22
October
2024
Regulating the Unseen: Limiting the Potential for Negative Externalities from MEV Realization
This article was written by DLx Law attorneys Tom Momberg & Angela Angelovska-Wilson for Global Legal Insights (GLI), which included this article as a Chapter in its 2025 publication on Blockchain & Cryptocurrency Laws & Regulations.
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1. Introduction
MEV is a multifaceted concept. It is described in greater detail below,[1] but, put simply, MEV can be broadly understood as a set of phenomena naturally occurring on any blockchain network (that is, any open and “permissionless”[2] blockchain network). Where MEV might be generated on a ‘blockchain network,’[3] methods for realizing it can potentially assume many different forms.
On any given blockchain network, most of the available opportunities for MEV realization (like those arising from the actions of ‘block builders‘[4] on the Ethereum network)[5] can be broadly classified as block optimization. Broadly speaking, “block optimization” consists of any form of MEV realization that is pursued by any participant in a blockchain network to optimize profits in connection with the prioritization or de-prioritization of messages (or, rather, what are commonly called “database transactions”)[6] by the network’s ‘base layer actors.’[7] Block optimization is foundational to the economic security of most if not all blockchain networks, and it is inherent in their ‘transcriptability.’[8]
Originally identified in the context of decentralized finance (“DeFi”) platforms, MEV has become a significant area of attention due to its potential to distort market fairness, lead to predatory practices (like certain kinds of “targeted trading”),[9] and undermine the decentralization ethos of blockchain ecosystems. Indeed, some forms of MEV realization can be[10] exploitative or expose participants on blockchain networks to negative externalities (notwithstanding instances of fraud or unauthorized access).[11] Nonetheless, the protocol designs behind most blockchain networks are meant to channel opportunities for MEV realization in ways that create positive incentives for base layer actors and improve the economic security of the networks these actors are tasked with securing. In this way, MEV is intrinsically tied to (and inseparable from) the economic security of a blockchain network.
An emerging focus on MEV
Legal considerations surrounding MEV are still in their infancy, but recent events suggest that legal and regulatory scrutiny is beginning to intensify. For example, in May 2024, the United States (“U.S.”) Department of Justice (“DOJ”) charged[12] two brothers (Anton and James Peraire-Bueno) with wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering after the brothers allegedly exploited vulnerabilities in the processes used to secure Ethereum. In its indictment, the DOJ alleged that the brothers stole about $25 million in digital assets from digital asset traders when their trades were going through the processes necessary to be confirmed on the network.[13] In this case, the DOJ argues that many of the Peraire-Bueno brothers’ alleged ill-gotten gains are attributable to their realization of certain forms of MEV.[14]
The Peraire-Bueno case[15] is the DOJ’s first-ever (if not the U.S.’s first-ever) known lawsuit allegedly involving facts pertaining to MEV. Nevertheless—and, although neither Congress nor any U.S. federal regulatory authority has, to date, drawn any significant attention to MEV-related facts or concerns—global rulemaking bodies have had their eyes on MEV since at least 2022. The Bank for International Settlements (the “BIS”), the International Organization of Securities Commissions (“IOSCO”), and the International Monetary Fund (the “IMF”) together with the Financial Stability Board (the “FSB”) have each expressed sentiments in some way broadly likening MEV realization activities to acts of market manipulation and abuse as they are understood in conventional market contexts. Although this might be a mischaracterization of what is really happening with MEV, there is some merit to these authorities’ concerns.
Between these concerns and the alleged events underlying the DOJ’s case against the Peraire-Bueno brothers, interested parties must recognize that potential vulnerabilities in blockchain networks and the systems they support could open the door for manipulation or certain MEV practices that could hinder network security or functionality and harm users. In that spirit, this Chapter explores various legal considerations associated with MEV. In doing so, it admonishes the potential for blockchain-based fraud and reflexive enforcement or regulatory intervention that might attempt to address these emerging phenomena under existing law or by applying conventional legal approaches that could be unfit for purpose.
Generally almost all MEV generated and realized by the various participants on major blockchain networks is generated and realized in the ways intended by network developers to bolster economic security and does not pose threats of network disruption or user losses. Even though this is true—generally—this cannot be universally true, at least not without a continuous balance of network incentives. Participants in these networks should always be assumed to be rational actors who, if presented with an opportunity to realize MEV by any means (i.e., a way to obtain additional value), will take that opportunity, regardless of whether doing so could expose others to negative externalities. If developers are not meticulous in their design and implementation of a blockchain network’s base layer and the systems that support it, then the behaviors and incentives of base layer actors could manifest—or even evolve over time—in ways that create opportunities for certain network participants to engage in potentially harmful forms of MEV realization.
Taking steps toward a consistent, yet flexible, approach to MEV
Given these considerations, as well as the complexity of the underlying subject matter, this Chapter seeks to help advance a more universally consistent understanding of MEV. This Chapter also invites the start of a broader discussion necessary to help ensure that the blockchain technology industry and interested government parties can not only protect blockchain networks and their users from loss or disruption, but also build and support stronger and more secure and resilient networks and other blockchain-based systems.
This Chapter starts on this path by offering background and clarification on some foundational concepts in Section 2 (on “Understanding MEV”). The key technical and economic details covered here are meant to help lawmakers, policymakers, attorneys, and blockchain developers alike understand how fundamentally different blockchain-based systems (and MEV) are from more conventional systems, infrastructures, and market activities.
In Section 3 (on “Engaging with international regulatory perspectives”), this Chapter reviews the MEV-focused perspectives of the global rulemaking bodies—the BIS, IOSCO, and the IMF and FSB—and addresses some of their concerns and their purported solutions to those concerns. Then, in Section 4 (on “Assessing MEV-related activities in connection with existing legal frameworks”), this Chapter reviews some existing legal frameworks and assesses whether they are potentially relevant to MEV-related activities, with primary consideration for user (or ‘consumer‘) protection matters.
In consideration for blockchain networks and MEV-related activities as wholly anomalous from more conventional infrastructure and services, applying existing law to circumstances involving MEV—or even borrowing concepts from more conventional notions of fraud, price manipulation, or market abuse to apply to MEV scenarios—would likely have consequences that limit innovation or otherwise harm the industry. Not to mention, they would likely be ill-suited to achieving any goals aligned with compelling government interests in protecting consumers and network security and holding bad actors accountable.
Accordingly, finally, in Section 5 (on “Abandoning conventional notions in pursuit of a flexible, principles-based approach”), this Chapter urges authorities to exercise caution before attempting to apply existing law or to push for more traditional forms of regulation. Giving due consideration to the DOJ’s allegations and the potentially adverse views espoused by global rulemaking and advisory bodies, Section 5 argues that pursuing such a path, for the lack of a better analogy, would be like attempting to hammer a square peg into a round hole. Section 5 concludes this Chapter by imploring both relevant authorities and the broader blockchain technology industry to discard conventional notions in favor of a more flexible, principles-based approach that does not risk hampering the growth and progress of the blockchain industry but that at the same time is suitable to address compelling government interests.
2. Understanding MEV
MEV has gone by many different names. It is sometimes called ‘Miner Extractable Value‘ or ‘Maximal Extractable Value‘ by certain people or in certain contexts, but it has come to be most widely referred to phonetically—not as any acronym, but simply—as “mevh.”
MEV and related considerations are wholly unique to open and permissionless blockchain networks. As the term is used throughout this Chapter, “blockchain network” refers to any digital database maintained across a network of distributed and independently operated computers (or “nodes”) whose operators follow some particular means for achieving consensus collectively across all nodes (using a “consensus mechanism”) to secure and update the state of the network on an ongoing basis.[16]
Putting it simply and stripping away quite a bit of nuance (on which this Chapter elaborates in Section 2, below)): “MEV” refers[17] to the maximum value that can be realized (in excess of standard block rewards and gas fees) by the participants in any blockchain network based on the block production functions of the particular set or sets of participants tasked with securing the network (known broadly as “base layer actors”). Ultimately, the availability of MEV realization opportunities arises from a blockchain network’s finite capacity to order and prioritize the database transactions submitted by users[18] (which is the function of the network’s “base layer”).
By this very definition, MEV is generated by a blockchain network’s users based on where, when, and how they transact and submit messages to the network. The amount of MEV actually realized by a network’s participants, however, depends on the messages that the base layer actors include or exclude—or the way in which they order included messages—within any given block.
Accordingly, MEV serves as a measure of a blockchain network’s efficiency in handling and prioritizing messages within the limited space of a block, especially as volumes might fluctuate. Intrinsically, not all database transactions can be processed on a blockchain network immediately or in the order in which they are submitted.[19] MEV can therefore be conceptualized not just as naturally occurring phenomena on each network but also more broadly as a tool for understanding how the prioritization of transactions can affect a network’s efficiency, its overall health and security, and the resilience of its consensus protocols.
Looking at MEV in practice and how system vulnerabilities can lead to disruption
Grounding this explanation with an example, consider the Ethereum network and the alleged facts in the DOJ’s recent indictment and ongoing case against the Peraire-Bueno brothers. The two brothers allegedly submitted certain database transactions with malicious code targeting a vulnerability[20] in the underlying software used by a special type of Ethereum participant called a “relay.”[21] The DOJ posits that this malicious code caused the relay to prematurely release nonpublic information about the contents and order of other database transactions that were included within the same batch as the brothers’ transactions.
Ordinarily, every Ethereum relay releases a single proposed batch of database transactions (each, a “bundle”) to whichever validator (another special kind of participant in the Ethereum network) is selected[22] to propose the next update to the state of the network (or “block”) to be confirmed (or “validated”) collectively by the other validators.[23] The contents of each bundle is encrypted and meant to remain confidential until it is released just in time for block proposal.[24] Additionally, validators on Ethereum are meant to be diverse and distributed so as to prevent the concentration of power and responsibility in any one actor or group of actors, which could otherwise lead to a misalignment between the incentives of validators and the economic security interests of the network.[25]
The Peraire-Bueno brothers, however, allegedly operated many validators on Ethereum in a way that obfuscated their identities, thereby circumventing network restrictions against validator concentration and at the same time increasing the chances that one of the brothers’ validator nodes would be selected to propose compromised bundles for validation by the remaining validators.[26] In the time it took before the relay could release bundles to validators to be considered for validation, the brothers allegedly altered certain bundles and reordered the full slate of included database transactions to their advantage.[27]
The DOJ contends that the Peraire-Bueno brothers replaced other traders’ sell operations with their own trades to siphon gains off of anticipated increases in the values of illiquid tokens being traded on decentralized digital asset exchanges, typically rendering those traders’ tokens worthless in the process.[28] The processes that the Peraire-Bueno brothers were allegedly able to manipulate (using the vulnerability they were purported to have identified in the relay software) are maintained as part of a greater and more intricate system (known as “MEV-boost”) underlying Ethereum’s base layer.[29]
Specifically, the Ethereum MEV-boost system distinguishes and silos the responsibility of validators as the “proposers” of blocks (to the exclusion of transaction ordering or other activities directly involving MEV) and delegates the responsibility of composing the blocks to a different set of specialized actors (known as block “builders”).[30] Ethereum is different from blockchain networks that follow a more pure version of the proof-of-stake (“PoS”)[31] consensus mechanism, where validators are typically considered to assume both these responsibilities (as both proposer and builder). The methods employed by the MEV-boost system are meant to continuously maintain this kind-of proposer-builder separation (or “PBS”) on the currently operating version of the Ethereum network.[32]
Given that the block building process is inherently a profit-maximizing activity, the interests of the actors responsible for managing it can often be misaligned from the economic security interests of the actors responsible for direct participation in network consensus. The system of MEV-boost (much like other potential PBS-maintenance methods and systems that Ethereum researchers have explored in recent years)[33] is therefore focused on structuring validators’ incentives such that validators are not compelled to participate in the block building process on Ethereum.[34]
Although MEV is a set of broadly necessary and unavoidable phenomena, the alleged facts surrounding the Peraire-Bueno brothers’ case help to highlight some of the MEV-related considerations with which blockchain technology developers have to grapple. Ethereum, the network on which the brothers allegedly perpetuated their scheme, also offers helpful examples through which these considerations might be more easily well understood and applied across other blockchain networks outside of Ethereum.
Ethereum’s transition to PoS consensus in 2022 compelled the adoption and observation of the system of PBS maintained as part of the network’s base layer to this day.[35] This version of Ethereum was in many ways designed to prevent base layer actors, as well as traders and other users, from engaging in the kind of transaction manipulation allegedly perpetrated by the Peraire-Bueno brothers.
Through a complex system involving a variety of roles assumed by network participants, PBS as it is currently observed on Ethereum is meant to reduce or eliminate opportunities—and otherwise disincentivize the pursuit of those opportunities—for anyone to exploit either public or nonpublic information about pending database transactions before they are confirmed on the network.[36] Although several methods of MEV realization persisted on the first iterations of Ethereum[37] and other early blockchain networks that could potentially be harmful to network users or otherwise be disruptive to network operations, opportunities to engage in these kinds of methods largely are not available on today’s Ethereum network. Hence, the kind of harmful MEV realization methods allegedly used by the Peraire-Bueno brothers are something they could do only by attacking software vulnerabilities and fraudulently gaining access to and manipulating the database transaction flows of Ethereum’s base layer.
As nascent as blockchain technology is, MEV has only much more recently been studied, described, and understood by the industry in the way it is today. Even more recent, still, has MEV captured the attention of global rulemaking bodies.
The DOJ’s recent charges against the Peraire-Bueno brothers could therefore simply represent the first instance of a potentially increasing government focus on MEV-related activities happening in connection with digital asset exchanges, decentralized applications (“dApps”), and other environments supported by the most widely used blockchain networks. This instance purportedly involves forms of MEV realization that were possible only because the brothers were allegedly able to obtain unauthorized access to certain information and processes involved in Ethereum’s base layer. Thus, the lack of other MEV-related regulatory attention could just as likely be an indication that authorities might not widely or consistently view the vast majority of the MEV-related activities commonly occurring on blockchain networks as affecting or inviting any compelling government interests.
Putting together a universal conception of MEV across different networks
As suggested in the introduction of this Chapter, depending on the systems and incentives structures in place to support a given blockchain network, block optimization strategies can sometimes encompass potentially disruptive practices that expose the network and its users to negative externalities. Most of these kinds of potentially disruptive practices can be broadly categorized as targeted trading.
As used in this Chapter, the term “targeted trading” refers broadly to leveraging available information about the upcoming order of database transactions or the contents of unordered transactions to request a competing transaction that benefits from a price differential if ordered a certain way.[38] This includes certain acts of the Peraire-Bueno brothers as alleged by the DOJ,[39] where a database transaction is placed ahead of a known future transaction to allow a user or trader to capitalize on the ensuing price movement.[40] For purposes of this Chapter’s discussion, targeted trading also broadly includes the practices commonly known as “sandwich attacks”[41] and “backrunning.”[42]
Importantly, every blockchain network inherently creates an economy of incentives among the certain set (or sets) of network participants tasked with securing the network. The incentives in this economy can manifest for these participants in different ways and can potentially vary over time, depending on at least a handful of factors. Factors include (but are certainly not limited to) each of the following:
- the form of consensus mechanism applied at the level of the underlying blockchain network protocols (i.e., the ‘base layer‘);
- the structure and organization of processes applied by base layer actors in connection with the ultimate inclusion and ordering of database transactions, with each update made to the database record maintained as the network’s source of truth (i.e., within each ‘block‘ added to the ‘blockchain‘);
- the effect these base layer processes can have on the order and timing of users’ requested operations vis-à-vis one another (i.e., based on the contents of those database transactions); and
- the time, location, and manner in which users’ database transactions are submitted to be considered for inclusion, which can vary by use case and depending on the kinds of software applications running on the network that users might interact with or that might affect or interact with users’ requested operations.
This sometimes fickle incentives economy distinguishes blockchain networks and the operations they support as something fundamentally distinct from and incomparable to conventional forms of data, communications, or financial systems or infrastructures. MEV presents many varying complexities in how it can be generated and realized on different networks and systems. In recognition of these complexities and the integral role MEV plays in the economic security of these networks and systems, anyone grappling with MEV-related matters as they might come up within any particular instance or on any particular network or form of consensus must first possess a core understanding of the universal conditions and principles inherent in all blockchain networks (i.e., those conditions and principles related to the pursuit of network efficiency, security, and decentralization), as well as the variety of ways they can be implemented in practice.
To appreciate some of the universally inherent conditions and principles underlying open and permissionless blockchain networks (including how and why MEV is uniquely and inextricably linked to the ongoing maintenance of economic security of permissionless systems), consider them in comparison to permissioned[43] blockchain environments. Such an appreciation is necessary to be able to contend with MEV-related challenges, regardless of one’s interest in the matter (e.g., as a blockchain developer, user, investor, or entrepreneur, as an attorney, as a maker or enforcer of law or policy, etc.).
Proof-of-authority (“PoA”) is the most common form of consensus used in the implementation of blockchain technology to maintain permissioned environments, where all nodes responsible for securing the underlying network (the “authorized nodes”) must be pre-authenticated, so it serves as a good example.[44] Here, security and integrity are entrusted to the authorized nodes, who are selected based on their demonstrated reputation and reliability. This is why PoA consensus appeals to developers of institutional applications that require a high degree of control and trust among participants.[45] Much like more conventional data and communications systems and infrastructure, the trust and economic security in a PoA system relies on a person, organization, or group to maintain the trusted environment in which the network nodes operate.[46]
PoA systems, by their very design, are more suitable for implementation and maintenance by a central organizer than for supporting any kind of truly decentralized system,[47] which is why they have great appeal to organizations seeking secure and efficient data or transaction processing in a trusted environment. The organizer designates trusted persons or organizations (often in separate geographies to help ensure operation continuity) to operate some amount of a limited number of authorized nodes. Via the authorized nodes, the designees securely propose and validate each block on the network, typically by following some set of pre-defined processes and database transaction ordering criteria.
Now, contrast this kind of permissioned system with the two most common forms of consensus—PoS and proof-of-work (“PoW”)—iterations or evolutions of which support the base layers of the most widely known and used permissionless blockchain networks. In PoS systems, a modified iteration of which underlies PBS Ethereum among many other highly capitalized blockchain networks, validators are entrusted to operate nodes to secure the network. In PoW systems, under the form of consensus pioneered by Bitcoin, “miners” are the set of base layer actors entrusted to operate nodes to secure the network.
Under both PoS and PoW forms, as well as under any other form of consensus underlying an open and permissionless network, the incentives of all base layer actors must be aligned with the interests of the network and its users, because they each assume a role in achieving consensus or otherwise maintaining the economic security of the network. Generally speaking, PoS systems are intended to achieve an alignment of these interests by requiring the primary base layer actors (i.e., validators) to put up tokens as collateral to be able to participate in securing the network. This is meant to inherently tie validators’ economic incentives to the long-term health and security of the network (and, in turn, to the interests of the network’s users). Serving as a prominent and basic example of a PoW system, the Bitcoin protocol is designed to achieve an alignment of interests among miners through a system of earned block rewards and user operation fees (i.e., transaction fees). This is meant to incentivize miners and align their interests in maintaining and strengthening network reliability, security, and integrity, as well as the inherent value of the network and the tokens the miners receive as rewards.
In essence, the base layer actors responsible for securing a blockchain network (whether that network is supported by a PoS consensus, a PoW consensus, or any other open and permissionless system) are going to be naturally inclined to optimize the amount of value they can receive in connection with the transaction inclusion and ordering process. Herein arises opportunities for MEV realization, where base layer actors endeavor to manage the block building process as efficiently as possible given the finite amount of available block space.
The incentives economy borne from a pure PoW system like the Bitcoin network naturally fosters a competitive environment for block space, especially during periods of high network congestion.[48] Bitcoin miners are motivated to select transactions offering higher fees, and the network’s scripting language is deliberately designed to be limited, prioritizing security and simplicity over versatility. This design choice inherently narrows the scope for MEV realization opportunities on Bitcoin (including opportunities to engage in potentially harmful targeted trading strategies) that can otherwise arise on many PoS systems and other more sophisticated base layer protocols that support users’ smart contract interactions.
Hence, MEV-related considerations tend to grow with the more tact and utility that a blockchain network offers. Depending on how the base layer incentives are structured on a given blockchain network, these considerations can vary drastically. Imbalances can arise when incentives might influence behaviors that conflict with the interests of network security and resiliency. The particular way or ways in which a network’s protocols or supporting infrastructures are designed to achieve base layer consensus is most likely the root cause of any imbalances in this incentives economy maintained among the base layer actors. Creating and maintaining a balanced incentives economy is one of the core reasons why the research and design of decentralized blockchain networks is so meticulous. Nevertheless, the communities and developers building and driving engagement on highly reputable blockchain projects generally appear to engage in a concerted effort to mitigate, if not eliminate, potentially disruptive forms of MEV realization while channeling MEV as a tool to strengthen the economic security of the network’s base layer.
Blockchain networks will continue to grow, and the systems they support will likely soon begin to move into more widespread retail use. The industry nevertheless so far lacks an equitable yet flexible framework appropriate to consistently and reliably limit the possibility of opportunities for disruptive forms of MEV realization that could expose end users to negative externalities. Now equipped with a more refined picture of what MEV is and how it can be generated and realized, this Chapter uses it as a lens through which to review and address the perspectives on MEV from international rulemaking bodies like the BIS.
3. Engaging with international regulatory perspectives
In June 2022, the BIS published a bulletin attempting to explain why MEV occurs and questioning whether it could pose regulatory risks. The BIS bulletin is PoW miner-centric in its discussion, however, and therefore does not consider the vast array of manifestations of MEV opportunities across a broad spectrum of different blockchain networks and connected environments.[49]
Then, and even more significantly, IOSCO published a series of reports—starting in March 2022[50] and concluding with a final comprehensive consultation report in December 2023—making related policy recommendations for the blockchain and DeFi industries.[51] The final report identifies the legitimately inherent need for developers, data intermediaries, and providers of DeFi or other blockchain technology-related services to, “to the extent practicable,” identify, manage, and mitigate the potentially disruptive effects of certain MEV realization strategies as an operational matter.[52]
The final report goes even further, though. It goes so far as to suggest that the design of blockchain-based trading mechanisms ought to be tailored to minimize potentially disruptive effects of any available MEV realization methods, particularly when trading regulated financial instruments.[43] This kind of design principle, without defining exactly what would be considered universally ‘disruptive,’ fails to consider that even certain forms of targeted trading can be a legitimate part of the block optimization pursuits of participants helping to secure the network. The report mistakenly borrows terms from traditional financial markets to describe certain forms of targeted trading on blockchain networks,[54] which, among other matters, likely perpetuates confusion among regulators and the general public about MEV and related foundational concepts.[55]
Notably, IOSCO’s report also neglects to recognize the ineluctable nature of MEV on blockchain networks given the lack of any ‘natural order‘ to the execution of operations.[56] As discussed above, this is a feature inherent in all blockchain networks, so its understanding is precursory to any competent authority’s ability to adequately and consistently apply IOSCO’s principle of “same activity, same risk, same regulatory outcome”[l57] to underlying circumstances involving MEV.
The final report discourages a broad regulatory approach and calls for a nuanced approach that balances the need for innovation with the imperative to protect market integrity and investors.[58] This balance is indeed needed, but prescriptive regulations would be problematic, and the approach considered by the report is only partially correct; that is, to explore mechanisms that can increase transaction order opacity or implement market structure changes that can democratize MEV-related operations. Even though these are appropriate end objectives, the report fails to urge regulators to aptly exercise caution in consideration of the relative means to these ends. Importantly—and especially in light of the experimental and continuously changing and advancing nature of the mechanisms that blockchain developers and DeFi service providers use to respond to MEV-related risks—lawmakers and policymakers ought to refrain from adopting specific solutions or imposing specific requirements on industry participants in consideration of MEV-related activities.[59]
Furthermore, drawing a comparison to digital assets, IOSCO’s final report asserts that, “in certain traditional market contexts, the ability to order, insert, and otherwise control transactions enables conduct that [might] be considered manipulative and unlawful in a particular jurisdiction.”[60] This assertion is consistent with the position taken by the IMF and FSB, which published a joint synthesis paper in September 2023 claiming (among other things) that certain targeted trading strategies could be unlawful market manipulation in certain jurisdictions if the digital assets involved are considered to be securities.[61]
This sentiment was also echoed by financial market regulatory authorities in the European Union (the “EU”)[62] and United Kingdom (the “U.K.”),[63] which have similarly sought to label MEV (or at least certain targeted trading practices) as market manipulation or fraud. Yet, none of these regulatory bodies have advanced any thorough analysis as to why or how any particular MEV-related activities could be considered market manipulation or fraud, even in a traditional sense or under any set of existing laws.
The regulatory approach called for by IOSCO is generally misguided because it seeks to apply existing legal frameworks to the specific mechanisms involved in blockchain networks, where base layer actors receive a set of pending user messages that lack a time-based transaction queue. Although other international regulatory bodies have suggested that certain MEV realization strategies are unlawful under existing frameworks, neither they nor IOSCO have offered any clear analysis of where, when, how, or why.
Neither IOSCO nor any other lawmakers or policymakers have offered any considerations as to whether the eradication of the MEV-related activities they have criticized would serve any benefit to the end users of blockchain networks.[64] Proper assessment of this question requires an adequate understanding of the intrinsic connection between MEV and the behavior of base layer actors, as well as the relative impact on the economic security of these networks.[65] Even some of the kinds of targeted trading activities they identified as problematic could be beneficial overall to the markets that blockchain networks support, such as by helping to maintain economic security and, in some circumstances, encouraging application developers and users to take more effective message routing patterns.
Regulators must exercise care in distinguishing between potentially disruptive practices and those forms of MEV that contribute positively to network security and market functionality. Without this careful delineation, prescriptive regulations could stifle innovation and impose unnecessary restrictions on blockchain developers and users. Nevertheless, lawmakers, regulators, and developers alike ought to also understand the potential for complications under existing legal frameworks. Accordingly, next, Section 4 (on “Assessing MEV-related activities in connection with existing legal frameworks”) examines the potential of any existing laws or regulations to apply to MEV-related activities in this evolving landscape.
4. Assessing MEV-related activities in connection with existing legal frameworks
The driving motivation behind most if not all laws regulating financial markets is the desire to protect consumers. This is why most of these laws tend to focus on fair access to market information and transaction execution, which, even if not expressly applicable to MEV-related activities, ought to similarly motivate and influence the development of a principles-based framework for MEV.
Aside from publications detailing current regulatory perspectives on MEV, various legal and regulatory bodies have at least a handful of times sought to address some negative implications stemming from digital asset markets. These efforts so far generally appear to attempt to mitigate the potential for market manipulation, fraud, and other abuses while also generally considering the flexibility needed by blockchain industries to independently address potential MEV-related concerns as technology continues to advance. Although other legal considerations could potentially be relevant to a discussion of MEV—including but not limited to insider trading,[66] computer fraud or abuse,[67] wire fraud,[68] sanctions or export controls,[69] and common law principles in tort or in contract[70]—these considerations are tangential and largely circumstantial and therefore not the focus of this Chapter.
Some jurisdictions around the globe have introduced laws or regulations intended for enforcement against market abuses or fraud specifically in the digital asset sector. The United Arab Emirates, for example, established laws expressly prohibiting market manipulation in digital asset markets in 2015.[71] Nonetheless, most of these laws are likely an inappropriate means of limiting the exposure of blockchain network end users to potentially disruptive forms of MEV.
The EU’s forthcoming Markets in Crypto-Assets Regulation (“MiCA”), which would require persons arranging or executing digital asset transactions (i.e., ‘crypto-asset issuers‘ and ‘crypto-asset service providers‘) to adopt systems and procedures to detect market abuse, is planned to be in full effect by the end of 2024.[72] MiCA tasks the European Securities and Markets Authority (“ESMA”) with devising regulatory strategies to prevent and detect market abuse associated with digital assets. Even though MiCA and the ESMA regulations thereunder target more conventional market abuse behaviors like wash trading and insider trading, some have suggested that MiCA might have implications for MEV participants, particularly MEV realization strategies resembling targeted trading.[73] Although many other jurisdictions have adopted or are attempting to adopt digital asset-specific laws, they generally do not consider matters or potential concerns relevant to MEV or fair and effective transaction ordering.
Under MiCA, crypto-asset “issuers” or “service providers” could potentially be required to limit the exposure of their customers or users to potentially disruptive forms of MEV realizations.[74] Under MiCA, these participants might also face obligations regarding transparency and fairness in transaction execution, especially in relation to practices resembling market abuse. Although MiCA aims to promote fair market conduct, it risks overregulating in areas where blockchain’s inherent transparency and permissionlessness already offer safeguards. This Chapter is not the first—and certainly will not be the last—to suggest that MEV-related activities, especially those that enhance network efficiency, should not be unduly constrained by rules designed for traditional financial markets.[75] Any application of MiCA to MEV must account for the unique characteristics of blockchain systems, which operate under fundamentally different incentives structures.
Perhaps just as importantly, the EU’s Cyber Resilience Act (the “CRA”) could potentially be extended to apply and protect end users of most digital or web-based financial products and services.[76] The CRA applies to operators offering digital products and services in the European Economic Area, and therefore could potentially be applied to digital asset exchanges and dApp operators.[77] The CRA requires providers of covered products or services to ensure the security of their systems, conduct periodic cybersecurity risk assessments, and report identified cybersecurity vulnerabilities and exploits.[78]
Like the EU, Hong Kong has amended its Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”), to require virtual asset service providers (“VASPs”) operating in Hong Kong to provide ongoing user support, ensure proper risk disclosure, and comply with other consumer-focused requirements.[79] In turn, the Monetary Authority of Singapore issued proposals for heightened obligations for what it calls “digital payment token service providers.”[80]
These legal regimes could potentially be interpreted to require covered service providers to protect their users against potential negative externalities from MEV realization. Specifically, the guidance included under Singapore’s proposed regimes seeks to prompt covered persons to implement practices meant to ensure market integrity in the digital asset sector, including policies and procedures that support the fair ordering and execution of user orders or requests.[81]
Although the state of MEV-related activities across the blockchain technology sector is overwhelmingly positive, developers and blockchain network participants should still exercise caution as to the potential relevance of at least a couple of existing legal frameworks, such as those applicable to price manipulation and fraud. To date, there have been very few instances—besides the DOJ’s recently brought case against the Peraire-Bueno brothers—of legal enforcement or litigation specifically dealing with MEV-related activities. Enforcement efforts instead appear to focus on schemes where participants attempt to manipulate markets for profit, which, along with data breaches and theft, reasonably ought to be the primary focus of regulatory bodies.
Although price manipulation, data breaches, theft, and other potentially disruptive actions on blockchain networks are sometimes defined in terms of MEV, these kinds of actions are not themselves forms of MEV realization. They are the very actions that MEV opportunities are meant to help prevent by ensuring the economic security of these networks.
Unlike other leading nations that uniformly regulate certain intermediaries in the digital asset sector, the U.S. applies existing commodities and securities laws when bringing market manipulation enforcement actions against digital asset market participants who violate those laws. The Securities and Exchange Act (the “SEA”), in the limited scenario where a digital asset might be deemed by the Securities Exchange Commission (the “SEC”) to be securities,[82] and the U.S. Commodities Exchange Act (the “CEA”) are the two sources of law used to address price manipulation in the digital asset industry. The regulatory authority committed to enforcing the CEA’s anti-fraud and market manipulation statutes in spot commodities markets, the Commodity Futures Trading Commission (the “CFTC”), broadly treats all digital assets as commodities for purposes of its enforcement authority. Regulations under both the SEA and CEA are broadly intended to help ensure market integrity and protect investors in these different conventional financial markets. Between the SEC and CFTC, however, the CFTC could likely assume the bulk of any federal regulatory authority over digital asset markets in the U.S. long term.[83]
Recent cases help to demonstrate the stance of U.S. regulatory authorities on the illegal manipulation of digital asset prices by automated means. In April 2023, for example, the DOJ charged[84] certain officers of Hydrogen Technology Corporation with allegations of conspiracy to commit securities price manipulation, conspiracy to commit wire fraud, and two counts of wire fraud. In this case, the DOJ alleged[85] that the defendants were engaged in a conspiracy to artificially inflate the price of the company’s own digital asset (HYDRO) using a bot to carry out automated spoof orders[86] and wash trades.[87],[88]
In September 2021—around the same time the CFTC settled charges of various CEA violations[89] against Tether[90] and Bitfinex,[91] and in connection with the same set of events—a federal court permitted private investors to proceed against Bitfinex on civil claims of alleged market manipulation under the CEA.[92] This followed allegations that Bitfinex had, after leading investors to believe that all USDT was pegged to the U.S. dollar, used unbacked USDT to manipulate digital asset markets more broadly and signal to the market that the purchases made with the unbacked USDT reflected “massive and measurable customer demand.”[93]
Legal frameworks covering price manipulation and fraud in financial markets aim to protect markets from the intentional creation of artificial prices unnatural to the free market. At their core, these laws are a mechanism to protect consumers, but they are broadly unsuitable for addressing matters relevant to MEV realization. Price manipulation and fraud are materially distinct from MEV-related activities, and efforts to apply these kinds of legal frameworks to these activities would likely be ill-fit for purpose and not cognizant of MEV’s broader meaning and its role in ensuring economic security on blockchain networks and blockchain-based systems.
5. Abandoning conventional notions in pursuit of a flexible, principles-based approach
The application of existing legal frameworks to MEV-related activities presents a unique set of challenges, primarily due to the novel and complex nature of blockchain networks and the systems they support. These difficulties arise from several key areas, including the technological intricacies of blockchain networks and their base layers, the decentralized and often borderless nature of blockchain-based transactions, and the evolving landscape of digital asset classification and regulation.
Technical complexity, novelty, and geographical diversity
The technological complexity and novelty of blockchain technology and MEV-related practices pose significant hurdles for conventional legal frameworks. Many existing laws and regulations were designed with centralized systems in mind, where intermediaries are easily identifiable and generally have complete visibility into and control over customer information and otherwise private transactions.
Existing legal frameworks are often rigid, tailored to specific industries or activities, and modifying them to accommodate the fluid and innovative realm of blockchain and MEV would require comprehensive understanding, foresight, and agility that current legislative processes may lack. Moreover, the process of legal and regulatory adaptation or the creation of new frameworks is inherently slow, often lagging behind the pace of technological innovation.[94]
The decentralized nature of blockchain transactions complicates jurisdictional oversight and enforcement. Blockchain networks are generally permissionless,[95] and MEV-related activities can be conducted by individuals or organizations across the globe, often without a clear legal nexus to any particular jurisdiction. This global, borderless aspect of these activities challenges the ability of regulators to effectively monitor, regulate, and enforce laws against parties involved in potentially harmful forms of MEV opportunity realization. The lack of a centralized point of control further complicates any efforts by regulators to attempt to apply consumer protection laws or enforce fair market practices.
Adding to the complexity is the challenge of international cooperation. MEV-related activities often span multiple jurisdictions, which could potentially require a level of global regulatory harmony that is difficult to achieve. Differences in legal traditions, priorities, and existing blockchain- or digital asset-related frameworks across countries complicate achieving any unified approach to effectively address any potential underlying concerns. Without international consensus, any local or national regulatory efforts may be easily circumvented, diminishing their effectiveness and potentially creating regulatory arbitrage opportunities.
Evolving classifications and regulatory lag
Evolving regulatory classifications of digital assets and digital asset-related activities, as well as the inherent lag in regulatory adaptation to technological advancements, add even more layers of complexity. This potentially suggests that regulatory authorities– outside of risk monitoring efforts and general cooperation with industry leaders and various operators—may not be in the best position to do anything to address MEV-related activities.
The legal status of digital assets remains under debate in many jurisdictions, affecting how MEV-related activities may be treated. For instance, whether a digital asset is classified as a security, commodity, or neither can significantly impact the applicability of securities fraud and market manipulation laws. This uncertainty makes it difficult for blockchain network participants to navigate potential compliance obligations and for regulators to establish any more prescriptive guidelines.
Furthermore, the pace at which blockchain technology and MEV-related practices evolve often outstrips the speed at which legal frameworks can be updated. This lag results in a regulatory environment that may be ill-suited to addressing the realities of the current MEV landscape. The need for technical expertise to understand and regulate these activities also often poses a barrier to effective legal and regulatory responses. The dynamic nature of MEV, which can serve various legitimate purposes across different blockchain projects, underscores the difficulty of applying a one-size-fits-all regulatory approach. This variability, coupled with the continuous innovation in blockchain technology, means that MEV will likely take on new forms, necessitating a regulatory stance that is both flexible and nuanced. Any prescriptive or hands-on regulatory approach likely would risk stifling innovation and may not necessarily mitigate potential harms to end users (which are likely the center of any potential regulatory concerns) more effectively than industry-led initiatives.
Comparisons to other industries
The challenge of regulating evolving technologies is not unique to blockchain. For example, the U.S. Government Accountability Office (the “GAO”) has identified similar hurdles in regulating drones and medical devices that incorporate artificial intelligence, highlighting the struggle of regulatory agencies to timely address the implications of emerging technologies.[96] This illustrates the broader difficulty of ensuring that legal frameworks remain relevant and effective in the face of rapid technological change.
Perhaps an even more poignant example lies in the past experiences of lawmakers and regulatory authorities in regulating online services,[97] which ought to suggest that the complexities of new and developing technological infrastructure require adaptable, responsive regulatory strategies.[98] Historical regulatory approaches to the internet underscore the paramount importance of neutrality in online infrastructure, a principle that has been foundational in shaping the digital sphere. Neutrality, meaning the effort to ensure that the internet remains open and accessible for all users, has with few exceptions generally served as a guiding tenet for many lawmakers and regulatory authorities.[99]
The need for adaptable strategies in the internet is echoed by the recognition of broadband as essential infrastructure by regulatory authorities like the GAO,[100] highlighting the importance of a strategic, coordinated approach to internet regulation in a way that promotes neutrality. The GAO’s approach seeks to ensure that any regulatory frameworks governing online platforms and services support the open exchange of ideas and the equitable development of new technologies. This perspective is particularly relevant to the blockchain sector, where the pace of innovation and the decentralized nature of the technology demand regulatory models that can accommodate ongoing changes.[101]
Call to action: Assumption of a principles-based approach to MEV
The concept of neutrality is as foundational of a principle to blockchain networks as it is to the internet more broadly. Generally, any efforts by lawmakers or regulators in the blockchain technology sector ought to similarly adopt the concept of neutrality as a guiding tenant, but geopolitical realities likely will overcome this principle for many. Various actors in the digital asset and blockchain sector that operate as transaction intermediaries (i.e., decentralized exchange (“DEXs”), centralized exchanges, certain kinds of DeFi protocols, etc.) or data intermediaries (i.e., block relays, remote procedure call (“RPC”) endpoints, network front end platforms, etc.) could potentially end up ultimately being forced by regulators to at least include geographically based blocking controls.
Although not the subject of this Chapter, censorship is generally antithetical to network neutrality, a foundational principle in the blockchain sector. Although it may be the only solution to minimizing risks against potential sanctions enforcement, for example, active censorship is not a practical solution to risks of potentially harmful forms of MEV realization. When it comes to the potential for manifestations of MEV opportunities and realization strategies in blockchain-based environments, it is likely that minimal regulatory intervention, aligned with industry-led adoption and pursuit of basic market principles, offers the more appropriate path forward.
To conclude, this Chapter emphasizes the importance of a nuanced and principles-based approach to addressing MEV. Rather than applying traditional regulatory frameworks, which could stifle blockchain innovation and fail to account for the decentralized nature of these systems, policymakers ought to focus on fostering collaboration between industry stakeholders and regulators. This collaborative approach will help to ensure that MEV is managed in a way that strengthens network security while promoting fair practices, all without undermining the ethos of permissionlessness and decentralization that underpins blockchain networks. Only through such a balanced and forward-looking regulatory strategy can the full potential of blockchain networks be realized.
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Acknowledgment and disclaimer
The authors would like to thank the team at the Proof of Stake Alliance for their valuable input and assistance in preparing this Chapter. The authors would also like to thank industry participants and the project research teams that devoted their time and attention to MEV in valuable ways that have helped inform the discussion included in this Chapter. Importantly, MEV is still the focus of much ongoing research, and many of the concepts and facts outlined by this Chapter are the subject of continuous review, discussion, and contention, not just by the authors but by developers, scholars, researchers, and participants across the blockchain technology industry. Therefore, the discussion advanced in this Chapter and the views expressed by its authors should not be interpreted as unwavering or as attributable to other persons and organizations across the industry, including those who may have helped influence or support the production of this Chapter.
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[1] For the definition of “MEV” and a discussion of related foundational concepts, see Section 2 (on “Understanding MEV”).
[2] Unlike permissioned networks, which typically observe transaction ordering rules that limit third-party opportunities to realize any gains in connection with the ordering process, “permissionless” blockchain networks support general computing activities, which can include—but are most often not limited to—financial transactions.
[3] For the meaning of “blockchain network” as the term is used throughout this Chapter, see Section 2 (on “Understanding MEV”).
[4] For a description of Ethereum “block builders,” see infra note 32.
[5] Ethereum network (supported by the Ethereum Foundation (https://www.ethereum.org)).
[6] “Database transaction” is a technical term referring to messages that are submitted for processing and operationalization on a given blockchain network; the term does not necessarily have any financial implications. On a technical level, a database transaction is simply a unit of work in a database management system, treated consistently and reliably, and can be considered separate from other transactions. When a database transaction is processed, it is typically signified by a database modification (i.e., with its inclusion within a block). See Antonello Zanini, Database Transactions 101: The Essential Guide, Db Visualizer: theTable (Feb. 14, 2023), https://www.dbvis.com/thetable/database-transactions-101-the-essential-guide; Carlos Garcia, What is a Database Transaction?, AppMaster: Blog (Jan. 18, 2023); Microsoft, What is a Transaction?, Microsoft Windows App Development: Documentation (Jan. 7, 2021), https://learn.microsoft.com/en-us/windows/win32/ktm/what-is-a-transaction?redirectedfrom=MSDN.
[7] For the meaning of “base layer actor” as the term is used throughout this Chapter, see Section 2 (on “Understanding MEV”).
[8] “Transcriptability” refers to the level of ability of any particular system to be publicly audited, a quality that is necessary for the decentralization of trust on a blockchain network and, thereby, the maintenance of its economic security. See Phil Daian, IC3 Initiative for Cryptocurrencies and Contracts: MEV Wat Do, Youtube.com (Aug. 9, 2021), https://www.youtube.com/watch?v=9tRLaCE_s9w.
[9] For the meaning of “targeted trading” as the term is used throughout this Chapter, see “Understanding MEV—Putting together a universal conception of MEV across different networks.”
[10] Importantly, even targeted trading practices—or, for that matter, any other form of MEV realization that could potentially be considered disruptive to a blockchain network or its users—are not necessarily inherently disruptive based on their form. Rather, these forms of MEV realization could be, but in some circumstances might not be, disruptive, depending on their effect and the unique purposes and attributes of the given network or system. This Chapter refers to and discusses “blockchain networks” in a manner consistent with how the term is used in the following article: MEV Fair Market Principles: Working Draft, Proof of Stake Alliance at 5 (rev. Jun. 24, 2024), https://static1.squarespace.com/static/62f147feb8108a08e666aea5/t/667a11a9f073b12621fa11f2/1719275946573/POSA+MEV+Fair+Market+Principles.pdf [hereinafter MEV Fair Market Principles Paper].
[11] Other potentially adversarial or disruptive tactics that can potentially be performed by or among base layer actors (like censorship, reorganizations, or multi-slot attacks) are generally considered to be technically restricted based on the development and design decisions that go into a blockchain network’s underlying protocols or supporting systems.
[12] U.S. v. Peraire-Bueno, 1:24-cr-00293 (S.D.N.Y.), Criminal Complaint, sealed and redacted (May 8, 2024), https://www.justice.gov/opa/media/1351996/dl [hereinafter DOJ Peraire-Bueno Complaint].
[13] See id. at ¶ 17.
[14] Id.
[15] The Peraire-Bueno case is currently stalled pending a pre-trial hearing to determine the competency of the defendants’ counsel to represent both brothers in light of a potential conflict of interest. See U.S. v. James Peraire-Bueno, Notice and Request Re: Individual Criminal Rule 3(a), https://archive.org/details/gov.uscourts.nysd.621520/gov.uscourts.nysd.621520.34.0.pdf; see also U.S. v. Peraire-Bueno Court Docket, Courtlistener.com, https://www.courtlistener.com/docket/68532791/united-states-v-peraire-bueno (last visited Sep. 19, 2024).
[16] See MEV Fair Market Principles Paper, supra note 11 at 1, n.1.
[17] This Chapter’s definition of “MEV” is meant to be consistent with the discussion of MEV presented in the MEV Fair Market Principles Paper. See supra note 11 at 2.
[18] Broadly speaking, “MEV” includes all such values that can possibly be realized from a given block as a result of the theoretically most optimal and efficient contents and order of messages within that block.
[19] The inability to process all messages immediately or in the order of their submission stems from the inherent qualities of blockchain networks by design, where generally there is no central processing authority. Even seemingly neutral ordering schemes, like “first-come-first-served,” are biased due to variations in message transmission times, influenced by users’ proximity to an RPC node or message bundle relay. Therefore, MEV opportunities serve as an incentives structure to ensure that base layer actors order messages in a way that maintains network efficiency and security, even though this can sometimes result in inflation of overall user costs. It is in this way essential to a blockchain network’s functionality but creates a competitive environment for message ordering among base layer actors, highlighting the intricate balance that developers of blockchain networks must often attempt to strike between efficiency, security, and user accessibility.
[20] The “vulnerability” discussed in the DOJ’s indictment of the Peraire-Bueno brothers purportedly consisted of errors in the code underlying the relay used by the brothers’ validator nodes to receive reported bundles. See DOJ Peraire-Bueno Complaint, supra note 13 at ¶ 17. After the brothers discovered the vulnerability, they allegedly submitted database transactions with certain contents that manipulated the vulnerability to acquire confidential information about upcoming bundles before the relay released them to proposing validators, giving them enough time to include their own database transactions and reorder the existing database transactions within select pending bundles before being released by the relay. Id. at ¶¶ 17, 20–26.
[21] Relays are a special kind of service intermediary that helps to facilitate the Ethereum network’s current working implementation of its PoS consensus mechanism under which block proposer responsibilities are separated from those of block builders (known as “proposer-builder separation” or “PBS”). For further discussion of PBS on Ethereum, see “Understanding MEV—Looking at MEV in practice and how system vulnerabilities can lead to disruption.” Relays are meant to significantly enhance network efficiency and allow Ethereum validators to remain neutral “base layer actors.” Through a collection of processes known as “MEV-boost,” each block builder on Ethereum uses bots to simulate the optimal order of operations underlying user message submissions and submits updated bundle offers (or “bids”) to one or more competing relays. Each relay then selects the most profitable bid among block builders, a set of base layer actors that compete for the opportunity to have their bid selected for release to the validator set to propose the upcoming block.
[22] The validator selected to propose a block for consensus on Ethereum is rotated for each new block and has a 12-second window (known as a “slot”) to propose their block before incurring penalties. Penalties, referred to as “slashing,” are used to ensure consensus and deter misbehavior throughout the consensus process. Slashing occurs when a validator dishonestly proposes a block, either by proposing or signing two different blocks for the same time slot, changing block history, or double voting on a single block. See Matthieu Saint Olive & Simran Jagdev, Understanding Slashing in Ethereum Staking: Its Importance and Consequences, Consensys: News: Staking (Feb. 7, 2024), https://consensys.io/blog/understanding-slashing-in-ethereum-staking-its-importance-and-consequences. In the brief time before the close of each slot, Ethereum block builders gather all pending messages (and information about the requested user operations they contain) from public sources, like the Ethereum public memory pool (or “mempool”), and often from private sources, like protected mempools or direct user message submissions to block builders. See Justin Drake & Mike Neuder, Execution Tickets, Ethereum Research: Blog: Proof-of-Stake: Economics (Dec 23, 2023), https://ethresear.ch/t/execution-tickets/17944.
[23] See Derya Karl, How is ETH 2.0 going to enhance the security landscape?, Medium: News: Ethereum: Cybersecurity (Aug. 31, 2022), https://medium.com/silence-laboratories/how-is-eth-2-0-going-to-enhance-the-security-landscape-508a91a9e97f.
[24] See id.
[25] See Flashbots, The Future of MEV is Suave, Flashbots.org (Nov. 22, 2022), https://writings.flashbots.net/the-future-of-mev-is-suave (implying in its description of SUAVE that certain tools and systems are necessary to safeguard against the potentially centralizing forces of MEV).
[26] See DOJ Peraire-Bueno Complaint, supra note 13 at ¶¶ 2–3, 17, 19.
[27] Id. at ¶¶ 17, 23–26.
[28] Id. at ¶¶ 17, 27–29.
[29] See R. Alex Stokes, Distributed Block Building (and Exploring the Builder Design Space, Broadly), Github: Flash Bots: MEV-Boost (Jun. 7, 2022), https://github.com/flashbots/mev-boost/issues/139.
[30] See id.
[31] Inherently, a pure PoS system is not composed of multiple different sets of base layer actors with distinct roles and responsibilities but rather just of validators, which assume responsibility for both block building and block proposal.
[32] See R. Alex Stokes, supra note 40.
[33] See Vitalik Buterin, Multi dimensional EIP 1559, Ethereum Research: Blog: Economics (Jan. 5, 2022), https://ethresear.ch/t/multidimensional-eip-1559/11651.
[34] See id.
[35] See Derya Karl, supra note 33.
[36] See id.
[37] The early Ethereum network and its users were often exposed to potentially negative externalities from miners and traders and other participants on the network (known as searchers or solvers) who could sometimes engage in targeted trading and other potentially harmful methods of MEV realization based on public (and sometimes private) information about the inclusion and order of database transactions before the confirmation of blocks. See MEV Fair Market Principles Paper, supra note 11 at 6–8. Over time, the growing community of researchers and developers working or building on Ethereum implemented various early PBS systems. See Philip Daian et al., Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges, Cornell University: Arxiv: Cryptography And Security: Computer Science and Game Theory (Apr. 10, 2019), https://arxiv.org/abs/1904.05234. This evolved through the development of various tools that users (or the digital asset exchanges, decentralized applications, and other applications that users use to interact with the network) started to deploy to ensure the privacy of users’ database transactions or allow users to pay for ordering priority or express various “intents,” thus preventing or limiting the MEV that users might otherwise generate when submitting database transactions to the network. See generally MEV Fair Market Principles Paper, supra note 11 at 12–13 (discussing various tools, like order flow auctions and protected mempools, which were employed on the former, PoW-based Ethereum to curb available opportunities for targeted trading or other potentially disruptive forms of MEV realization).
[38] This Chapter advances its use of the term “targeted trading” to broadly distinguish certain forms of MEV realization that can potentially—but do not necessarily—expose a blockchain network or its users to negative externalities; the term is meant to be consistent with the use of the same term in the MEV Fair Market Principles Paper. See supra note 11 at 2–3.
[39] The DOJ’s recent indictment alleges facts that, if true, would indicate that the Peraire-Bueno brothers engaged in exploitative forms of MEV realization by leveraging fraudulently obtained nonpublic information, and their position as the operator of several validator nodes, to experience gains at the expense of traders and other network users. See DOJ Peraire-Bueno Complaint, supra note 13 at ¶¶ 17–18.
[40] This particular activity—where a user or trader will seek to have their database transaction as first in a block to benefit from a token’s price differential based on known information—is often mislabeled as, and conflated with, the practice of “frontrunning” in traditional financial markets. Importantly, “frontrunning,” as the term is conventionally understood, is not what happens in this instance. Instead, “targeted trading” on blockchain-based systems or networks arises (if it arises) based on the incentives structures naturally arising out of the limited capacity of a blockchain network’s base layer actors to include and order transactions. In this way, “targeted trading” encompasses a broader set of acts and strategies that take advantage of transaction ordering for profit. See MEV Fair Market Principles Paper, supra note 11 at 5, n.11.
[41] “Sandwich attack” typically refers to the practice of a trader seeking to have separate database transactions placed before and after a target transaction to profit from the price impact caused by the target transaction.
[42] “Backrunning” typically refers to the practice where a user or trader might submit their transaction requests immediately after a known profitable trade to capitalize on the initial transaction’s market impact.
[43] For the meaning of “permissioned” systems, see supra note 2.
[44] See Proof of Authority Consensus: What is Proof of Authority Consensus, Alpha Blockchain Platform Guide, https://apla.readthedocs.io/en/latest/concepts/consensus.html (last visited Aug. 23, 2024); Peng Zhang et al., Role of Blockchain Technology in IoT Applications, AP: Advances in Computers, vol. 135, pt. 4.2 (2019), https://www.sciencedirect.com/topics/computer-science/proof-of-authority.
[45] See Proof of Authority Consensus: PoA Consensus and Common Attack Vectors, Alpha Blockchain Platform Guide, supra note 72.
[46] See id.
[47] Interestingly, some permissionless blockchain networks, like Polkadot (https://polkadot.com/platform/chain) and NEAR (https://near.org/blockchain), were initially established under iterations of PoA systems in pursuit of simplicity and efficiency, but they later transitioned to different PoS system variations in an effort to leverage the economic security benefits of decentralization. This reflects what was a broader trend of PoS system adoption across the sector, Ethereum included, finding potentially improved ways of balancing efficiency, security, and decentralization with different incentives structures for validators or other base layer actors.
[48] Unlike PoS systems, where validators might have long-term vested interests in the network’s health due to staked assets, PoW miners are primarily motivated by immediate returns, which is likely the primary driver of their strategies for the selection and inclusion of database transactions and the construction of blocks.
[49] Raphael Auer et al., BIS Bulletin No. 58: Miners as Intermediaries: Extractable Value and Market Manipulation in Crypto and DeFi, Bank for Int’l Settlements: Publications (Jun. 16, 2022) (describing MEV as a “form of market manipulation” and “an intrinsic shortcoming of pseudo-anonymous blockchains” that may call for “new regulatory approaches”).
[50] Bd. of the Int’l Org. of Sec. Comm’ns, IOSCO Decentralized Finance Report, Public Report OR/01/2022 (Mar. 2022), https://www.iosco.org/library/pubdocs/pdf/IOSCOPD699.pdf.
[51] Bd. of the Int’l Org. of Sec. Comm’ns, IOSCO Final Report with Policy Recommendations for Decentralized Finance, Public Report FR/14/2023 at 20, 34–35 (Dec. 2023), https://www.iosco.org/library/pubdocs/pdf/IOSCOPD754.pdf [hereinafter IOSCO Final Report]; see also Bd. of the Int’l Org. of Sec. Comm’ns, IOSCO Consultation Report with Policy Recommendations for Decentralized Finance, Public Report CR/04/2023 at 32, 58–59 (Sep. 2023), https://www.iosco.org/library/pubdocs/pdf/IOSCOPD744.pdf (discussing the initial policy recommendations considered by IOSCO prior to their finalization in the December 2023 report).
[52] IOSCO’s final report suggests that the design of trading mechanisms in the blockchain technology sector ought to be tailored to minimize potentially disruptive effects of any available MEV realization methods, particularly when involved in trading regulated financial instruments. The report also calls for addressing additional conflicts that may arise where any given service provider in this area might have an economic interest in MEV-related activities, such as through payment for order flow arrangements. IOSCO Final Report, supra note 79 at 35.
[53] The report also points to the necessity of addressing additional conflicts that may arise where any given service provider in this area might have an economic interest in MEV-related activities, such as through payment for order flow arrangements.
[54] See IOSCO Final Report, supra note 79 at 34–35.
[55] See Mikolaj Barczentewicz, Public Comment on IOSCO’s Consultation Report on Policy Recommendations for DeFi, re: MEV and IOSCO Recommendations Four & Five, CryptoFinReg.org: Reg. of Crypto-Fin. Rsch. Proj., 2 (Oct. 2023), https://www.barczentewicz.com/papers/MEV_Response_to_IOSCO_2023.10.19.pdf [hereinafter Barcentewicz Public Comment on IOSCO Consultation Report].
[56] See id. at 3; Mikolaj Barczentewicz et al., Blockchain Transaction Ordering as Market Manipulation, 20.1 Ohio State Tech. L.J. 1, 65–74 (Aug. 2023), https://dx.doi.org/10.2139/ssrn.4187752.
[57] See IOSCO Final Report, supra note 79 at 3, 28.
[58] See IOSCO Final Report, supra note 79 at 57.
[59] See Barcentewicz Public Comment on IOSCO Consultation Report, supra note 83 at 1–2, 5.
[60] IOSCO Final Report, supra note 79 at 34.
[61] Aside from this discussion on the potential illegality of MEV activities, the synthesis paper does not encompass any description of the technological underpinnings of decentralized message ordering or the consensus process. Also, similar to the IOSCO reports, the IMF and FSB’s paper borrows terms from traditional markets and inappropriately uses them to describe the operations performed within decentralized systems. See Arif Ismail et al., IMF-FSB Synthesis Paper: Policies for Crypto-Assets, Int’l Monetary Fund & Fin. Stability Bd., 15 (Sep. 7, 2023), https://www.fsb.org/2023/09/imf-fsb-synthesis-paper-policies-for-crypto-assets.
[62] See Eur. Sec. & Markets Auth., Third Consultation Paper on the EU Markets in Crypto-Assets Regulation (MiCA) (Mar. 25, 2023), https://www.esma.europa.eu/sites/default/files/2024-03/ESMA75-453128700-1002_MiCA_Consultation_Paper_-_RTS_market_abuse_and_GLs_on_investor_protection_and_operational_resilience.pdf.
[63] See U.K. Fin. Conduct Auth., Research Note: Review of Maximal Extractable Value and Blockchain Oracles (Feb. 2, 2024), https://www.fca.org.uk/publications/research-notes/research-note-review-maximal-extractable-value-and-blockchain-oracles.
[64] See Barcentewicz Public Comment on IOSCO Consultation Report, supra note 83, at 5.
[65] Id.
[66] MEV-related practices could potentially fall under the scrutiny of various insider trading laws in certain nations, particularly where any asymmetric information advantages that participants pursue might be considered “insider information,” and where those laws might extend specifically to digital asset markets. The legal challenge lies in determining whether information derived from pending transactions on a blockchain network could potentially constitute a form of “insider” knowledge, thereby giving any MEV “solvers” with this knowledge an unfair advantage of the kind that existing insider trading laws might prohibit. Although legal exposure may likely be minimal, this might be noteworthy for blockchain network participants engaging in MEV-related activities who have access to a protected mempool or private order flow information. See Mikolaj Barczentewicz et al., Blockchain Transaction Ordering as Market Manipulation, 20.1 Ohio State Tech. L.J. 1, 65–74 (Aug. 2023), https://dx.doi.org/10.2139/ssrn.4187752 (debating the difference between transactions submitted to privacy RPC nodes versus those sent to standard RPC softwares; finding both situations to potentially implicate existing insider trading laws); see also Securities and Exchange Act of 1934, 15 U.S.C. § § 78j(b) (2012) (a provision of the U.S. Securities Exchange Act of 1934 providing the authority under which Rule 10b-5 was established); Rule 10b-5, 17 C.F.R. § 240.10b-5 (providing the main enforcement provision against insider trading under U.S. securities laws); Commodities Exchange Act of 1936, 7 U.S.C. § 6(c) (1936) (a provision of the U.S. Commodities Exchange Act describing the CFTC’s authority in enforcing insider trading in commodities and derivatives markets); 17 C.F.R. § 180.1 (detailing the main regulation against insider trading in commodities and derivatives markets); Eur. Comm. Reg. 596/2014 of Apr. 16, 2014, EU Market Abuse Regulation, 2014 O.J. (L 173) (codifying market abuse regulations, including insider trading, in the EU); Canada Business Corporations Act, R.S.C. 1985, c. C-44 (providing the main source of law for insider trading enforcement in Canada).
[67] In the U.S., the Computer Fraud and Abuse Act could potentially be enforced against blockchain network participants if they deploy MEV realization strategies (or engage in other acts) on the basis of unauthorized access to systems or information (e.g., by “hacking”). See 18 U.S.C. § 1030. EU member nations enforce even more rigorous cybersecurity laws than the U.S., and the EU adopted the Cybersecurity Act in 2019, providing the EU Agency for Cybersecurity (“ENISA”) a mandate to ensure cybersecurity throughout member bodies and later being used to establish a certification scheme called the European Cybersecurity Scheme on Common Criteria (“EUCC”). See Commission Regulation 2019/881, 2019, Regulation on ENISA and on Information and Communications Technology Cybersecurity Certificate and Repealing the EU Cybersecurity Act, O.J. (L 151) 15, https://eur-lex.europa.eu/eli/reg/2019/881/oj. The EU also adopted the NIS 2 and Cyber Resilience Act to ensure the application of industry-wide security frameworks. See, e.g., Eur. Council Dir. 2022/2555, NIS 2 Directive (EU); Commission Regulation 2022/0272, Cyber Resilience Act, 2022 O.J. (L 454) (Sep. 15, 2022), https://eur-lex.europa.eu/resource.html?uri=cellar:864f472b-34e9-11ed-9c68-01aa75ed71a1.0001.02/DOC_1&format=PDF). The EU has also reached an agreement on the Cyber Solidarity Act aimed to strengthen cybersecurity detection frameworks, build a reserve of services, and test critical infrastructure. See Commission Regulation 2023/0109 of April 18, 2023, Cyber Solidarity Act, 2023 O.J. (L 2841), https://www.eu-cyber-solidarity-act.com and https://digital-strategy.ec.europa.eu/en/library/proposed-regulation-cyber-solidarity-act.
[68] MEV activities that involve deceptive practices to extract value from pending transactions might be considered wire fraud, such as in jurisdictions where activities taking place over the internet might be able to satisfy statutory requirements. The transmission of deceptive transactions or information across state or international lines to execute MEV strategies could fit within the scope of some nations’ wire fraud laws that penalize the use of electronic communications to commit fraudulent acts. See, e.g., Fraud by wire, radio, or television, 18 U.S.C. § 1343 (enforcing liability over the use of interstate wires to carry out a scheme to defraud); Fraud Act 2006, c. 35 (U.K.) (codifying legal liability for fraud in the U.K.).
[69] Although perhaps no law or regulatory guidance explicitly requires them to do so, block relay providers, RPC node operators, Layer-2 network sequencers, and other data intermediaries in the blockchain space could potentially be required in certain jurisdictions to ensure they do not include or process any database transactions, block proposals, or Layer-2 rollups containing transactions that are otherwise prohibited under sanctions laws. See Exec. Order No. 13694, 80 Fed. Reg. 18077 (Apr. 1, 2015) (blocking the property of certain persons engaging in significant malicious cyber-enabled activities); see also U.S. Treasury Dep’t, Off. of Foreign Assets Control, OFAC Sanctions Compliance Guidance for the Virtual Currency Industry and Updated FAQs (Oct. 15, 2021), https://ofac.treasury.gov/recent-actions/20211015 (promoting members of the virtual asset industry to adopt compliance measures that help prevent sanctions violations). Similarly, various developers, providers, and ecosystem participants might also consider the potential applicability of export control regulations across various jurisdictions like the U.S., particularly when their activities might involve the transfer or provision of technology, software, or cryptographic tools relevant to various MEV realization or shield strategies. Given the global and decentralized nature of blockchain networks, transactions can inadvertently involve jurisdictions with stringent export control laws. Actors in this sector could potentially be exposed to legal risks if they transmit, or if their platforms are used to transmit, controlled technologies or data across borders without proper authorization. See Ana Paula Pereira, 51% of Ethereum Blocks are Now Compliant with OFAC Standards, Raising Censorship Concerns, Cointelegraph: News (Oct. 14, 2022) (discussing the implementation of censorship resistance lists implemented by proposers and sent to builders via an independent relay); Tom Carreras, Ethereum’s MEV-Boost Censorship Issues Are Getting Better, Crypto Briefing: News (Feb. 14, 2023).
[70] MEV-related practices could potentially invoke the application of certain common law principles in the U.S. or other British common law nations. Common law principles, such as in tort or contract, influence liability and enforcement in cases of economic interference or breach of contract. Economic torts might include interference with prospective or anticipated contractual relations (see Restat. (2d) of Torts, vol. 4, § 766, Intentional Interference with Performance of Contract by Third Person (Am. L. Inst. 1979)) or products liability (see Restatement (3dThird) of Torts, Prod. Liab. § 19, Products Liability (Am. L. Inst. 19988). Separately, contractual obligations between users and blockchain service providers could potentially be breached by MEV-related practices (see Restatement (2dSecond) of Contracts, § 1 (Am. L. Inst. 1981)).
[71] See EU Financial Services and Markets Regulation 2015 (“FSMR”), https://en.adgm.thomsonreuters.com/sites/default/files/net_file_store/ADGM1547_12483_VER24121823.pdf
[72] EU Commission Regulation 2023/1114 of May 31, 2023, Markets in Crypto-Assets, 2023 O.J. (L 150) 1, 130., [hereinafter MiCA Title VI].
[73] Josef Bergt, New Era of Crypto Regulation: Understanding MiCA’s Comprehensive Framework, Chambers and Partners: News (Dec. 17, 2023), https://chambers.com/articles/new-era-of-crypto-regulation-understanding-micas-comprehensive-framework; Dalmas Ngetich, EU’s MiCA rules could prohibit MEV activities on Ethereum, Crypto.news (Jul. 31, 2023), https://crypto.news/eus-mica-rules-could-prohibit-mev-activities-on-ethereum; see also https://www.coindesk.com/policy/2024/04/05/eu-watchdog-says-reordering-blockchain-transactions-might-be-market-abuse-industry-says-its-not.
[74] See MiCA Title VI, supra note 101.
[75] See, e.g., Mikolaj Barczentewicz, supra note 95 at 74.
[76] Commission Regulation 2022/0272 of September 15, 2022, Cyber Resilience Act, 2022 O.J. (L 454), https://data.consilium.europa.eu/doc/document/ST-11726-2023-INIT/en/pdf.
[77] See id. at 2.
[78] Digital asset exchanges and dApp providers could potentially be required under these laws to implement systems or strategies designed to limit or prevent the exposure of retail users or investors to potentially disruptive forms of MEV realization like targeted trading, or to other activities that might be considered to be unfair, deceptive, or abusive acts or practices, on underlying blockchain networks or systems. This is likely especially true under any legal regime that broadly requires covered persons to protect the interests of users or investors from—or to provide accurate and timely disclosure of—risks of harm in connection with digital asset transactions.
[79] Anti-Money Laundering and Counter-Terrorist Financing Ordinance (2012) Cap. 615 (H.K.), https://www.elegislation.gov.hk/hk/cap615 (providing licensing requirements for VASPs, as amended in December 2022, supplementing SFO registration requirements); Securities and Futures Ordinance (2002) Cap. 571 (H.K.), https://www.elegislation.gov.hk/hk/cap571 (providing licensing requirements for VASPs, as amended in January 2024, and Hong Kong intending to use this dual-registration regime to regulate virtual asset markets).
[80] See Monetary Authority of Singapore, Consultation Paper on Proposed Measures on Market Integrity in Digital Payment Token Services, MAS P008-2023, 1–17 (Jul. 3, 2023), https://www.mas.gov.sg/-/media/mas/news-and-publications/consultation-papers/2023-consultation-paper-on-proposed-measures-on-market-integrity-in-dpt-services/consultation-paper-on-proposed-measures-on-market-integrity-in-dpt-services.pdf.
[81] Id. at 8.
[82] The application of securities laws to any MEV-related practices hinges first on whether such activities involve “securities.” Whether any specific digital asset either is a security or, perhaps, “represents” a security is a critical question on which U.S. law is not yet settled. See DLx Law, The Ineluctable Modality of Securities Law: Why Fungible Crypto Assets Are not Securities, Dlx: Discussion Draft: Crypto, 1, 61-72 (Dec. 13, 2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4282385. To the extent that any court might ultimately conclude any or most digital assets to be securities, the question could potentially be raised of whether various MEV-related activities could be construed as manipulative, deceptive, or otherwise in violation of U.S. federal securities laws or regulations. Certain MEV practices discussed in this Chapter involving digital assets that have been found to be securities could potentially raise questions about whether they constitute market manipulation under U.S. securities laws. Because MEV-related activity widely takes place across the borders of many nations, consideration ought to be given to the regulatory implications of that activity in each and every jurisdiction in which the activity may have an impact, including the potential application of securities regulations or other existing market regulatory frameworks in those jurisdictions.
[83] CFTC Press Release No. 8822-23, FY 2023 Enforcement Results (Nov. 7, 2023) (reporting that 49% of its enforcement actions in 2023 involved the digital asset industry); Sarah Wynn, Digital assets were involved in half of all charges brought by the CFTC in record-setting year, The Block: News: Companies (Nov. 7, 2023), https://www.theblock.co/post/262021/digital-assets-were-involved-in-almost-half-of-all-charges-brought-by-the-cftc-in-record-setting-year (indicating that the 47 cases brought against the digital assets industry marked a stark increase from the 18 cases brought in 2022); Fin. Innovation and Tech. for the 21st Cent. Act (“FIT Act”), H.R. 4763, 118th Cong. (1st Sess. 2023) (proposing to cement the role of the CFTC in the regulation of digital assets.); Kollen Post, Major US Crypto Markets Bill is Facing a Congressional Gauntlet, Unchained: News: Regulation (Sep. 11, 2023), https://unchainedcrypto.com/major-us-crypto-markets-bill-is-facing-a-congressional-gauntlet (raising concern that the FIT Act is designed to undermine the SEC).
[84] See U.S. v. Kane, No. 23-CR-20172-KMW, Indictment at 1 (S.D. Fla. Nov. 30,2023) (pending) [hereinafter U.S. v. Kane Indictment].
[85] U.S. v. Kane Indictment at 2–9.
[86] “Spoofing” is an illegal activity under the SEA and CEA. “Spoof orders” are transactions placed without the intent of execution. These orders are canceled shortly after placement and artificially manipulate the perception of supply and demand for a given asset.
[87] “Wash trading” is an illegal activity under the SEA and CEA. Wash trading entails the purchase and sale of a security or commodity that artificially inflates the value of an asset without the transacting parties experiencing any risk.
[88] U.S. v. Kane Indictment at 9 (“The jury delivered a verdict finding one defendant so far to be guilty on both conspiracy charges, finding that he hired a market maker to design and implement the bot, which allegedly generated about $2 million in profit resulting from the manipulation.”).
[89] See In re Tether Holdings Ltd. et al., CFTC No. 22-04 (Oct. 15, 2021), https://www.cftc.gov/PressRoom/PressReleases/8450-21; In re BFXNA Inc., CFTC No. 16-19 (Jun. 2, 2016), https://www.cftc.gov/PressRoom/PressReleases/7380-16.
[90] Tether, assoc. with Tether Ltd. (https://tether.to/en).
[91] Bitfinex Exchange, assoc. with iFinex Inc (https://www.bitfinex.com).
[92] In re Tether & Bitfinex Crypto Asset Litigation, 576 F. Supp. 3d 55, 107-09 (S.D.N.Y. 2021) [hereinafter In re Tether].
[93] In re Tether at 81.
[94] This delay is exacerbated in the context of blockchain and MEV, where developments occur at a rapid pace, and new forms of MEV are constantly emerging. Legislative bodies face the arduous task of not only understanding these developments but also predicting future trends to create laws that are both effective and resilient over time. The need for consensus among stakeholders, public consultations, and the iterative process of lawmaking further slow down the ability to respond to this ever-changing landscape.
[95] See supra note 2.
[96] GAO, Federal Regulation: Selected Emerging Technologies Highlight the Need for Legislative Analysis and Enhanced Coordination, GAO-24-106122, Gov. Accountability Off. (2024).
[97] The evolving digital economy, characterized by rapid technological advancements and the emergence of new online platforms, continues to present a compelling case for regulatory frameworks that are flexible and accommodating to ongoing changes. Flexible regulation tends to better support innovation and protect end users without stifling growth.
[98] See, e.g., Ctr. for Am. Progress, Report: How to Regulate Tech, A Technology Policy Framework for Online Services (Nov. 16, 2021), https://www.americanprogress.org/article/how-to-regulate-tech-a-technology-policy-framework-for-online-services.
[99] The importance of neutrality in online infrastructure and its relevance to historical regulatory approaches is reflected in the discussions on the regulation of internet services and the designation of broadband as essential infrastructure. These discussions emphasize the need for regulatory frameworks that support innovation and user protection while maintaining an open and equitable digital environment. See GAO, Report to Congress on Broadband Internet: National Strategy Needed to Guide Federal Efforts to Reduce Digital Divide, GAO-22-104611, Gov. Accountability Off. (May 2022), https://www.gao.gov/assets/gao-22-104611.pdf [hereinafter GAO Broadband Report].
[100] See GAO Broadband Report, supra note 130.
[101] The challenges and best practices for regulating digital technologies, including the significance of international cooperation in regulating internet services, reinforce the argument for adaptable regulatory frameworks. These frameworks must not only evolve with technological advancements but also ensure that the principle of neutrality is upheld, preserving the open nature of the internet and fostering a conducive environment for innovation and growth. See Digital Regulation Handbook, Geneva: International Telecommunication Union and the World Bank (2020), Licence: CC BY-NC-SA 3.0 IGO; Michael O’Rielly, International Efforts to Regulate the Internet Continue, FCC Blog (Apr. 21, 2017), https://www.fcc.gov/news-events/blog/2017/04/21/international-efforts-regulate-internet-continue; KPMG, Platforms and conduct: Regulatory Challenges, https://kpmg.com/us/en/articles/2022/ten-key-regulatory-challenges-2022-platforms-conduct.html; Lin Yu-teng & Yang Shao Kai, The Shared Challenge of Regulating Online Platforms, USALI Perspectives, 3, No. 22 (Apr. 3, 2023), https://usali.org/usali-perspectives-blog/the-shared-challenge-of-regulating-online-platforms.
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