US Bills Could Spell Disaster for Crypto Sex Industry

Upcoming legislation in the U.S. could have an impact on cryptocurrency use in the sex industry, and those affected are speaking out.

AccessTimeIconMar 15, 2018 at 12:15 p.m. UTC
Updated Dec 11, 2022 at 1:51 p.m. UTC
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Anyone who says crypto doesn't have a real use case hasn't been talking to sex workers.

Shut out of more mainstream payment methods, they've been among the first users of cryptocurrency, creating a symbiotic dynamic between the adult entertainment industry and blockchain technology that continues today. Since most erotic webcam platforms already use digital tokens of some type to pay performers, freelancers have shown a willingness to use bitcoin.

And the sex industry is keeping up with innovation – Playboy TV and Penthouse are already developing partnerships with the cryptocurrency startup Vice Industry Tokens (VIT), which has issued its own custom cryptocurrency to reward porn viewers and performers.

But that years-long trend could take a hit this week when the U.S. Senate votes on a wildly controversial bill package called FOSTA-SESTA (“Fight Online Sex Trafficking Act” and “ Stop Enabling Sex Traffickers Act").

Already, non-profits like the Center for Democracy and Technology (CDT) are speaking out on the bill, arguing, "No internet user, website operator, trafficking victim, law enforcement officer or other individual will be immune to the consequences of and fallout from this legislation."

But the Center for Democracy and Technology is far from alone in its view.

Joining the CDT, the ACLU and the Electronic Frontier Foundation in their condemnation of FOSTA-SESTA is blockchain startup Spankchain, which sees the bills as enabling lawsuits against "whoever uses or operates" a interstate or foreign facility offering questionable adult content.

Spankchain co-founder Janice Griffith, an adult performer herself, told CoinDesk these bills could wreak havoc across their token ecosystem, saying:

"It will cause a problem for anyone involved in any kind of sex work. Producers can be in trouble for, ‘promoting prostitution,’ it could also potentially cause a problem for token holders... It’s not just porn, it’s an attack on freedom of speech. And it is going to trickle down."

Basically, these laws make anyone who uses or operates a porn site liable if that site gets flagged for fishy content and isn’t restricted to one specific state.

This is problematic for anyone who talks online about prostitution, which is only legal in Nevada, or facilitates user-generated content. The adult entertainment industry is regulated, but stolen content and footage of real sex crimes can slip past moderators.

It gets especially tricky for platforms or services that use cryptocurrency because then token holders could be seen as having an active role in promoting, buying or profiting from the illicit activity – VIT, for example, records data on the engagement of porn viewers, from clicks to likes, paying users tokens for their personal information.

This means international sites with user-generated content, a crucial part of VIT’s business beyond enterprise partnerships, might soon be vulnerable to lawsuits if any content or chats are seen as “promoting” prostitution. Plus, users and platforms might be held liable if content involves a sex trafficking victim.

Likewise, if people talked about paying escorts on a cryptocurrency forum like Bitcoin Talk, theoretically, the forum itself could be targeted by a lawsuit.

Centralized liability

Some critics go so far as to argue the geographic restrictions in this legislation are absurd. The porn industry is in the middle of a technological renaissance, dominated by a shift to global audiences and traveling performers with strong personal brands.

Much like the cryptocurrency industry, entrepreneurs need to move freely for work. That doesn’t automatically make them sex trafficking victims.

Attorney Zoe Dolan, whose clients include several blockchain startups and unrelated defendants accused of sex crimes, told CoinDesk:

"If we are honest about ongoing trends away from centralized entities back toward individuals... Congress would probably do better to engage with technology companies and movements rather than pursue an adversarial approach that vests power in plaintiffs' attorneys and prosecutors."

And the consequences don't stop there. Sex workers have also been outspoken about how these bills would make it harder to talk online about safety tips and personal experiences.

“Make no mistake, if these bills pass, sex workers will die,” adult performer Lorelei Lee told Motherboard. “The ability to share information quickly and widely in our community is the main way that we stay safe.”

Decentralized protocols like VIT throw another wrench into the mix, especially if they track user engagement with specific content. If FOSTA-SESTA passes, token holders could someday be liable for criminal charges, alongside content creators and digital media companies.

Sinful tokens

This threat still isn't stopping token buyers for now. VIT’s website shows its token sale has raised more than $15.7 million worth of ether tokens so far, with roughly a week left to go.

This may be low when gauged against all-time ICO funding, but that figure might be surprising given the climate for such sales. The SEC has recently been vocal in its belief that any token might be considered a security, and now VIT buyers must consider the additional risks related to adult content.

Attorney Nelson Rosario, who specializes in blockchain technology at Marshall, Gerstein & Borun LLP, told CoinDesk:

“The SEC has signaled that most ICO tokens should be considered securities. Individuals really need to do their due diligence before getting involved in the ICO market. Now, add to the mix ICO tokens for sin industry items, and you are really tempting fate.”

This doesn’t inherently mean VIT buyers will face any liability. The bills haven’t even become law yet. However, it does mean token holders need to read up on media regulations and figure out how each platform acquires content.

It would also be prudent for users to avoid tipping or receiving tokens in any context that could be seen as “promoting” prostitution.

“There is a principle in the law that ignorance of the law is no excuse,” Rosario explained. “You can be liable for breaking the law even if you don't know you're breaking the law.”

Blockchain solutions

All of this means that cryptocurrency users involved with the sex industry may soon face more legal risks than ever before. As a blockchain-fueled content platform, Spankchain itself could get hit hard by any additional liability for facilitating open conversations between and about sex workers.

The threat goes beyond the startup’s platform, potentially jeopardizing conduits for marketing and audience engagement. Griffith worries broader media platforms, like Twitter, may ban conversations about sex work entirely rather than deal with complex liability issues.

Are laws that conflate consenting sex workers with trafficking victims really the best way to curtail exploitive digital content?

Even Assistant Attorney General Stephen Boyd wrote a letter saying FOSTA, aka H.R. 1865, raises “a serious constitutional concern.” Griffith believes blockchain platforms could offer solutions for increased accountability and protection with regards to erotic content, if such platforms aren’t overregulated.

If sex workers are free to use the platform without fear of criminal charges, they can help flag stolen or suspicious content and users. In this way, blockchain technology could help reduce the threat of illicit duplicates spreading across the web.

“We have a complete record of everything occurring on the blockchain. With regards to human trafficking,” Griffith said. “I think that blockchain technology could address the issues that this bill is lying about and saying that they want to address.”

Colorful condoms via Shutterstock

Correction: This report has been updated to amend the name of law firm Marshall, Gerstein & Borun LLP.


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