NY State Senate Bill 2021-S9275

Archive: Last Bill Status - Stricken

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
May 25, 2022	recommit, enacting clause stricken
May 12, 2022	referred to internet and technology

2021-S9275 (ACTIVE) - Details

Law Section:: General Business Law
Laws Affected:: Add §350-b-2, Gen Bus L

2021-S9275 (ACTIVE) - Summary

Requires certain disclosures by a developer of virtual tokens in advertisements involving such virtual tokens.

2021-S9275 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S9275

SPONSOR: COONEY
 
TITLE OF BILL:

An act to amend the general business law, in relation to requiring
certain disclosures in advertisements involving virtual tokens

 
PURPOSE OR GENERAL IDEA OF BILL:

Requires certain disclosures in advertisements involving virtual tokens.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 defines different terms relating to virtual tokens as well as
the definition of an advertisement. It also prohibits advertisers from
advertising a security token without conspicuously disclosing the amount
they were paid to make the advertisement. Lastly, it describes the form
of disclosure for advertisements.

Section 2 is the effective date.

 
JUSTIFICATION:

There has been a flood of new, unregulated virtual tokens that resemble
securities and that have been placed on the open market for unwitting
investors to invest large sums of money into in the hopes of a signif-
icant price increase. Although most of these tokens are advertised as
investment opportunities, many people invest in them without fully
understanding what they are investing in. The majority of the time,
these security tokens are created by small groups of anonymous individ-
uals who have complete control over the price of the security tokens,
either through their ability to cease technical support or to sell a
large portion of the supply all at once to make substantial profits.

The use of public figures to promote a security token is a common strat-
egy used to garner interest in the security token. These public figures
are frequently compensated in the same security tokens created by the
developers, in the hopes that their promotion of the security token will
cause the price to increase rapidly - sometimes by 10,000% or more in a
single day - and net the advertiser a large sum of money. Users are
unaware of the amount of money paid to the advertiser, even when they
are compensated with other forms of consideration such as money, leaving
them with very little information about why the advertiser is advertis-
ing the security token.

Advertisers of securities, such as stocks, must already disclose the
amount of consideration they were paid under federal anti-touting laws,
and it is time for virtual tokens that act as securities to be subjected
to the same rules. If prospective investors learn of the amount of
compensation provided to the advertiser for their advertisement, they
may or may not be hesitant to put their hard-earned money into such an
investment. Regardless of the decision they end up making, it is every
investor's right to have the information necessary to make that decision
in the first place.

 
PRIOR LEGISLATIVE HISTORY:

New bill.
 
FISCAL IMPLICATIONS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect immediately.

2021-S9275 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   9275
 
                             I N  S E N A T E
 
                               May 12, 2022
                                ___________
 
 Introduced  by  Sen.  COONEY -- read twice and ordered printed, and when
   printed to be committed to the Committee on Internet and Technology
 
 AN ACT to amend the general  business  law,  in  relation  to  requiring
   certain disclosures in advertisements involving virtual tokens
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. The general business law is amended by adding a new section
 350-b-2 to read as follows:
   § 350-B-2. DISCLOSURES REQUIRED IN ADVERTISEMENTS  INVOLVING  SECURITY
 TOKENS.  1.  AS  USED IN THIS SECTION THE FOLLOWING TERMS SHALL HAVE THE
 FOLLOWING MEANINGS:
   (A) "VIRTUAL TOKENS" SHALL MEAN SECURITY TOKENS AND STABLECOINS;
   (B) "SECURITY TOKENS" SHALL MEAN ANY FORM OF FUNGIBLE AND NON-FUNGIBLE
 COMPUTER CODE BY WHICH ALL SUCH FORMS OF OWNERSHIP OF SAID COMPUTER CODE
 IS DETERMINED THROUGH VERIFICATION OF  TRANSACTIONS  OR  ANY  DERIVATIVE
 METHOD,  AND  THAT  IS  STORED ON A PEER-TO-PEER COMPUTER NETWORK OR ANY
 OTHER SUCH COMPUTERIZED SYSTEM OR THROUGH ANY DERIVATIVE MEANS OF  STOR-
 AGE, AND WHICH CONFORMS TO ONE OF THE FOLLOWING:
   (I)  SUCH  CLASS  OF VIRTUAL TOKENS ARE ADVERTISED BY THE DEVELOPER OR
 ANOTHER AT THE DEVELOPER'S DIRECTION TO  BE  BOUGHT  AND  SOLD  FOR  THE
 PURPOSE OF PROFIT, WHETHER OR NOT SUCH PURPOSE IS ADVERTISED AS THE SOLE
 PURPOSE;
   (II)  SUCH  VIRTUAL  TOKENS CAN BE REASONABLY UNDERSTOOD BY MEMBERS OF
 THE PUBLIC TO BE BOUGHT AND SOLD FOR THE PURPOSE OF PROFIT;
   (III) THE VALUE OF SUCH CLASS OF VIRTUAL TOKENS IS DETERMINED  BY  THE
 SUPPLY AND DEMAND OF THE VIRTUAL TOKEN;
   (IV)  SUCH  CLASS OF VIRTUAL TOKENS: (I) ARE NOT PEGGED TO AN EXTERNAL
 SOURCE, WHETHER OR NOT SUCH EXTERNAL SOURCE IS VOLATILE, (II) ARE PEGGED
 TO ANOTHER CLASS OF VIRTUAL TOKENS, OR SUCH CLASS OF VIRTUAL  TOKENS  DO
 NOT EMPLOY TECHNOLOGY WHICH PREVENTS LARGE FLUCTUATIONS IN ITS PRICE, OR
 SUCH TECHNOLOGY FAILS TO PREVENT THE SAME;
   (C)  "STABLECOIN"  SHALL  MEAN  ANY  FORM OF FUNGIBLE AND NON-FUNGIBLE
 COMPUTER CODE BY WHICH ALL SUCH FORMS OF OWNERSHIP OF SAID COMPUTER CODE
 IS DETERMINED THROUGH VERIFICATION OF  TRANSACTIONS  OR  ANY  DERIVATIVE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD13980-03-2
 S. 9275                             2
 
 METHOD,  AND  THAT  IS  STORED ON A PEER-TO-PEER COMPUTER NETWORK OR ANY
 OTHER SUCH COMPUTERIZED SYSTEM OR THROUGH ANY DERIVATIVE MEANS OF  STOR-
 AGE, AND WHICH CONFORMS TO ALL OF THE FOLLOWING:
   (I)  SUCH  CLASS OF VIRTUAL TOKENS ARE NOT ADVERTISED BY THE DEVELOPER
 OR ANOTHER AT THE DEVELOPER'S DIRECTION TO BE BOUGHT AND  SOLD  FOR  THE
 PURPOSE OF PROFIT, WHETHER OR NOT SUCH PURPOSE IS ADVERTISED AS THE SOLE
 PURPOSE;
   (II)  SUCH  CLASS OF VIRTUAL TOKENS CANNOT BE REASONABLY UNDERSTOOD BY
 MEMBERS OF THE PUBLIC TO BE BOUGHT AND SOLD FOR THE PURPOSE OF PROFIT;
   (III) THE VALUE OF SUCH CLASS OF VIRTUAL TOKENS IS NOT  DETERMINED  BY
 THE SUPPLY AND DEMAND OF THE CLASS OF VIRTUAL TOKEN; AND
   (IV)  SUCH  CLASS  OF VIRTUAL TOKENS ARE PEGGED TO AN EXTERNAL SOURCE,
 OTHER THAN ANOTHER CLASS OF VIRTUAL TOKENS, WHETHER OR NOT SUCH EXTERNAL
 SOURCE IS VOLATILE, OR SUCH CLASS OF VIRTUAL TOKENS DO EMPLOY TECHNOLOGY
 WHICH PREVENTS LARGE FLUCTUATIONS  IN  ITS  PRICE,  OR  SUCH  TECHNOLOGY
 SUCCEEDS IN PREVENTING THE SAME;
   (D)  "CLASS"  SHALL  MEAN  A GROUP OF FUNGIBLE OR NON-FUNGIBLE TOKENS,
 IRRESPECTIVE OF THE AMOUNT CREATED, THAT IS INTENDED BY THE DEVELOPER TO
 BE:
   (I) IN THE CASE OF FUNGIBLE TOKENS, VALUED AND EXCHANGED TOGETHER; OR
   (II) IN THE CASE OF NON-FUNGIBLE TOKENS, REGARDED AS PART OF THE  SAME
 GROUP  OF DIGITAL OR PHYSICAL ITEMS OR VALUED TOGETHER WITH THE DEVELOP-
 ER'S OTHER NON-FUNGIBLE TOKENS BASED ON THE FACT THAT  THE  NON-FUNGIBLE
 TOKENS  WERE  CREATED  BY  A  CERTAIN DEVELOPER, TAKING INTO ACCOUNT THE
 DEVELOPER'S NOTORIETY, SALE VOLUME, AND HOW HE OR SHE IS REGARDED WITHIN
 VIRTUAL TOKEN COMMUNITIES;
   (E) "DEVELOPER" SHALL MEAN THE PERSON OR PERSONS, WHETHER  NATURAL  OR
 OTHERWISE,  AND ANY AGENT OR EMPLOYEE THEREOF WHO EITHER CREATE IN WHOLE
 OR IN PART, MAINTAIN IN WHOLE OR IN PART, OR OWN MORE THAN  TEN  PERCENT
 OF  A  CLASS  OF VIRTUAL TOKENS UTILIZING ANY TECHNICAL STANDARD AND WHO
 OFFERS THEM FOR PURCHASE IN THE STATE OF NEW YORK OR, WHERE THE SALE  OF
 THEIR  TOKENS  IN  THE STATE OF NEW YORK IS PROHIBITED, SUCH PERSON DOES
 NOT USE REASONABLE EFFORTS TO PREVENT SUCH  VIRTUAL  TOKENS  FROM  BEING
 MADE AVAILABLE FOR PURCHASE IN THE STATE OF NEW YORK;
   (F)  "TECHNICAL STANDARD" SHALL MEAN THE RULES THAT A CLASS OF VIRTUAL
 TOKENS SHALL COMPLY WITH IN ORDER TO USE THE BLOCKCHAIN NETWORK  OR  ANY
 DERIVATIVE MEANS THEREOF;
   (G)  "NON-FUNGIBLE TOKEN" SHALL MEAN A VIRTUAL TOKEN USED TO DENOTE ON
 THE BLOCKCHAIN OWNERSHIP OF ANY DIGITAL OR PHYSICAL ITEM OR ANY  DERIVA-
 TIVE MEANS THEREOF;
   (H) "FUNGIBLE TOKEN" SHALL MEAN ANY VIRTUAL TOKEN STORED ON THE BLOCK-
 CHAIN OTHER THAN NON-FUNGIBLE TOKENS;
   (I) "OWNED" AND "OWNERSHIP" SHALL MEAN THE MEANS BY WHICH OWNERSHIP OF
 A DIGITAL ASSET IS NOTED ON THE BLOCKCHAIN OR ANY DERIVATIVE MEANS THER-
 EOF;
   (J)  "TOKEN" SHALL MEAN THE TECHNICAL STANDARD USED TO CREATE A FUNGI-
 BLE OR NON-FUNGIBLE PIECE OF COMPUTER CODE;
   (K) "WALLET" SHALL MEAN A DEVICE, PROGRAM, OR SERVICE WHICH STORES THE
 PUBLIC AND/OR PRIVATE KEYS FOR VIRTUAL TOKEN TRANSACTIONS;
   (L) "BLOCKCHAIN" SHALL MEAN ANY TYPE OF TECHNOLOGY WHICH  STORES  CODE
 ON  A  DATABASE  OF  WHICH SAID DATABASE REPRESENTS THE RECORD OF TRANS-
 ACTIONS THAT MAKE UP VIRTUAL TOKENS OR ANY DERIVATIVE TECHNOLOGY;
   (M) "PRIVATE KEY" SHALL MEAN THE UNIQUE IDENTIFIER OF A WALLET, OR ANY
 SUBSTANTIALLY SIMILAR ANALOGUE, THAT IS PAIRED WITH A PUBLICLY AVAILABLE
 IDENTIFIER AND ASSOCIATED WITH AN ALGORITHM THAT IS NECESSARY  TO  CARRY
 OUT AN ENCRYPTION OR DECRYPTION REQUIRED TO EXECUTE A TRANSACTION; AND
 S. 9275                             3

   (N)  "ADVERTISEMENT"  SHALL MEAN AND INCLUDE BUT NOT BE LIMITED TO ANY
 PUBLIC NOTICE,  CIRCULAR,  ADVERTISEMENT,  NEWSPAPER,  ARTICLE,  LETTER,
 INVESTMENT  SERVICE  OR  COMMUNICATION  TO  MORE THAN ONE PERSON WHETHER
 DIRECTLY OR INDIRECTLY.
   2.  IT SHALL BE UNLAWFUL FOR ANY PERSON, WHETHER NATURAL OR OTHERWISE,
 OR ANY AGENT OR EMPLOYEE THEREOF TO GIVE PUBLICITY TO, OR CIRCULATE  ANY
 ADVERTISEMENT  WHICH, THOUGH NOT PURPORTING TO OFFER A CLASS OF SECURITY
 TOKENS FOR SALE, DESCRIBES SUCH CLASS OF SECURITY TOKENS THAT IS CREATED
 BY A DEVELOPER SEEKING SUCH  ADVERTISEMENT  FOR  CONSIDERATION,  WHETHER
 DIRECTLY  OR  INDIRECTLY,  WITHOUT FULLY DISCLOSING THE RECEIPT, WHETHER
 PAST OR PROSPECTIVE, OF THE AMOUNT THEREOF.
   3. THE FORM OF DISCLOSURE SHALL BE WRITTEN ON EACH ADVERTISEMENT IN  A
 SUFFICIENTLY  READABLE TYPEFACE OR, WHERE SUCH ADVERTISEMENT IS AUDITORY
 IN NATURE, STATED IN A CLEAR AND UNDERSTANDABLE TONE PRIOR TO THE  AUDI-
 TORY STATEMENT.
   § 2. This act shall take effect immediately.

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Senate Bill S9275

Sponsored By

Archive: Last Bill Status - Stricken

Actions

2021-S9275 (ACTIVE) - Details

2021-S9275 (ACTIVE) - Summary

2021-S9275 (ACTIVE) - Sponsor Memo

2021-S9275 (ACTIVE) - Bill Text download pdf

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Sponsored By

Jeremy Cooney

Archive: Last Bill Status - Stricken

Actions

2021-S9275 (ACTIVE) - Details

2021-S9275 (ACTIVE) - Summary

2021-S9275 (ACTIVE) - Sponsor Memo

2021-S9275 (ACTIVE) - Bill Text download pdf

Comments