Disclaimer: This is not legal advice and I am not your lawyer.
PART 1: INTRODUCTION
Gabe Shapiro recently proposed an experimental solution to the problem lawyers face when working within an anonymous network. The problem is that lawyers must represent specific individuals or entities rather than the public-at-large. I can’t say I legally represent the Ethereum community, for example, because the vast amount of ethical rules that guide my representation would apply to the millions of users around the world.
For instance, lawyers are prohibited from representing clients with conflicting interests under Rule 1.7(a) of the MRPC. So how would I even go about checking for these conflicts for every pseudonymous ETH address? How could I even get their contact information in the first place?
It’s true that sometimes lawyers represent an entire nebulous class of individuals, but only in the context of class actions regarding specific, pending litigation. There’s no similar class representation for ongoing business matters.
I ran into this problem last year when I noticed an airdrop of Kick tokens to my ETH address. The tokens appeared to have value, but they were locked, meaning I couldn’t transfer them from my account. Others within the Ethereum community wondered if we had to pay taxes on them.
Tech people aren’t lawyers and lawyers aren’t tech people, so nobody really could offer a definitive answer to this issue. A lawyer who does know how to answer it will only tell his or her clients and nobody else. The lawyer isn’t compelled to share the information with other lawyers, and so can, in a sense, have a monopoly on the legal solution at play.
I wanted to write a tax memo discussing the value, or lack thereof, of Kick tokens in order to settle the issue for everyone. But to whom do I send the memo? Even if I send the memo to a client, the memo becomes the property of the specific client and not the community-at-large.
But what if I was the client?
I could, using Shapiro’s proposal, write the memo to myself, then make it publicly available. This would lessen the burden of other lawyers who might be unfamiliar with the inner workings of Kick’s smart contract, and so therefore save their clients some time and money.
I am, after all, personally affected by the tax implications. I have the right to representation just like everyone else, but it just so happens that I’m also qualified to give legal advice. In this case, I’m writing the memo as an attorney, then as a client I’m waiving confidentiality and letting others see the work. Shapiro calls this concept “Autonomous Lawyering,” which he fully articulates to his substack subscribers.
What would motivate a lawyer to make a memo publicly available? If the lawyer has a monopoly on the legal solution, wouldn’t it make more sense to keep the memo private and charge each client a fee for access? Shapiro points out that the autonomous lawyer benefits from the increase of value to the network he or she is invested in.
To return to the Kick example, imagine a situation where all or most ETH holders believe they have immediate income tax liability due to receiving a locked token. I, as an ETH holder, rely on Rev. Rul. 2019–24 stating that “[a] tax payer does not have receipt of cryptocurrency when the airdrop is recorded on the distributed ledger if the taxpayer is not able to exercise dominion and control over the cryptocurrency.” I then write a memo to the effect and selfishly keep it to myself and my clients.
Tax day comes and I notice a sudden drop in the value of my ETH. As it turns out, there was a massive selloff within the Ethereum community in order to pay income tax on the Kick airdrop. I end up losing more money from my investment than I gained from charging fees. I could’ve prevented this by acting as an autonomous lawyer and making my tax memo public. This narrative is, of course, overly simplistic, but the point is that autonomous lawyering can benefit the lawyer by adding value to the network he or she is invested in.
Shapiro also proposes that lawyers who profit from the work of autonomous lawyers could tip them by sending some cryptocurrency their way. In other words, if your lawyer relies on my memo, he should send a few DAI to my ENS: rob.primal.eth
But then that means I profited from Shapiro’s work. Shouldn’t some of the tip go to him? If I fork his memo on autonomous lawyering in order to issue the Kick memo, for example, he should get, say, 15% of each tip from lawyers who profited from my memo. The flow would look like this:
Appreciative Lawyer → Smart contract → 85% to rob.primal.eth → 15% to lex-node.eth
If someone forked my memo the flow might look like
Appreciative Lawyer → Smart contract → 85% to newlawyer → 10% to rob.primal.eth → 5% to lex-node.eth
This could be done automatically using a simple smart contract. Or perhaps the solidity masters could automate this process further using OpenLaw (looking at you, Ross Campbell).
When describing a system, it’s important to note security flaws. Could autonomous lawyering be misused? Certainly. Let’s say I short a particular token like UNI, then write a memo to myself concluding that it’s a security and possibly illegal for me to own or trade. I publish this memo and people start to panic sell, thus causing the price to drop precipitously. I then close my short and use the profit to purchase UNI at the new lower price. Once I accumulate enough UNI, I then revise my memo concluding UNI is “sufficiently decentralized” and therefore is no longer a security. This causes the price to move upward, further increasing my investment.
Of course, this is market manipulation and already prohibited under Section 9(a)(1) of the Securities Exchange Act. But how can regulators prove my intent, especially if they can’t link my ETH address to my identity? Even if the SEC was aware of my trades, I could argue that the revised memo was just a good faith error or that I revised it due to new information that’s come to pass. The danger here is that nobody would hold me to account, especially the client, since he is I.
Realistically speaking, the bar associations would likely adopt new rules or issue interpretations of existing rules to eliminate or limit the prospects of autonomous lawyering if this were to occur.
Shapiro also details risks to the autonomous lawyer, including the possibility of third-party reliance on legal analysis that some states may recognize as creating a professional duty of care. He states that there currently “is not a perfect solution to this problem” but that he hopes the following combination of practices should be respected by courts as preventing third-party malpractice claims from arising:
- the lawyer providing clear disclosure about the nature and intent of their autonomous lawyering, including disclosure that the lawyer is only representing himself or is acting in a nonrepresentational role and makes no guarantee or assurance regarding the results;
- the lawyer retaining copyright in any formal written legal analysis and only licensing it for specific intended uses (e.g., as an aid to third parties’ own independent legal research, conditional upon their deemed agreement not to rely on it or to assert any attorney-client or other duty of care owed by the lawyer); and
- the use of prominent disclaimers regarding the limitations and narrow purposes of the legal analysis.
In his example memo regarding autonomous lawyering, Shapiro included a number of disclosures including his intent that doing so would make YFI more valuable, that by writing the memo it’s possible others would tip him retrospectively or hire him for some other task, that he wanted to do the research anyway, that the memo provides an example of autonomous lawyering, and so on.
He also included disclaimers, including characterizing the memo as a “recreational memo” that the reader agrees to use only for “entertainment purposes or to help organize the independent research efforts of other persons on the topics discussed.” He further states that [b]y reading on, you covenant and agree not to rely on or hold me responsible for this memorandum or any information or conclusions herein, but solely to use it for entertainment, as an inspiration for your own research or as an aid to discussion with your own legal counsel.”
The idea here is that the reader enters into an agreement just by the act of reading. But this isn’t really an enforceable agreement. I can’t, for example, say that by reading this article you agree to give pay me $100 a month for the rest of your life. I mean, I could say that, but no court would enforce such a provision. Something else is needed to show you ascended to my terms. In the old days, this something else would be a signature. Today, simple clicks can be used to show ascension.
And this brings me to my own contribution to the experimental field of autonomous lawyering.
PART 2: CREATING AN AUTONOMOUS MEMO
Sign up for a free OpenLaw account, if you haven’t already, otherwise you won’t be able to view what I’ve made so far. Basically it’s a clickwrap agreement for viewing an autonomous lawyering sample memorandum. Once you have an account, navigate to this contract and you’ll see the following:
It’s a simple template prompting users to ascend to the agreement that the memo doesn’t create an attorney-client relationship and that it may only be used for entertainment, as an inspiration for your own research or as an aid to discussions with your own legal counsel. To the right you see the title and the prompt that you must agree to the terms and conditions to view this memo.
Click “yes” then like magic you see…
This very article that I’m writing. So let’s say you wanted to issue your own memo using this clickwrap method, here’s how you do it. Click on “Edit” in the above top right corner next to “VIEW: Draft”.
And you’ll see the “Edit” page for this memo.
Select and copy the entire text.
Then click on the “OPENLAW” icon inthe upper-right hand corner.
Which will take you to OpenLaw’s home page.
Click on the pink icon “CREATE”.
And select “Agreement” from the drop-down menu.
You should now see a blank “Edit” window.
Create a title for your memo, starting with “Memorandum” so it can be easily catalogued, then paste the copied text.
Now delete the portions of my own memo leaving only the following:
And change the title from AUTONOMOUS LAWYERING SAMPLE MEMORANDUM to your own title. Then copy your own memo and paste it here:
Click “Save” in the upper-right hand corner:
Then click “Back”
And there you have it.
Thank you for reading and please let me know in the comments what you think of autonomous lawyering.