) who ordinarily concern themselves with futures in soybean oil and pork bellies have decided it would be so much cooler to focus on crypto. They’ve already begun treating NFTs’ blockchain brothers, Bitcoin and other cryptocurrencies, as commodities and would likely treat NFTs as commodities too. The CFTC has oversight over (a) commodities-based derivatives (a financial contract that has a value based on the value of the underlying asset) and (b) fraud and manipulation in commodities transactions in interstate commerce (pretty much all transactions involve some element of interstate commerce these days).
2. Regulating NFTs as securities: For a straight-up exchange of cash or crypto for an NFT of your favorite Hello Kitty character, the U.S. securities laws likely would not apply, but if ownership of Chococat is divided into fractional shares (a/k/a “shards” by crypto geeks) so that you and 999 of your friends can pool your funds together, the sale of those fractional shares would likely be treated as securities, subject to regulation in the U.S. by the Securities & Exchange Commission.
3. Regulating NFTs like everything else: Just because it happens on the blockchain doesn’t mean it exists in some sort of lawless metaverse. You can call it an NFT, but laws against fraud and theft, which are as old as Hammurabi, still apply.
On the bright side: As with crypto, the hype (and shady dealings) surrounding NFTs obscure the deeper usefulness of blockchain technology. NFTs represent a remarkable breakthrough. The digital revolution of the last few decades has been fueled in part by the near-zero cost of replicating digital goods. Once the code is written, software can be replicated millions of times for little additional cost. The digital revolution upended industries including music, book publishing and journalism.
Blockchain tech, however, turns the “copy and paste” concept on its head because it enables the production of unique digital assets. In theory, this empowers creators to get fuller value for their music, writings and other art because digital creations can be unique or offered in limited editions but still sold through cheaper distribution channels enabled by the Internet.
It gets worse: The near-term prognosis for gene therapies continues to get grimmer. Astellas Pharma reported that a young boy with a rare neuromuscular disease died of liver failure after receiving a gene therapy as part of a trial. The boy’s death came after three other boys who were also part of the trial died a year earlier. Last week, we reported that the FDA had put a hold on biotech star Allogene Therapeutics cancer drug clinical trials after a report of a “chromosomal abnormality” in a lymphoma patient treated with the company’s gene therapy.
“Investor sentiment is probably at all-time lows for gene therapy,” Luca Issi, senior biotechnology analyst at RBC Capital Markets told The Wall Street Journal. A few years ago, “the skies were blue, and now that is not the case.”
Some experts say, though, that the spate of issues is reflective of the substantial growth in the field.
“One of the reasons you’re hearing about all these [setbacks] is that the scale of these trials is going up exponentially because the therapies are all working so well,” Nicole Paulk, assistant professor of biochemistry and biophysics at the U.C., San Francisco told The WSJ. “With that increase in numbers, there will be increases in growing pains.”
· The CFTC announced the settlement of two cases. Tether Holdings will pay $41 million to settle a claim that it mislead investors about the extent of assets backing up its Tether cryptocurrency “stablecoin” that is tied to the U.S. dollar. Bitfinex allegedly engaged in illegal, off-exchange retail commodity transactions in digital assets with U.S citizens on the Bitfinex trading platform and operated as a futures commission merchant without registering as required. Neither company admitted guilt.
· The Biden administration is reportedly considering nominating former FDA Commissioner Robert Califf to return to his post. Califf served as FDA commissioner during the Obama administration and then subsequently served as head of health policy at Google parent company, Alphabet.
· Women in Quantum Series: Rojalin Mishr, a senior engineer at Riverlane, has some optimism about equality and diversity. Key quote: “Thankfully, a great number of organizations are working toward bringing balance. With growing diversity in the top positions, the culture is changing for the better.”
“But he'd learned long ago that a life lived without risks pretty much wasn't worth living. Life rewarded courage, even when that first step was taken neck-deep in fear.”
― Tamera Alexander, Within My Heart
Obligatory disclaimer: Any opinions are those of the cited source or the author of this newsletter, not the author’s employer. If for some reason you think any legal advice is given in this newsletter, you’re sadly mistaken.