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Friday, August 22, 2014

Serious Criticism of the New York Bitlicense: An Official Comment

The following was submitted to the New York Department of Financial Services regarding its proposed regulations on Bitcoin and virtual currencies:

* * * * 
August 22, 2014

Ladies and Gentlemen:

I am a New York lawyer and advisor and bitcoin industry developer who works with several startup companies and entrepreneurs.  I submit herewith my initial comments on the proposed virtual currency regulations first released by the Department on July 24, 2014. These comments are not exhaustive, and further comments may be forthcoming. 

It is feared that New York State's proposed regulations on virtual currency (most commonly referred to as Bitcoin) may drive new virtual currency founders out of the state and soon make it hard for any New Yorker to buy or sell Bitcoin. These consequences may not be the stated intent of the proposed regulations, but they may be their effect. While some commentators have tried to dismiss these concerns as exaggerated or hysterical, a careful evaluation of the proposed regulations reveals three legitimate "macro" concerns which support such strong concerns and justify the alarm with which many industry participants have reacted to the regulations as first proposed. 

The first concern arises from the burdens on industry participants which do not have the great financial resources of major international financial institutions. There is the fear that this regulatory scheme will lead to eventual domination of an emerging field by large multinationals (which as licensed banks are exempt from the regulations), who may eventually end up hiring the very same regulators in the symbiotic revolving door between big business and big government.  There are concerns within the industry that the regulations are either designed to or likely will force smaller players out of the industry or at least out of the New York market in favor of established financial institutions, which not coincidentally are the same institutions most likely to be potential future employers of today's regulators, legislators, lobbyists and other "players" in the government.

Some of the proposed virtual currency regulations mirror existing state requirements for regular banks. It must be noted that your agency's own guidance for those considering forming a bank in the New York metropolitan area suggests that prospective banks have minimum capital of $50 million net of startup costs. (See  The proposed regulations also impose requirements for written anti-money laundering, know-your-customer and cybersecurity policies as well as the requirements to report "suspicious" transactions. Bitcoin and virtual currency bitcoin businesses are largely internet dependent and as such their operations involve concerns about cybersecurity, both for the companies' internal operations and as regards the safety of any customer information or transaction information.  However, the burden of these requirements is likely to be absolutely draconian in expense (both in time and money) in relation to the size of business conducted. This raises serious questions as to whether the proposed regulations are appropriate for the virtual currency industry in general, and also whether they support the inference that the Department believes that companies should have capital and compliance abilities on the level of banks in order to engage in this industry within the State of New York. 

I urge the Department to carefully consider whose interests are protected by any regulatory scheme which limits their choices of service providers or forms of payment to merchants, and encourages oligopolies in the name of "consumer protection."

The second concern arises from the broad definition of a "New York person." As currently drafted, the regulations will require anyone in the business of buying and selling virtual currency to a  "New York person" to get a state-issued "bitlicense." (Note: I use that term for the ease of third parties who may read this comment and who commonly refer to the proposed regulations as imposing a "bitlicense.") However, the initial draft of the regulation has broadly defined this term. The unavoidable result of such broad scope is that the definition can be interpreted to reach all sorts of people and companies with minimal contact with the state. Residing part-time in New York, even for one day, could make that person subject to the rule as a customer, meaning businesses might not accept that person as a customer. This is no different from the practice in the heavily-regulated securities brokerage industry, where broker-dealers will only handle customer accounts for people living in certain states where the broker-dealer is licensed).  And of course, any trust, corporation or other entity with any connection to New York, even a satellite office, becomes subject to the regulation whether it is engaged in the exchange business or other specified "virtual currency business activity."  

One is entitled to candidly wonder whether the burden of these regulations makes it worth it for a bitcoin industry business to either stay in New York or accept business from "New York persons" which makes that business, no matter where it is located, subject to the New York regulation.  Of course, it bears mentioning that the largest international financial institutions which already comply with equivalent requirements would gain a substantial competitive advantage if not a virtual government-sanctioned oligopoly. 

There is a third "macro" concern arising from the regulation as proposed. As a "coin" or unit of virtual currency is really only a unit of data, units or bits of data are the same objects whether they are used as currency or as part of a database. The regulation as drafted fails to distinguish between the various uses of the Bitcoin technology and instead targets the technology itself.  As currently written, the regulation threatens to govern Bitcoin in any use including uses or applications having nothing to do with use as a currency or medium of exchange.  That is because Section 200.2(m) of the regulation defines "virtual currency" as:
"...any type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology."
It seems the Department may have intended to regulate and limit the use of Bitcoin as a form of currency, but the regulation as presently proposed has a broader scope that covers Bitcoin as an object. If the regulation intends only to cover and regulate its use as a currency or form of medium of exchange, the regulation needs to be more narrowly drafted to clarify its true scope. I urge the Department to revise the regulation to clarify that the regulation would only cover the use of Bitcoin-based technologies as a currency or medium of exchange, but would not seek to regulate its use for other information technology applications. 

This clarification is of crucial importance given that the modern post-industrial economy is information-centric. Any regulation imposing a regulatory cost on the transfer or maintenance of information is virtually guaranteed to impose a serious competitive disadvantage on New York State; in fact, such a regulation would threaten New York City's very stature as a world center of international finance and commerce. 

It has been my experience in talking with virtual currency industry participants that an inference as to an overall hostility towards small business and in particular towards an innovative technology has been drawn. If the Department did not intend such an inference, it is incumbent upon the Department to clarify the revised regulations and redraft them with an eye towards not making New York State prohibitively expensive for all but the largest financial institutions to participate in this emerging industry.  As it stands now, the foreseeable consequence of the proposed regulations is that Bitcoin industry participants will move their operations to friendlier jurisdictions where they are able to compete on a fairer and more level playing field. However, another possible result is that some companies will refuse to do business with anyone situated in the State of New York. (Indeed, some companies have already threatened to take this approach.)

The regulations do not only cover doing business in New York. They affect anyone in the world doing business with someone living in New York State.  They affect all New York residents and threaten to reduce New Yorkers' choices as consumers in virtually any field of product or service.  They make New York State a frying pan, and New Yorkers hot potatoes, in an increasingly competitive and global world economy. 

There is the danger that regulators and elected officials have simply overvalued and overrated the attractiveness of the New York market to entrepreneurs in an age where the flow of information, capital and people is increasingly unrestrained, and where neighboring jurisdictions are often able to offer friendlier climates in which to run businesses, own property and raise families. This is a reality which New York's government leaders should confront if they wish this State, and New York City in particular, to retain its current status as an international leader. 


Eric Dixon, Esq.
Eric Dixon LLC
116 West 23rd Street 5th Floor
New York NY 10011
Ph. 917-696-2442

Thursday, August 21, 2014

How One Man's Death By Orange Could Lead To Absurdity

There is the very real and very tragic news of the death of a man in South Africa by pelting with oranges.

In a world both prone to violence and now revealed to be increasingly narcissistic (the hey-look-at-me syndrome), one has to be on the watch for exaggerated responses.  The actual death is a tragedy. But the follow-up could be absurd. Might we see the following acts of political correctness?

10. Holder Justice Department announces anyone possessing an orange toy gun may be charged with two felonies: one for weapons possession, the second for a hate crime.

9. Syracuse University announces its collegiate sports clubs will no longer be called the "Orangemen."

8. Arts departments across the nation are instructed to never, ever let red and yellow be next to each other. The combination could be deadly.

7. Tropicana has suspended sales of orange juice while they consider how to rebrand their tangerine-citrusy mix of high fructose corn syrup and water.

6. New Jersey Governor Chris Christie is cutting all state funding to the towns of Orange, East Orange, South Orange and West Orange NJ until they switch their town names. North Orange cannot be found and is considered a fugitive from justice.

5. Public works departments around America are furiously rushing to buy day-glo green and other fluorescent colors to cover over all objects colored with the hue previously known as "orange."

4. Prisons around America now hire Joe Arpaio as a fashion consultant, announce prisoners will now be fitted in pink prison jumpsuits to reduce violence among inmates.

3. Showtime cancels "Orange Is The New Black" after community groups threaten protest.

2. Seton Hall University announces it will move its campus from South Orange, NJ to protect its students and encourage their continued growth. The university will Three Mile Island.  We look forward to students fingers, toes and feet...during the fall semester.

And the number 1 protest of Orange is:

1. Joan Rivers wears orange sundress to Late Show With David Letterman; entire audience walks out in protest.

Stop Blaming Obama (Or, America Regressing To The Norm of Human History?)

I promise much more will be written on this theme...but is Obama the first ARISTOCRATIC president this country has had?

Follow my reasoning. Consider that his Administration is not really discouraging class conflict but is enhancing class consciousness.  This supports the inference that -- but is not the same as -- his Administration or its policies are designed to stoke resentment of the "rich" in order to make the "rich" want to self-isolate.  Then you have to think how the "rich" are defined. Suspend rationality. In a world sanctifying envy on every level, being "rich" simply means you have something which someone else wants and thinks they're entitled to take from you.

Consider that in most societies, the "achiever" class ends up being clostered behind high fences, in policed communities or otherwise segregated. (How the achievers got their wealth, and the merits and demerits of feudalism, are related topics and useful for discussion, but not in a short blog post.) Think back to the classic medieval protections of the high castle walls and moats.  The "haves" recognized that their possessions, their status, even their literal physical safety, were at risk from the "commoners."

What if current policies are either designed to enhance this new class consciousness, this new (or a return to the old) awareness that relative wealth carried with it the penalty of being at risk from the class envy or raw rapaciousness of the street mob?

Could the effect (if not the objective) be to make the self-isolating achievers more dependent on government for their protection?

Could the effect or objective be to induce the "haves" to seek government protection or interference?

Could the effect be to have the "haves" realize their common class interest with the government class?

Could this all be about a reordering of American society into a two-tiered structure, one much more in line with classic human societal boundaries in which you have the "owners of the means of production" (whether that means the literal owners or the managerial class), and then you have...well...everyone else.

Could America be turning into the classic aristocracies of Europe (see why they're imitating European government policies?), and in such a new social utopia the power and influence of the meritocracy and aristocracy is actually magnified?

What if America, and the concept of a democratic, pluralistic, relatively equal (if illusory) society, is really the outlier in human history -- many argue that this is what makes America unique -- and is merely regressing to the norm?

Incidentally, Obama is not the cause of this mentality. His presidency, at most, is only a symptom. Blaming Obama is the biggest waste of time in addition to being a huge strategic blunder. It would be hilarious, if it wasn't so boring.

What do you think?

Wednesday, August 20, 2014

The Tea Party Amateur Hour

The next time you hear network or major media pundits citing the "Tea Party" as the reason for political gridlock, or whatever, consider the proof of the pudding in the Northeast. Like in New York State.

The biggest winner in New York State politics today is the State Republican Party and, to a lesser extent, the State Conservative Party.

How can this be, you ask? (Keep reading.) And what does this have to do with the Tea Party movement? (Think analytically. I will connect the dots.)

That's because the StopCommonCore petition has over 100,000 signatures and will likely give Rob Astorino a third ballot line in November.  In New York, voters can cross-endorse, so a candidate can be on multiple party ballot lines. The Republicans and Conservatives already endorsed Astorino and the third line supposedly will attract voters who just absolutely cannot bear to vote for Astorino when he is under the "Republican" ticket or the "Conservative" ticket.

As for incumbent Andrew Cuomo -- aka "Son of Sfacim" to you old Bob Grant radio fans -- he is on the Democratic ticket, barring a huge surprise from some leftist law professor aptly named Zephyr Teachout who has survived a court challenge to her claim of having been "domiciled" in the state for the required five years, and he is on the Working Families Party ticket (barring another primary upset from the same Teachout), and he is also going to be on the ballot line of the "Women's Equality Party."

How are the Republican and Conservative Parties winners? When Astorino trails by nearly 30 points (according to this morning's new Quinnipiac Poll results)?  When incumbent Andrew Cuomo has a favorable rating of nearly 60%? When Astorino is most surely a lost cause?

It's because the SCC petition was not about helping Rob Astorino in any way.

It's because the object, the goal, is...not to win.

It was about diverting activist -- that is, tea party -- energies away from a protest third party, which could then run candidates in any election across the state for the next four years with just a handful of signatures.  The protest movement could have thrown up its own candidate and qualified as a defined political party if the candidate got at least 50,000 votes. Instead, the Astorino-led pseudo party will in absolutely all likelihood decline to engage in the legal formalities needed after the general election to form a party even if it qualifies with the votes. That is because the ballot line is owned lock, stock and barrel by the Republican party establishment.

The result for the grass roots? It means that across all of New York State, protest candidates will have to collect hundreds or thousands of signatures, and survive court challenges, just to run in GOP primaries.  Had there been an independent ballot line which turned into a political party through the process I just described, any protest candidates would get on the general election ballot, in all manner of county and state legislative races, in any election in the state, by just getting five percent of the voters enrolled in this new party. As a new party, that means five percent of an extremely low number!  So a congressional candidate who otherwise would need 3,500 signatures could instead qualify with just a handful, literally just a few signatures.

This would have been a brilliant strategy. But leave it to the rank amateurs of the Tea Party -- that supposedly fearsome political force, if you listen to the pundits on MSNBC -- to kick this opportunity away.

The proof in the pudding is the committee on vacancies for the SCC petition, which is a who's who of state GOP consultants who are very experienced in, well, coming in second and trailing by substantial margins. This and other facts were ignored by many state "tea party" groups, of whom many are indeed run or controlled by so-called "antis" who really, secretly wish they were in the club but couldn't get through Pledge Week.

Anyone with half a brain could see this coming a mile away. This is why the most credible and legitimate tea party organizations in New York State, particularly ones in New York City and Long Island, stayed far away from this political Trojan Horse.

Even New Jersey governor Chris Christie, running the well-financed Republican Governors' Association, weighed in and knew enough to steer clear of a hopeless race.

The rest of the New York tea parties have been shown to be easily playable, a bunch of dupes, rubes and abject amateurs. Just in time to wear the colonial hats and be caricatures in funny costumes at the country fairs and Oktoberfests.

Sunday, August 17, 2014

Rick Perry's Indictment and Protecting The Public

Usually a Friday afternoon news dump is a way of releasing bad news and hiding it in plain sight, usually to avoid or reduce scrutiny.

Consider that the news of Texas Governor Rick Perry's indictment in Texas came down Friday afternoon.

Perry faces two felony charges of "abuse of official capacity" and "coercion of a public servant" by threatening to exercise his veto power over a bill to authorize funding for the Public Integrity Unit operating out of the office of the Travis County District Attorney unless the head of that office, Rosemary Lehmberg, resigned. Lehmberg was targeted for removal by Perry after her arrest for driving under the influence. 

The legalities of the indictment are too wide for immediate discussion here (and more facts need to be revealed, frankly). But some initial observations give serious concern. I start with the least troubling, and work up the ladder.

This type of case threatens to make Texas government less efficient (although government efficiency is often at odds with liberty). It is not a good precedent to have political decisions become criminalized. This suggests that the criminal code is vague, perhaps unconstitutionally vague. More troubling: Do Texas elected officials need to seek pre-clearance from the local prosecutor? Is the county prosecutor the de facto final word in Texas government? 

If the district attorney can indict any elected or appointed official for a disfavored political action or policy decision, you know who's really in charge. Putting partisanship aside, this cannot be good. Period.

But more importantly, this type of case weakens the legitimacy of the criminal justice system and the rule of law. The primary role of the justice system is to see that "justice is served," and that objective depends upon the public's respect for the system. (A case in point is provided by the widespread public protests of the Civil Rights Era.) When overtly political prosecutions are brought, the public's skepticism in fundamental, impartial justice is warranted and encouraged. Unfortunately, such cases also give cover to those who are serious lawbreakers, who would use arguments as to the illegitimacy of "the system" to excuse their own misconduct, avoid detection or responsibility or retaliate against legitimate authority. In all cases, society at large and the rule of law are weakened.

Bonafide criminal activity needs to be deterred before it occurs. Illegitimate or highly questionable prosecutions weaken the reputational cost imposed on suspected wrongdoers (which is the classic and often the most powerful penalty), and in so doing, reduce the cost of criminality. The punishment for wrongdoing, the societal disapproval, is reduced; the flip side is that bad behavior becomes less disapproved and more tolerable, even in polite and so-called law-abiding circles.

When legitimate crimes become viewed as partisan or as a cost of doing business, the power of disapproval is diminished or destroyed. The effect is to make real crime socially acceptable.

And when you give a ready moral cover of "injustice" or "partisanship" to prosecutions, the result is that you get much more dangerous crime.


Saturday, August 16, 2014

Christie's Political Operation Revealed in Town Dossiers

Select documents released by the New Jersey Governor's Office, Office of Intergovernmental Affairs contain election and political party affiliation data for individual towns in the state, suggesting that the Office of Governor Chris Christie was compiling data which has an unambiguously and principally political nature and purpose.  These documents, being compiled, maintained and possessed by the Office of the Governor, are clearly "public documents" and thus subject to review by the public.

Look at the page header in the pictures below. Then ask the simple questions:

Why is the Office of the Governor compiling these documents?

Why is the Office of the Governor -- on the taxpayer's dime -- tracking election results?

As for the third picture, what exactly is the public interest, the nonpartisan interest, in the Office of the Governor tracking vote totals for candidates divided by party?

Why is the Office of the Governor tracking voter turnout?

These documents were released pursuant to a preliminary agreement and a court order in ongoing litigation involving my client, who has sued the Governor's Office under the New Jersey Open Public Records Act to get these documents.  (See the press release I posted in March 2014.)  The documents were originally requested in January 2014. (For more of my other commentary on this story, see here and here.)

The vast majority of responsive documents are still not being released. The litigation is ongoing. The docket number for the case of Serringer v. Office of the Governor is MER-L-00563-14.

I argue that the release of even a tiny fraction of public documents acts as a State admission that the requested documents are disclosable under OPRA as public documents.  The question now remains as to why the remainder -- which can be substantial -- are being kept from public view.

The content of the pages pictured above may give a clue as to the answer.

More to come....

Friday, August 15, 2014

Bridgegate's MIllion-Dollar Legal Fee Bonanza

Fridays are always a good time for a news dump.

Particularly in the dog days of summer.  So an August Friday is actually time to get another pot of coffee.

The Record of Hackensack reported late Friday that the Gibson, Dunn law firm has now billed the State of New Jersey -- that means the taxpayers of New Jersey -- over $6.5 million for its work in connection with the investigation of the Bridgegate matter and ancillary matters affecting Gibson, Dunn's official client, which is the Office of the Governor of the State of New Jersey.

I have previously been very critical of Gibson, Dunn's work in connection with its initial investigative report (released in March 2014 and available here).  The outsized expense of the legal bills should only raise scrutiny as to the quality of the work.

Hello Israel

I must have a new fan club out there. Thanks for the 1,800 pageviews in the last hour. Amazing.

Monday, August 11, 2014

Is Justin Bieber Rational If He Despises His Fans?

The premise of this question is going to shock most people, not only followers and commentators on American popular culture (okay, so the young man is Canadian) but most certainly his fans.

But what if Bieber -- and other pop stars whose "misbehavior" gets chronicled by the paparazzi and tabloids, never mind on the "look at me now" social media -- has a point?

Is it impossible to be both "achiever" in life...and to keep your friends and stay popular?

And in the wake of the untimely death (reported by at least one news outlet to have been a suicide) of legendary actor-comedian Robin Williams, this quandary takes new life, new focus.

What am I getting at? Read more...follow the link to the Financial Policy Council think tank's website.

Sunday, July 27, 2014

Honduras President Blames U.S. For Honduras' Problems

The emerging Southwest border crisis is spawning some curious and ill-advised comments from foreign leaders who are blaming the United States for the stream of humanity going, well, towards the United States.

Perhaps the attitude of these foreign leaders, which is also surely on display in their home countries, is what is prompting people to flee.  And naturally, people seek entry to lands where conditions are more hospitable (they hope) than the land they have fled from.

But immigrants are not always poor. Throughout history, and particularly before technological advances in the 20th Century democratized transportation, overseas or continental travel was the domain, not of the poor, but of the wealthy.

The vast migrations of past centuries which populated the Western Hemisphere consisted mostly of people who could afford the trip. The poorest were left behind. Religious exile did not exempt you from this rule; you still had to be able to afford passage. Conditions being what they were, many immigrants sold all they had in order to make the trip -- contributing to the American lore of the impoverished immigrant coming through Ellis Island. They were poor after the trip, not before.

Nothing drives out the successful, ambitious and hardworking from countries -- and even from families -- than the envy, resentment and greed personified in the sentiment, "Your Problem Is Our Problem."  Consider the audacity of the President of Honduras, a nation unwilling to control itself yet declaring that the United States is not "doing its part" to combat the problems of, well, Honduras.

Never mind that the United States does more to combat the use, transport and production of illegal drugs than any other country on the planet.

Never mind that the United States sent billions to that nation after Hurricane Mitch struck Honduras in 1998.

Never mind...oh, never mind.

But consider who is expressing these sentiments.

Honduran-American entrepreneurs who immigrated to this country, that's who. 

Thursday, July 24, 2014

Playing To Win: Christie Allocating RGA Monies With Both Eyes on 2016


New York Republicans are (supposedly) up in arms over Republican Governors' Association head (and New Jersey Governor) Chris Christie all but declaring the gubernatorial campaign of New York Republican Rob Astorino a "lost cause." 

Careful: Read the quotes in press accounts carefully. Christie did not say Astorino's campaign was a lost cause. One can infer that was his intent. Christie is a shrewd man, much shrewder than most. But even the village idiot knows that a candidate trailing by 30 points in the polls in a deep blue state that historically has gone Democratic in presidential elections by at least double digits and sometimes as much as 20 points is unlikely to win. 

But the reality is this -- New York is a lost cause...for the 2016 presidential election. That is the election that matters. This is all about 2016!

New York State will go for the Democratic candidate (and it might even be carpetbagger-turned-favorite-daughter Hillary Clinton) in 2016 by at least ten points, and possibly as much as 30 if it's Hillary versus any "red state" conservative (i.e., not a Northeastern moderate like Christie, or Mitt Romney). 

Why on earth would Christie waste one dime of other people's money on a state where he has nothing to gain? 

Why? Because that's what he's "supposed to do"?

That is the naive perspective. 

Frankly, that's the amateur perspective.

Candidates need to earn that support.  

The smart underdog asks for RGA support, not to help his own campaign, but as part of a larger, long-term strategy for making the party competitive in a deep blue state. 

In other words, the smart underdog appeals to the rational selfishness of the decisionmaker.

The smart underdog asks for support by saying, in essence, "It's not about me. It's about you. This is how I can help you." And that, by the way, might make perfect sense.

Chris Christie is doing the smart thing (for himself) by spending that capital in states where he can build himself up in the fight for the 2016 nomination which will be in full gear after the midterms. Give Christie full marks for having the foresight years ago to angle for the RGA chairmanship. History favors those with the most foresight.

Eric Dixon is a New York and New Jersey based lawyer and political strategist with no connection to any of the candidates or public officials mentioned here. 

Thursday, July 17, 2014

New York Attacks Bitcoin: Episode One

New York State's new proposed regulations on virtual currency (e.g., Bitcoin) may drive new virtual currency founders out of the state and soon make it hard for any New Yorker to buy or sell Bitcoin.  (Bitcoin accounts for approximately at least 90% of the trading volume of all virtual currencies worldwide.)

In the name of consumer protection, one wonders if this is just another regulation that will lead to eventual domination of an emerging field by large multinationals (which as licensed banks are exempt from the regulations), who may eventually end up hiring the very same regulators in the symbiotic revolving door between big business and big government.

The regulations are proposed and have not even been officially issued by the state's Department of Banking and Finance. Official date of issuance is July 24, 2014, and that starts an official 45-day comment period.

The major impact of the "bitlicense" regulations will require anyone in the business of buying and selling virtual currency to a  "New York person" to get a state-issued bitlicense. Some of the regulations largely mirror the state requirements for regular banks. However, as bitcoin businesses are on the internet, there is the concern about cybersecurity. The "bitlicense regulations" do not only cover cryptocurrency exchanges but also impose some requirements which for startups and small businesses are absolutely draconian in expense (both in time and money) in relation to the size of business conducted. These requirements include the institution of written anti-money laundering, know-your-customer and cybersecurity policies as well as the requirements to report "suspicious" transactions. These are serious undertakings.

For sake of comparison, these are the requirements otherwise imposed on commercial banks.  This isn't a problem for established banks, which as I mentioned before, will be exempt from the regulation. To put things in perspective, if you want to start a commercial bank in New York, the state actually advises that new banks doing business in Metropolitan New York City have at least $50 million in net capital.

As a lawyer who does regulatory interpretation, I have to candidly wonder whether the burden of these regulations makes it worth it for a bitcoin business to either stay in New York or accept business from "New York persons" which makes that business, no matter where it is located, subject to the New York regulation.

Perhaps most critical is the question: What is a "New York person" under the regulation?  It is any person or entity who "resides in" or "is located" or "has a place of business" or "conducting business" in New York State. 

Now, what does it mean to "reside in" the state?

The New York tax regulations specify that all your income is subject to state tax if you live in the state more than half the year. Hmmmm. Where is that definition here? (Answer: It's not here.)  What does that mean? I interpret it to mean -- and this deserves official clarification -- that residing at all in New York makes you a New York person.  Any part-time residence (even if lived in far less than 183 days) may make you subject to the regulation as a customer (and businesses not licensed can't touch you, as I explain below). I do not interpret this as the New York tax resident standard, whereby part-time residents are taxed full-time if they are in the state more than 182 days out of the year. This is the regulation forcing wealthy people to count their days, diary their entire calendar for the year and even assiduously flee the state before the stroke of midnight or arrange for flights arriving after the stroke of midnight to save a few days. I interpret this as the "tag" rule: any quasi-permanent contact with New York makes you subject to the new rules and you could feel the impacts I outline below.  Residing part-time in New York could make you subject to the rule as a customer, meaning businesses might not touch you (just as some stock brokerages will only handle customer accounts for people living in certain states where they are licensed).  And of course, any trust, corporation or other entity with any connection to New York, even a satellite office, becomes subject to the regulation whether it is engaged in the exchange business or other specified "virtual currency business activity."

The initial reaction to this regulation -- which has only been proposed and is likely to be sharply contested -- is that it may drive some bitcoin vendors out of the state, for the simple reason that the rest of the world and certainly neighboring states have no such requirement.  

There is another possibility: big institutions ("Big Finance") will either be exempt (which they would be if they already are licensed by the state ("chartered") to conduct exchange services, or they will get the licenses. Generally, larger institutions are able to absorb the formidable costs of regulation and applying for licenses. This may soon transform Bitcoin into the domain -- at least within New York -- of Big Finance, but smaller competitors will have the option of moving to competition-friendly or regulation-free states or countries.  (I expect to hear plenty of conspiracy theorists saying these regulations are designed to lock down the Bitcoin sector for Big Finance.)

Another danger: As a "coin" or unit of virtual currency is really just a bit, that is, a unit of data, and a bit used as a coin and a bit used for storing information is really just the same thing with the nature of the item being really no different, then this leads to draw one of two possible conclusions: One, the regulation means (but fails so far) to regulate Bitcoin on the basis of how it is used and not what it is, or two, the regulation really does mean to regulate Bitcoin in its form as units of data. (Admittedly, there is a third possibility: the regulation was just poorly drafted. I don't think that is likely.)

If the regulation is truly intended to reach the latter interpretation, then Bitcoin cannot be used or exchanged in New York except for consumer-to-business merchant commerce.  Any other uses of Bitcoin or other blockchain based technologies are subject to the act's requirements. This means that Bitcoin cannot be used as a database for any exchange or storage of information, because, well, information has value. Especially and particularly in our information society. That is because Section 200.2(m) of the regulation defines "virtual currency" as:
"...any type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology."
What is the impact on regular New Yorkers? I think New Yorkers will eventually have no problem buying Bitcoin; they may have less competition and prices (spreads) may be cartel-like in their uniformity, they may not particularly like doing business with any big institution and the character of the still-early-stage Bitcoin community in New York may transform. (Or flee.)

Think of it as the mom-and-pop stand-alone coffee shop suddenly being surrounded and undercut on price, hours and ancillary services by a certain international coffee chain. 

That is the initial take on the impact on the still very small Bitcoin industry. But what about the impact on regular people who just want to buy and invest in Bitcoin?

That, my friends, is the major problem: The regulations do not only cover doing business in New York. They affect anyone in the world doing business with someone living in New York State.  They make New Yorkers a hot potato. The regulations don't just discourage Bitcoin startups and prompt them to leave for an unregulated (for now) climate. They essentially prevent those startups, no matter where located, from taking New Yorkers' bitcoin business (but the large institutions can come right in, and that may be exactly what is intended).

A different problem with the regulations is the requirement that anyone "controlling, administering or issuing" a virtual currency has to get a state license ("bitlicense").  This is sure to drive any virtual currency innovators out of New York. Want to develop an alternative virtual currency? Why bother with the New York regulations when most other states -- or countries -- are not even looking at regulating virtual currency?

The indirect but foreseeable consequence of the regulations is that restricting or discouraging Bitcoin through regulation will reduce the amount of any virtual currency floating around in commerce. This will affect (adversely, because the effect is never net positive!) any New York merchants whose business depends in any substantial part on Bitcoin.

As for myself -- Eric Dixon the lawyer, Eric Dixon LLC -- I am admitted to practice in New Jersey as well as New York, my 20 years of experience (I am a 1994 graduate of Yale Law School) mean I can waive into most states without taking their bar exams, and I would likely be welcomed to practice by most countries in the world. This may affect where I do business.  The impact on you -- if you need to move, I can move with you.  And if you want me to handle the regulations, we can certainly talk.  The regulations do not kill you if you are in New York, but you need to know what you are facing in order to have access to the New York market.  Email me at 

Tuesday, July 8, 2014

Freudian Take On Americans' Reaction to the Immigration Crisis

The American people owe an apology to every legal immigrant and visa holder, and particularly to those who leave this country dutifully when their work authorizations or student or tourist visas expire. They see first hand that their obedience to the law is rewarded with an exit stamp, while others exploit the narcissism of the American people who are both obsessed with being recognized by others as compassionate and terrified of having anyone impute the vilest of motives to them for daring to object. This emotion is not compassion, for the root goal is not to help anyone. The true goal is to be acknowledged as being helpful. Actual humanitarian relief is but a collateral consequence. Th e "compassion" is a false flag, a fraud, and is nothing to commend. This is selfishness as well as an attack by one group of people who have not earned the right to judge, to audaciously assert their moral superiority over anyone who objects. This abdication of the core governmental function to secure the homeland border will only end, not with a border fence, but with the American people regaining their boldness.  Until then, we are a nation of spoiled children.

Thursday, July 3, 2014

The Real Issue Under Hobby Lobby

Dig beneath the surface of the Supreme Court ruling allowing closely-held family businesses to exempt themselves from the contraceptive-payment mandate of the Affordable Care Act. (The amount of commentary on the case is copious and you can find it elsewhere. What you cannot find is the strategic analysis I set forth here.)

When you dig, you'll see the real issue.

You'll see that 99% of people are missing the point. Perhaps that is on purpose. Deception, you see, has its uses. The explanation now follows.

The stated issue is access. The real issue has nothing to do with access to birth control. This is all about an attack on religion and attacking anyone -- and I mean, anyone -- who dares to express a Judeo-Christian traditional religious value. 

That is the end. The invocation of access is just the means to construct an argument which allows its proponents the easy access (cough, cough) to impute negative motives to anyone who questions or opposes them. 

This strategy explains the many attacks you see in "politics."

And the progressives are just absolutely brilliant in executing this strategy. 

Friday, June 27, 2014

Principled Man Or Saboteur? When Those Under Indictment Continue In The Public Eye, Beware!

Sometimes extreme adversity and how you respond to your personal "black swan" event will determine more than family wealth, educational achievement or personal financial wealth your ultimate outcomes in life. 

Sometimes, the people around you can determine (fairly or not) quite a bit about your outcomes. That is, if you let them.

The Gospel According To Matthew is a useful guide. From Matthew 7:15 -- 
"Watch out for false prophets. They come to you in sheep's clothing, but inwardly they are ferocious wolves.
A real leader will not tarnish the principles or products with which he is associated by continuing to promote them after his personal problems, such as a revelation of unsavory character, indictment, arrest, plea of guilty or impending imprisonment. 

The person who is willing to degrade those principles, and by association, compromise or degrade the character and destroy the reputation of those sharing those principles, is not a martyr. That person is not a principled person, unless principle is defined as a narcissistic impulse to save oneself at the expense of anyone close by. That person is using everything and everyone around him as a shield.  You are collateral damage to him, nothing more. 

What is that person? That person, my friends, is a saboteur. 

Respond accordingly.

Wednesday, June 25, 2014

Warrants Needed For Cellphone Searches

The Supreme Court has ruled in a broad 8-1 ruling that warrants are needed to search your cellphone.

This decision is a major and much-needed victory for adherents of technological privacy, and a rebuke to the post-9/11 trend of eroding constitutional protections in the name of administrative or government convenience. 

Tuesday, June 24, 2014

Enron-Type Life Sentences For Port Authority Fraud? Could Be!

New Jersey state and Port Authority of New York and New Jersey officials who had the Port Authority raise $1.8 billion from a bond offering to use those funds to repair an "access road" to the Lincoln Tunnel could be facing jail time (20+ years, or effectively, "life") comparable to that of the upper management at notorious companies like WorldCom, Refco and Enron.  More on that below.

The New York Times speculates on the real legal trouble for people in the Port Authority and the Christie Administration. 

Even worse is what the article DOES NOT say. If a billion dollars were raised and spent fraudulently, and a federal securities fraud criminal prosecution were brought, anyone considered to have been a criminal conspirator would be liable for the entire monetary loss in the alleged fraud. (Conspiracy to commit a crime requires only that someone intended to do any one single component of the crime, so someone who is 1% culpable could be on the hook for everything.) With the federal sentencing guidelines based almost entirely on the dollar amount of the fraud, any of the co-conspirators could be facing more than 20 years in prison! That's because, under the 2010 federal sentencing guidelines covering financial crimes (because the offering was in 2010), the "offense level" for a fraud of this magnitude is a whopping 42. The base level for the crime is six points, but the amount of the fraud being over $400 million adds 36 points to give you 42. Under this 2010 sentencing matrix (go to page 401), even a Level One offender (no prior convictions) could be facing 360 months to life. 

Now, there are myriad ways to get "downward adjustments" for such a draconian sentence. You could "cooperate" with the government and try to get the government to recommend leniency. (If you feel like learning more, go to Section 5K1.1 of the Guidelines. Bring an oxygen tank and plenty of nonperishable food.).  You could also seek leniency on various hardship grounds, like family or caregiver considerations. Some audacious white-collar criminals have even reportedly discovered their alcoholic or substance abuse problems and gotten credit for going into rehab. And the guidelines are now "advisory" pursuant to a 2004 Supreme Court ruling, so judges have quite a bit of latitude to depart from the guidelines matrix (in both directions, I might add).

Finally, a second point arises from the article's mention of the Martin Act, which is the New York State securities statute (the "blue sky law"). The Martin Act was recently abused by then-Attorney General Eliot Spitzer to go after all sorts of small fry, because the Act allows for state criminal penalties without finding criminal intent!

I will continue to monitor developments.

Monday, June 23, 2014

Missisippi's Open Primary and Party Raiding

Missisippi's runoff election for the Republican nomination for U.S. Senate is tomorrow. It is reported that forces involved with the Democrats -- the opposing party -- are trying to boost crossover voting in that state's open primary to boost turnout for incumbent Senator Thad Cochran.

Missisippi has what is called an open primary. That means anyone can vote in the primary regardless of party affiliation.  In many states, however, the primary vote is restricted to people who have chosen their party in advance or in some cases, at the polling place. Primaries in these states are referred to as "closed primaries."  The mechanism these states use to enforce the sanctity of the electoral process is "deferred enrollment," where you have to switch parties well in advance of the primary election.

Before you think that closed primaries somehow disfranchise voters, know that the practice has been upheld by the Supreme Court.  The basis is that it deters the practice they call "party raiding," and helps preserve the integrity of the primary election and by extension supports the right of association of voters who choose to enroll in a political party. The New York State practice (which currently is an almost 11-month deferred enrollment period) was upheld decades ago in an excellent 1970 decision in Rosario v. Rockefeller

What do you think about open primaries? Do you think an open primary defeats the purpose of selecting a political party? 

Thursday, June 19, 2014

Redskins Part 2: Another Offensive Sports Logo

The cancellation of the Washington Redskins trademark has disturbing implications for business, but what about the implicit hypocrisy of inaction towards other potentially disparaged and offended groups?

As a proud Roman Catholic, I believe the name SAN DIEGO PADRES and its original logo of a fat bat-swinging monk is highly derogatory and disparaging to Roman Catholics and all people of faith everywhere. 

If you are a Roman Catholic (and even if you're not), have you been offended?

If so, you may have standing to petition the Patent and Trademark Office to revoke the Padres' trademark registration.  After all, now there is precedent with the ruling against the Washington Redskins. 

Rethinking Forgiveness: The True Mission of Religion?

Are major world religions increasingly missing their core mission?

Mind you, this is not a point on doctrine. It is a point on the institutions, the human and thus altogether quite fallible institutions which are supposed to support worship.

From time to time there are new reports of investigations of abuse (especially of children) at the hands of various religious leaders or lay people within the setting of a religious institution. The various priests and other church officials now admitting they didn't report certain abuses (of all types) just totally lost sight of their mission and primary duty, which is to minister to followers and congregants. 

What are they concerned about when they consciously avoid making judgments and taking action?  Well, it's the institution.  That can be dressed up and rationalized -- e.g., by protecting the Church we are helping so many more people through our programs, etc. -- but even that act of rationalization is fatally flawed in its motive (it doubles down on depraved indifference) and by degrading the credibility of the institution successfully compromises its ability to perform any other aspect of its mission in either the spiritual or secular realms.

All institutions behind a faith have a mission. But protecting the "institution" is not part of that mission. What is central is the faith, the doctrine, and only by extension, those secular acts which help fulfill that faith. Treating the institution as a sentient being which warrants special treatment because it is an "instrument" of a divine being is, well, one creative rationalization. It may work in certain monastic closters and even in some courts of law, but it will also dissipate the moral high ground upon which religion depends.

The failure to report abuses within a religious setting may not necessarily be criminal (this is different from the underlying act), but it is such a severe failure in judgment that it cannot be "forgiven." 

And lest we forget, there is no obligation to forgive. That obligation deserves further examination. Let's explore the thought process behind the sense that we are obliged to forgive when people "apologize." Consider whether there is contrition. Consider whether the wrongdoer has done this before, whether the apology is genuine, and whether the apology is sincere or just done to avoid responsibility (or worse, to live for another day, a day to repeat the crime on another victim).

Such an obligation is a fiction voiced by the manipulative who seek future opportunities to repeat their sins. This impulse to forgive needs to be resisted fiercely and viewed for what it is: a moral weakness of its own kind that borders on narcissism. Resist it! 

Those of us being asked to forgive must -- it is a duty -- remember who we are responsible for defending, those to whom we and we alone owe a duty

We must resist the call to forgive, particularly when the forgiveness carries with it the risk, borne by the totally innocent, of future harm. To protect those we love, we must neither forgive nor forget, and be very willing to face the claims of moral judgment from even those who have forfeited any moral claim to judge anyone.

Wednesday, June 18, 2014

Redskins Trademark Cancelled For Disparagement

Could private property rights and even basic civil liberties be under even more extreme attack? Has the eminent domain-type sense of government seizure of real property been extended into the intellectual property domain?

The United States Patent and Trademark Office has now cancelled the trademark registrations of the Washington Redskins because "Redskins" and an Indian headdress in the logo are considered disparaging to Native Americans. The full decision includes a discussion on the merits of the racism argument, and is worth reading. 

Are the next targets the Cleveland Indians or Chicago Blackhawks? (The Blackhawks' logo also features the head of an apparent Native American, and includes four feathers.) 

The federal government apparently is using its full weight to pressure a private business to change its name, in the process destroying millions of dollars in brand equity.  There is no compensation to the Redskins' owner (Daniel Snyder) for the loss in value to his franchise, which is valued (perhaps wildly optimistically) at $1.7 billion by Forbes magazine including a separate value of the brand -- that is, the name "Redskins" -- of $145 million. Perhaps overzealous government confiscation (or transformation) of property -- there is really no other way to view this -- is now a very real "risk factor" for any business.

Can your property be taken away because someone, with or without cause (and that's operating on the honor system, to be honest), targets you with a claim of "disparagement"?  If so, then the mugger's most effective weapon of choice becomes an Alinskyite imputation of the vilest of personal characteristics to his mark, with the apparent sanction and blessing of the federal government. This development may usher in a new age of legal plunder.

The real objection that deserves to be made is against the concept that select groups, claiming to speak for victimized classes, have a de facto right of approval or disapproval on the operations of a business. Are we entering an era where concentrated public opinion against certain businesses can be used to extort financial settlements or changes in business operations, including ones where the enterprise is made to suffer a financial penalty such as with the Redskins' potential signficant loss in brand value? Are self-proving cries of racism or other offense an acceptable motive to engage in the equivalent of the now-rightfully-banned practice that used to be called "redlining"?  And at what point do these rulings and private efforts start to echo the same egregious civil rights violations that were finally found unconstitutional by the U.S. Supreme Court in the 1950s and 1960s?

Monday, June 16, 2014

Warrantless Spying On One Hand, Stonewalling With The Other

The New Jersey Attorney General's Office -- whose Attorney General is not elected, but is appointed, by the Governor (Chris Christie) -- has reportedly solicited test cases to establish that the State has the right to get the phone records of people without getting a warrant.  This means that people not convicted of a crime, and people as to whom no probable cause that they have committed a crime has been established, would still be subject to having their personal records searched.

Your Fourth Amendment rights would be under new jeopardy.  The Fourth Amendment, lest you forget, provides as follows:

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon Probable Cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
The basis for this story is a troubling memorandum out of the New Jersey Attorney General's Office and just reported earlier today by the Newark Star-Ledger.

It deserves noting that the Attorney General's Office, being a part of the state Executive Branch, is effectively a defense counsel for a gubernatorial administration currently under siege in various scandals.

Theoretically, at least, the right to warrantless access to personal communications records would give the Attorney General's Office, operating under the auspices of the Governor's Executive Branch, the ability to inspect and surveill (and in a darker scenario, harass and intimidate) members of the press, public-minded civic activists and media and political critics.

In the meantime, the Christie Administration has routinely deflected public records requests under the state's Open Public Records Act.  (I have a client who has sued to get some of these records.)  Transparency, it seems, is a one-way street.

This initiative is a big threat to civil liberties, and warrants (no pun intended) continued attention.

Monday, June 9, 2014

Bitcoin Smart Contracts: Redefining Legal Profession?

Here is my new research report, courtesy of the independent New York think tank Financial Policy Council.

Monday, June 2, 2014

It's Too Easy To Vote: Why Real Reform Won't Happen Until It's HARD to Vote

Americans love to whine! People love to complain about politics and political gridlock. An accepted principle is that the country "needs" greater voter participation, that not enough people are engaged in the process. When commentators don't know what to say, or have nothing to say, they say this and repeat it ad nauseam. 

What if that idea were utter rubbish?  What if the solution lay in the historical trend, dominant throughout human history, towards the precise opposite, towards using merit (however subjectively defined) to restrict the franchise to those who care and value it the most?  In other words, is the solution to society's "political dysfunction" the enactment of restrictions on voting to limit and concentrate voting power towards the stakeholders who have the most to lose by its abuse? 

Today's Imperfect Practices

Right now, the United States has a dystopian voting culture where government employs the honor system as the means to enforce the barest of qualifications upon the franchise, and in which the letter and spirit of election laws are honored in their breach. We insist on a minimum age and take the word of one's declarations as to residence, citizenship and not yet having been convicted of a felony.  (In fact, in present day New York City, a bill to allow non-citizens to vote in elections for New York City elected office has been sponsored by a majority of the City Council.) 

One supposes if such attitudes work for, say, residential mortgages, then there should be no problem with voting, right? Even worse, anyone who dares to insist on verification of these minimal requirements is targeted with the most vile of motives and character slanders.  It is as if the right to vote is so sacred that to even suggest compliance with the law is a prerequisite for voting is to risk ostracization and even prosecution for the violation of another's civil rights.  Yet such failures (and refusal) to verify the most basic qualifications actually erode and dilute the value of the vote and obscenely violate the voting rights of those responsible citizens who follow the letter of the law.

The Accepted Paradigm Rests on Flawed Assumptions; A Paradigm Shift In Attitudes Is Needed

Perhaps the solution -- the best from an outcomes perspective -- is a fundamental change in our entire concept of desired voting and political behavior. 

Instead of pushing for "more" political participation, as self-styled "good government" groups are wont to do as they extort donations from corporate benefactors terrified of being accused of being undemocratic or racist for refusing, might the solution be to have less participation?

After all, tons of money are already spent on elections and campaigns.  The one special election for an open U.S. Senate seat in New Jersey this past year cost an estimated $24 million ($12 million each for the party primary and general).  Campaigns raise and spend a fortune; it is estimated the 2012 presidential race generated $1 billion in spending. This excludes special spending through so-called "independent expenditures" or issue advocacy expenditures not considered electioneering.  It is hard to imagine that outreach could be improved.

In addition, it is hard to find people who actually want to vote, who care, and who cannot vote. Technological advances mean nearly everyone who wants to be connected is. Email and cell phones means increasingly-tech-savvy campaigns can contact their base supporters as well as average voters. And in a day where political campaigns dominate popular media (as the content of shows like Saturday Night Live will attest) and television ads increasingly saturate both the airwaves and social media ad space, can one really find many Americans without serious mental impairments or other infirmities who are seriously, genuinely unaware of major elections?

The central reality which politically correct people dare not say is that the majority of Americans just do not care. In a society where people commonly vote for the winner of game shows, reality shows and "talent" shows, spend hours a day on all sorts of social media, anecdotal evidence is very strong to suggest that the grand majority of people who are motivated are indeed voting. (Whether they are voting for the candidates preferred by the self-styled good government groups and elites is another matter entirely and one suspects the choice of the vote is really the issue to which these organizations object.)

So why the push for increased voting? Such efforts would seem to pull in the increasingly indifferent and -- since we are all allowed to make judgments -- the increasingly ill-informed and ignorant. The result is that the vote of the concerned, the educated and the true stakeholders (e.g., asset owners) is diluted (and greatly so) by the vote of the indifferent, irresponsible, uneducated and slovenly remainder.

The danger of seeking greater "participation" "by all means necessary" should be obvious shortly. An unmotivated segment of the populace, already demonstrating a reluctance to vote even when it is free, increasingly convenient and the subject of much content in the popular and social media, might be convinced to "vote" only through undesirable channels. They might have to be induced (or bribed) to vote with "goodies" that naturally would be paid by others, or even worse, they might be voting through the hands of others -- their votes would be stolen through fraud and cast by those opportunists seeking to game the system and rig election outcomes to achieve their political goals.  After all, indifferent and feckless voters would hardly be a likely constituency to report voter fraud, suppression or other illicit activities.  The dangers to democracy of such unrestrained abuses can be immense.

A Proposed Solution: Encourage Voting...By Making It Harder To Vote

The solution might be to move in the opposite direction, to move towards a system where the importance of voting to the maintenance of our democratic system would be emphasized by the implementation and even application of barriers to the vote.  As long as government is in the sordid practice of trying to modify behavior, and as long as many Americans accept as gospel the right of either The Government or The Elites to engage in behavioral modification or otherwise attempt to drive our actions, why not use these elitist impulses to fuel a move in the opposite direction? Why not make people treat voting as a privilege to be honored and treasured, an act which is to be prioritized at the expense of sacrificing other desires, and to compel people to subordinate their other private matters (such as the horrible capitalistic impulses to make money, make a living and actually support one's family) to more socially-useful, higher priorities like civic participation?  

If we are a Nanny State and most people are okay with that, then what would the objection be to similar manipulation when it comes to regulating the right to vote, right?

I propose the following. Such "barriers" would include:

** the requirement for picture identification for all voters to register to vote or to switch party enrollment, which requirement would be on par with existing requirements to obtain a driver's license or official government identification card.

** actual election day in-person voting with rare exceptions for physical infirmities; this would be on par with one's getting a flu shot or other vaccination.

** the automatic cancellation of party enrollment for failure to vote in at least one party primary over three consecutive years, and of voter registration for failure to vote in at least one primary or general or special election in any two-year period; this is on par with the requirement to get an in-person automobile inspection (in most states) every two years.

** the elimination of "open" primaries so that party primaries are restricted to party members; and

** to protect the integrity of party primaries, preserve the First Amendment constitutional right of association of party members and deter the practice of "party raiding" by outsiders not genuinely aligned with the principles of the targeted political party, the institution of deferred enrollment statutes to require changes in party enrollment are made before the end of the period for party primary candidates to take measures to qualify for the primary ballot (e.g., registration fees or petitioning through the gathering of signatures from party members); this is hardly onerous in light of the narrow "open enrollment" periods under the new Patient Protection and Affordable Care Act. 

Such barriers would be only a beginning. True radical political change might erect higher barriers such as the institution of poll taxes.  Yes, this would link the ability to pay a fee in order to vote, putting it on par with the corporate shareholder voting right: you must buy a share in order to vote at the annual meeting. The key would be the even-handed application to avoid de facto discriminatory practices, as one must be aware of the valid sensitivities of some historically-targeted groups.  

Historical Precedent; Using Equal Application To Ensure Fairness For All

This is not fundamentally different from the colonial era practice that limited voting rights to property owners.  That is because colonial-era authorities recognized that in a system of "one man, one vote, no questions asked," the general masses, largely regarded as unshaven, uneducated but most of all regarded as unprincipled, would be liable to vote en masse to seize and redistribute the property of the landowners and merchants. 

voting threshold requiring ownership would -- and did -- serve to restrict the franchise to those who had far more to lose from bad policy decisions than they might be suspected to gain from benefits of oligarchies, state-sanctioned crony capitalism (what in colonial days was mercantilism and in the 19th Century, pre-Sherman Act, was monopoly capitalism).

But there is an alternative to reaching back to practices from our history which have sordid, and deservedly negative, meanings for many Americans whose ancestors suffered from legal and societal discrimination. Today, we have corporate law governing corporate shareholder voting rights. That is, one share of common stock, one vote. As long as you buy a share, you have a vote and no one cares who you are, what is your skin color or religion, or even where you reside. In fact, the truest, purest form of democracy on the planet may be practiced nowhere else than in the boardrooms of and record rooms of stock transfer agents and proxy solicitation firms serving corporations whose shares trade on the stock exchanges within the United States.

In the corporate arena, the "poll tax" of buying a share is remarkably democratic and egalitarian; all shares vote equally (at least within their classes, subject to exclusions seen in the certificates of designation for classes of preferred stock or other derivatives that are available and disclosed to all).  Why not use it in our broader society? Such a practice would instill a respect for the franchise as something very important, something that has a value, and something that, yes, it has to be earned. It propels the standard that one had to have enough merit to earn his (or her) keep in order to have the right to vote to decide how to appropriate tax money collected from others. As for the valid fears that such measures could be misused for racially discriminatory objectives, the key to success would be a painstakingly even, fair application across the board of such barriers should quickly dispel fears of a return to the odious days of the early to mid-20th Century.  (In addition, it should be noted that poll taxes and other measures were often designed to prevent poor, non-landowning whites from voting and to restrict the franchise as much as possible to property-owning stakeholders.)

American corporate law is remarkably consistent and fair. Generally, one share of common stock has one vote. It's just that some people have more votes, because they have more shares. They have more votes, because it is recognized that owners with more shares have more at stake; while they have more to gain that recognition is never divorced from the reality that the owners have just as much to lose.

American corporate law also recognizes and rewards the entrepreneurialism and risk/reward calculus of our capital classes. Voting rights are recognized as a form of currency with its own value, hence the rise of supervoting stock and the creation of different classes of securities issued by a company with different sets of rights. The issuance of such instruments as "Class Z Participating Preferred Stock" illustrates how corporations recognize and reflect either the investors' demand for certain voting rights or their willingness to relinquish or subordinate those rights in exchange for a monetary return or other term that has a greater value.

Above all else, corporate law and capital structures respect and respond to their constituents. Investors to whom voting rights matter most get to hold shares with voting rights. Investors who care even more about voting can buy supervoting shares (if issued). Investors who could care less about their vote can buy nonvoting shares which have other features that offset (or compensate for) the loss of the voting right. In short, this is a brilliant legal framework that respects and responds to the desires of the stakeholders whose monies are at risk.

So why aren't we allowing people to sell their votes? If a vote has more value to the purchaser and little enough value to the original holder so that he or she is willing to sell it, why not allow that? This is a fair trade with willing and satisfied participants on both sides of the transaction.

But the welfare-dependency state and its related-by-birth political establishment DO recognize the value of the stakeholder in our politics. The difference is just that they define the stakeholder differently. In their world view stakeholders are measured not by wealth but by power (yes, a different form of currency).  

Now, there are groups whose interests are so implicated by political and civic discourse that their voices need to be given the proverbial seat at the table. An example is the subset of our younger generations who are subject to military service in the event of a draft and who, even today, are required to register with the Selective Service upon turning 18 years of age. A new voting regime can create an exclusion for men and women between the ages of, say, 18-35 who are subject to military service. Such regulatory ingenuity should not be a difficult task to achieve for the regulatory state with its legions of bureaucrats and lawyers.

This change may seem radical at first, but it is a "back to the future" approach with substantial precedent in American corporate law. In short, this proposed new voting paradigm elevates and enhances the role of the stakeholder in American public life.

Eric Dixon is a New York corporate lawyer who has represented political candidates, parties and media organizations in various election law compliance, opposition research and civil litigation since 1994.