New York And Ohio Consider Bills To Clarify The Legal Status Of Blockchains

Yesterday, New York joined the growing list of states attempting to clarify the legal status of blockchains and EDCCs (aka smart contracts), with the introduction of a bill titled “An act to amend the state technology law, in relation to blockchain technology and smart contracts.” Last week, a similar bill, Senate Bill 300, was referred to committee in Ohio’s legislature.

If passed, each bill would change its respective state’s version of the Uniform Electronic Transaction Act (UETA). The UETA was created to ensure electronic transactions would have the same force and effect as transactions completed on paper. Since its promulgation in 1999, it has been adopted by 47 states, including New York and Ohio.

The proposed bills seek to update the nearly 20-year-old law, first and foremost by providing a legal definition of the term “blockchain.” Both bills use a definition identical to that used in earlier bills passed in Arizona and Tennessee:

“‘Blockchain technology’ means distributed ledger technology that uses a distributed, decentralized, shared, and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless. The data on the ledger is protected with cryptography, is immutable and auditable and provides an uncensored truth.”

The bills also seek to clarify the legal status of “smart contracts.” While neither state’s current laws contain prohibitions on the use of EDCCs, the new additions would clarify that a contract may not be deemed unenforceable simply because it “contains a smart contract term.”

Again, the New York and Ohio bills feature identical definitions. Both bills state:

“‘Smart contract’ means an event-driven program that runs on a distributed, decentralized, shared, and replicated ledger and that can take custody over and instruct transfer of assets on that ledger.”

Ohio Senator Matt Dolan (R), who sponsored SB 300, told ETHNews that the language in his bill was based on the Arizona law, but was uncertain how the final bill will look. “We might scale back on some of that language” he said, stressing that the bill in its current form was mainly an attempt “just to start the conversation” and make sure Ohio is equipped to address blockchain technology going forward.

Nevada also amended its version of the UETA to accommodate blockchains. Its bill used language that differed from the Arizona, New York, Ohio, and Tennessee bills, but was identical to that of a failed Nebraska bill, defining a blockchain and/or a distributed ledger as:

“An electronic record of transactions or other data which is:
1. Uniformly ordered;
2. Redundantly maintained or processed by one or more computers or machines to guarantee the consistency or nonrepudiation of the recorded transactions or other data; and
3. Validated by the use of cryptography.”

Other states have taken various approaches to clarifying the legal status of blockchains and EDCCs. Vermont added a definition of blockchains to its rules of evidence, while Delaware added a definition to its corporate code. 

Tim Prentiss is a writer and editor for ETHNews. He has a master’s degree in journalism from the University of Nevada, Reno. He lives in Reno with his daughter. In his spare time he writes songs and disassembles perfectly good electronic devices.

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