Unchained Podcast – Episode 968

Title: DEX in the City: Class Actions in Crypto Are on the Rise. Are They More Dangerous Than SEC Enforcement?
Host: Laura Shin (with Katherine “KK” Kirkpatrick, Jesse, and V as main legal commentators)
Date: December 3, 2025

Episode Overview

In this episode of Unchained, the panel dives deep into the rising wave of class action lawsuits targeting the crypto industry, dissecting whether these civil litigations are a bigger existential threat than traditional regulatory enforcement from agencies like the SEC or CFTC. Using real-life examples and sharp legal analysis, Katherine “KK” Kirkpatrick, Jesse, and V deconstruct why the plaintiffs’ bar is increasingly turning its sights on crypto companies—and why this shift matters. The conversation also touches upon the unique challenges of litigating crypto cases, international regulatory bans, and ends with positive stories spotlighting crypto’s charitable side.

Key Discussion Points & Insights

1. The Class Action Surge in Crypto

• For years, SEC, CFTC, and DOJ enforcement were seen as existential threats for the crypto industry.
• A "new player" has stepped up as regulatory actions quiet down: the plaintiffs’ bar and, specifically, class action lawsuits.
• Distinction is drawn between civil (plaintiffs) litigation and government-led actions and why class actions can be harder to deal with, potentially leading to worse outcomes for targets.

V [00:00]: "SEC, CFTC enforcement actions, DOJ actions were sort of existential for the industry, but class actions in some ways can be even more dangerous."

What Is a Class Action?

• A class action is a lawsuit where a small number of people represent a larger group with a common injury.
• Originally from England, class action became an "American thing,” but global adoption is rising.

KK [03:16]: "This is a lawsuit where a small number of people represent an entire group, all who have usually shared the same injury or where their circumstances have similar questions of law and fact."

Pluses and Pitfalls of Class Actions

• Pros: Efficient way for many with small harms to seek collective remedy (e.g., "Erin Brockovich").
• Cons: Plaintiffs’ lawyers motivated by contingency fees and large settlements sometimes file abusive or frivolous actions, especially in turbulent markets. Potential for "judicially sanctioned extortion."
• Increasing creativity is required as Supreme Court rulings and arbitration clauses make class certification harder.

Jesse [10:28]: "Courts generally, and the Supreme Court generally over the past 15 years, has been recognizing that potentially this has been abused."

2. Unique Risks Class Actions Pose to Crypto

• No "Wells process" or established settlement frameworks as with regulators.
• Plaintiffs’ lawyers are incentivized to sue many targets—sometimes as "settlement bait."
• Groundbreaking, novel legal theories are common, raising litigation risk, compliance costs, and public reputation harm.

V [07:23]: "Class actions in some ways can be even more dangerous...A lot of times it's contingency fee based with potentially massive statutory damages. And...more novel legal theories than you would typically see from, like, you know, a regulator."

3. Current Notable Lawsuits Targeting Crypto

A. Coinbase Derivative Lawsuit [13:11]

• Coinbase shareholders allege insiders traded on non-public information, enriching themselves at the expense of the company.
• Even large, legal-savvy public companies like Coinbase face ongoing exposure due to their crypto focus and visibility.

KK [15:51]: "If you look at a large, thriving, visible public company, they're going to be dealing with an onslaught of lawsuits. This is all part of their strategy. But this one is notable because they keep getting hit by these allegations and they're at a higher risk of getting sued because they're a crypto company."

B. Binance & Hamas – Terrorism Financing Lawsuit [16:28]

• Families of October 7th Hamas attack victims file suit alleging Binance enabled terrorism financing through weak AML/KYC controls, citing damning internal Binance communications and leveraging admissions made in the DOJ case against Binance.
• Uniquely high damages possible (e.g., treble damages), showing how class actions can be weaponized beyond securities law.

Jesse [18:56]: "Binance folks, in their own words calling the platform an international circumvention of KYC, joking about saying, like, bad actors come here...And like, we could go through it all. This issue has been talked about over and over again. But this class action is not alone. They're spinning up all over the place."

C. Kalshi: The Blurring Line Between Prediction Markets & Gambling [21:45]

• Kalshi faces a new class action alleging it operates as an unlicensed sportsbook, not a CFTC-regulated prediction market, by secretly taking the other side of bets via subsidiaries and hedge funds.
• Legal analysis centers around whether market makers = "the house", preemption by federal law, and the importance of proper disclosure.

V [24:50]: "Customers think they're betting against each other, but the complaint says they're actually betting against Kalshi and their hedge fund friends, and they never knew that."

• Jury Dilemma: Crypto cases are extremely hard to explain to juries; issues of market making, derivatives, and peer-to-peer models are highly technical and easily misconstrued.

KK [28:34]: "When you have a jury involved, you need to break all of this down into English in that the jury will understand. And I mean juries, most average people are not going to understand prediction markets or crypto..."

4. The Regulatory Void and the Importance of Private Rights of Action

• In the US, securities and commodities laws provide a "private right of action," letting individuals sue in addition to (or instead of) regulatory agencies—a policy choice by Congress to “deputize” private enforcement.
• As regulatory agencies quiet down, private lawsuits fill the gap.

V [11:57]: "When Congress passed the securities laws and commodities laws, they specifically created a private right of action...because Congress basically wanted private citizens to...help the regulators enforce..."

5. Crypto Bans: Regulatory Context Abroad [33:19]

• "Crypto bans" take different forms globally, with varying effectiveness:
  • India: Fluctuated between outright bans, legal challenges, and now punitive taxation (30%), stalling clarity and adoption.
  • China: Legendary for shifting from crackdowns on mining and ICOs to a blanket ban and latest pronouncements focused especially on stablecoins, all to retain capital controls and push government-backed CBDCs.
  • Underlying theme: True bans are hard; often they result in displacement, underground activity, or are circumvented by local authorities.

Jesse [39:48]: "China still has about 14% of global Bitcoin mining hash rate because on the local level, the local governments are getting a lot of money from this. So...can you really ban this?"

6. Decentralization: More Than a Buzzword

• Outages at centralized institutions (e.g., CME’s 10-hour halt due to a single data center failure in Aurora, IL) underscore why decentralization is fundamental to crypto advocates.
• Centralized points of failure remain a theme, whether in tradfi or blockchain infrastructure (e.g., Cloudflare outages impeding wallet access).

KK [44:04]: "How can CME be impacted by a physical issue at one data center...decentralization means that no one data center, electronic, physical, otherwise can impact or create outages that impact global markets."

Jesse [44:45]: "What does that mean about relying on something like a Cloudflare? How do we find a way to actually not have over reliance on one platform, one cloud provider, one server?"

7. Good News: Crypto’s Charitable Side [46:59]

Boys Club DAO

• Donated $200,000 (in Ethereum via The Giving Block) to Lower East Side Girls Club, continuing a tradition of using crypto for positive impact and inclusive financial education.

Jesse [47:12]: "They just donated another $200,000 to the lower east side Girls Club, which helps build financial, understanding, inclusion for lots of really underprivileged women and girls."

Shifai & Maggie

• Recognized for crypto education, onboarding, and community-building—particularly for women—despite some recent “side drama.” Shout out to persevering through controversy and keeping the spirit of inclusion alive.

V [48:48]: "They do a lot of education about crypto...helping them to find different roles in crypto. So I really don't get why some people are getting so mad and so emotional about this. Anyway, just a reminder that sometimes you sort of just have to ignore the haters and keep doing what you're doing."

Notable Quotes and Memorable Moments

• V [00:00]: "Class actions in some ways can be even more dangerous [than SEC enforcement]."
• Jesse [00:11]: "Crypto is just rediscovering all the problems that gambling regulators dealt with 80 years ago..."
• KK [08:08]: "Plaintiff’s attorneys take the big bowl of spaghetti and they throw it on the wall to see what sticks."
• Jesse [18:56]: "Binance folks, in their own words, [called] the platform an international circumvention of KYC, joking about...bad actors come here."
• V [24:50]: "The punchline is that customers think they're betting against each other, but the complaint says they're actually betting against Kalshi and their hedge fund friends, and they never knew that."
• Jesse [29:34]: "Think about the MEV case when the jury was like crying."
• KK [44:04]: "How can CME be impacted by a physical issue at one data center...?"
• Jesse [47:14]: "So I want to talk about one...Boys Club Dao...they just donated another $200,000 to the lower east side Girls Club..."

Timestamps for Key Segments

• Opening/Setting the Stage: 00:00 – 05:17
• Class Action Basics & History: 03:16 – 07:23
• Why Class Actions May Be Worse Than Reg Enforcement: 07:23 – 10:19
• Current Class Action Landscape & Notable Cases: 13:11 – 29:34
  • Coinbase Derivative Lawsuit: 13:11 – 15:51
  • Binance & the Hamas Lawsuit: 16:28 – 21:18
  • Kalshi Gambling Lawsuit: 21:45 – 29:34
• Jury Challenges in Crypto Cases: 28:34 – 32:48
• International Crypto Bans (India, China): 33:47 – 41:01
• CME Data Center Outage & Decentralization: 42:42 – 44:45
• Good News: Crypto Charitable Efforts: 46:59 – 49:58

Tone & Style

Engaging, frank, and occasionally irreverent legal analysis, with a mix of insight, inside-baseball, and real-world stories. Legal lingo is demystified for a broad audience, and panelists don’t shy away from calling out industry realities or poking fun at themselves.

Final Takeaways

• The plaintiffs’ bar and class actions represent an evolving, potentially more dangerous threat to crypto companies than traditional regulators—due to their incentive structures, creativity, and impact on reputational and business risk.
• Real-life lawsuits affecting major industry players (Coinbase, Binance, Kalshi) reflect deep ambiguities at law’s intersection with technology and financial innovation.
• The confusion of both courts and juries about the realities of crypto is itself a legal risk.
• International bans tend to be porous or incomplete, demonstrating crypto’s resilience—and the ongoing battle for control among states, citizens, and decentralized systems.
• Crypto’s commitment to decentralization is more than theoretical; central points of failure in traditional systems (like CME) provide a cautionary tale.
• The episode ends on a positive note, spotlighting crypto’s potential for community building and charity.

Listen to this episode for an in-depth, nuanced, and occasionally humorous breakdown of why class actions are suddenly one of crypto’s biggest legal headaches—and how, for all its troubles, crypto continues to change the world for the better.