The previously hypothetical application of antitrust laws to the world of cryptocurrency is now a reality in United American, Corp. v. Bitman, Inc., a case before the courts in the US State of Florida. The case is most recently awaiting a decision on the motion to dismiss filing, which provides insights into the antitrust law angle to the case.
The case relates to a number of blockchain solutions offered by United American Corp, all of which rely on a cryptocurrency called Bitcoin Cash, one of the hundreds of publicly available cryptocurrencies. As with other cryptocurrencies, Bitcoin Cash’s protocols set out its rules and governance.
In November 2018, protocol developers disagreed on how to update Bitcoin Cash’s protocols. This resulted in a split between two different camps: Bitcoin ABC and Bitcoin SV. When such splits occur, the preferred camp is decided by the cryptocurrency miners by choosing to mine for their preferred camp. Of the two camps, Bitcoin ABC garnered greater support and succeeded Bitcoin Cash in name. However, the battle between the two camps to gain miners’ buy-in caused the combined value of the two camps to drop below the levels of the formerly unified Bitcoin Cash cryptocurrency.
United America Corp. alleges that a number of investors, mining pools (groups of miners that combine their mining resources), crypto-exchanges and protocol developers colluded to get as many miners as possible to support Bitcoin ABC over Bitcoin SV . The alleged collusion led to the prices of both falling, resulting in financial harm.
The case raises a number of very interesting issues: who has standing to bring a case for antitrust damages in the blockchain context (investors? miners? users?), and whether actions such as getting miners to support one camp over another can really be said to be a harm, meaning it distorted the competitive process.
The most interesting issue that the case raises, however, is whether changing protocols and trying to attract users to a specific camp does actually amount to collusion. The attempt to get more users on a specific camp is essentially an effort to expand capacity, which is not in itself anticompetitive, in the same way that a factory expansion of capacity is not in itself anticompetitive.
There may, however, be circumstances in which protocol design do raise concerns of anticompetitive conduct: it could be found that the intent to attract miners to one camp over another was predatory, with the objective of losing money in the short term, only to recoup it in the longer term after removing the competition. If it was possible to prove anticompetitive conduct in such a context, follow-on damages cases could also become possible.
Any decision in the United America Corp. case has the potential to establish legal firsts in the blockchain industry, and the court should be careful to ensure it delineates the precise legal underpinnings in its reasoning. But one thing is clear from this case so far: it is possible to apply standard antitrust analysis and principles to issues arising in blockchain and cryptocurrency.
Watch this space for more potential antitrust cases in the US, and for when similar cases inevitably start to be brought in the EU - both to prove anticompetitive conduct and follow-on damages actions.
United American Corp (UnitedCorp), a digital technologies company, has filed a lawsuit against Bitmain, Bitcoin.com, Roger Ver, Kraken, and other individuals involved in, what United Corp claims is, a "well-planned scheme to take control of the Bitcoin Cash network."