Unchained: Why Crypto Market Structure May Not Pass Until 2027 – DEX in the City (Ep. 946)

Date: November 13, 2025
Host: Laura Shin
Co-Hosts: Jesse Brooks, Katherine "KK" Kirkpatrick Boss, V Li

Episode Overview

This debut episode of “DEX in the City” under the revamped Unchained On Air series brings together powerhouse crypto lawyers Jesse Brooks, Katherine “KK” Kirkpatrick Boss, and V Li for a deep, lively discussion on the evolving dynamics of DeFi safety, recourse, legal issues, and the seemingly glacial progress toward comprehensive US crypto market legislation. With sharp insights from both traditional finance and crypto policy frontlines, the trio aims to break down complicated concepts, challenge “crypto Twitter” conventional wisdom, and offer real talk about what’s really happening in decentralized finance regulation, hacks, and congressional wrangling.

Key Discussion Points and Insights

1. The Tension Between DeFi Safety, Decentralization, and Recourse

(Timestamps: 01:49–09:51)

• Central Question: How do DeFi projects balance the ideals of decentralization, user safety, and providing user recourse after events like protocol exploits?
• Not Binary: Decentralization is not black-and-white; real-life incidents force communities, developers, and sometimes governments to intervene, challenging the notion of “pure DeFi.”
• Recent Example:
  • Balancer Exploit: A $128m exploit on Balancer’s liquidity pools led to a patchwork of responses: some pools were paused, different blockchains took varied actions (no rollbacks on Ethereum, but forks and halted production on some L2s/sidechains).
  • Quote [B, 09:51]:
    “Decentralization is not binary, meaning even chains that claim to be or aspire to be immutable... sometimes feel the need to intervene when users lose funds. So I think this really puts the idea of pure DeFi to the test.” – V Li

Discussion Dynamics

• Risk Management Papers: The hosts discuss their own recent academic and legal publications, advocating for tech-based, optional safeguards in DeFi rather than regulatory mandates.
• Standards vs. Flexibility:
  • Ad hoc responses to hacks highlight the need for transparent standards or at least clear best practices.
  • Users need to know “ahead of time what they’re getting into” ([B, 19:54]).
• Industry-Led Safeguards:
  • Smart contract audits are seen as self-imposed, common-sense standards already; similar self-regulation is evolving elsewhere.

Memorable Quote

“In my mind, the crypto ecosystem is about giving people... more power over their finances... and it should also be the opportunity to engage in a more risk-forward or risk-conservative manner.” – Jesse Brooks [15:14]

2. Legal Recourse and the Limits of the Courts: The MIT Brothers Case

(Timestamps: 24:33–34:12)

• The Case:
  • Two brothers exploited an MEV Boost relay bug, extracting $25m from bots using sandwich attacks; they argued it was fair game due to lack of deception, no direct contact, victims being bots, and operating within code-as-law.
  • Government charged them with wire fraud and conspiracy.
• Outcome:
  • Judge declared a mistrial after a hung jury, highlighting the challenge jurors face in grasping technical crypto exploits and the limitations of the legal system in providing clarity or recourse in DeFi.
• Quote [C, 24:33]:
  “To me the big question of this pod today is: who’s going to enforce the rules when code alone isn’t enough? And this [case] is when the courts tried to enforce it and it didn’t really go so great.”

Wider Implications

• Parallels to Mango Markets: Like the MIT case, courts haven’t provided decisive clarity—underscoring the argument that perhaps protocols/users should have more up-front choices around risk and recourse.

3. Crypto Market Structure Legislation: Why It May Not Pass Until 2027

(Timestamps: 34:12–39:31)

• Current State of Play:
  • House: Passed Clarity Act (crypto market structure bill supported by many in the industry).
  • Senate: Agriculture and Banking Committees have competing drafts; Senate Ag’s is vague on DeFi and AML, replete with “brackets” (open issues to reconcile).
  • Legislative Maze: Committee jurisdiction, sausage-making, and partisan politics make converging on a common bill a massive challenge.
• Why the Delay?
  • Floor time constraints, election-year politics, deeply technical subject matter, and lack of congressional crypto literacy.
  • Even with industry and regulator pressure, best-case hope is late 2026 or early 2027 for full enactment.
• Quote [B, 36:29]: “Realistically I don't think the process is going to wrap until 2026, probably not until late 2026, maybe even early 2027... But DeFi will keep shipping.”

Lingering Risks

• Regulatory Uncertainty: Without legislation, progress made by the SEC and CFTC could be reversed with administration or personnel changes.
• Quote [D, 37:36]:
  “A lot of this work can be undone... The thing that will really let me sleep at night is crypto market structure legislation.”

Quick Policy Primer

• Ag Committee’s involvement goes back to original commodities markets (“cows and corn and wheat”)—hence crypto’s classification as a commodity falls under its jurisdiction.
• Self-custody rights, AML details, and DeFi oversight—still very much up in the air.

Notable Quotes and Timestamped Highlights

• “Decentralization is not binary... sometimes feel the need to intervene when users lose funds.” – V Li [09:51]
• “Shouldn't we allow users to say, okay, here are all the options out there and let's go from there?” – Jesse Brooks [15:14]
• “A white hat hacker is kind of a good guy. You often see [in crypto] someone will pay a hacker to return the money.” – Katherine “KK” Kirkpatrick Boss [14:37]
• “If you’re able to create protocols where users feel safe, that is going to be like a competitive business advantage for you.” – V Li [22:16]
• “There’s a fear that if we even open up the discussion... regulators or legislators are going to seize on that as a way of regulating DeFi.” – KK [17:59]
• “Who’s going to enforce the rules when code alone isn’t enough?” – Jesse Brooks [24:33]
• “For many legislators, there’s still a real education gap... they don’t feel comfortable with this industry and it’s not a priority for them.” – KK [37:36]

Section Timestamps

• Balancer & DeFi Risk Debate: [01:49–15:14]
• Programmable Risk Discussion: [09:51–24:33]
• MIT Brothers Case: [24:33–34:12]
• Market Structure Legislation: [34:12–39:31]
• Closing Thoughts & Wrap: [39:31–End]

Tone & Vibe

• Candid, irreverent, lively banter — but deeply technical and policy-savvy
• A blend of personal experience, hard policy realities, and industry optimism
• Heavy on “real talk,” mythbusting, and practical impact for users, builders, and lawyers

Final Thoughts

• The hosts predict that US crypto market structure reform likely won't emerge before 2027—but urge builders and users alike not to wait for perfect clarity.
• The debate over DeFi safety, standards, and recourse will keep evolving both in the marketplace and in legal/policy circles.
• Expect these hosts to keep breaking down complicated issues, correcting crypto Twitter, and “having fun while we’re doing it.”

[End of Summary]