Opinion Highlights of Dismissal of Case Challenging New York $5K BitLicense

Coindesk Coverage Here

Chino v New York Dept. of Fin. Servs., 2017 N.Y. Misc. LEXIS 5029, 2017 NY Slip Op 51908(U)

Failure to Exhaust Administrative Remedies: "Petitioner did not complete LTD's application, and did not respond to DFS' January 2016 letter which notified him of his failure to do so. Petitioner acknowledges that he abandoned the application process because of the pendency of this hybrid action/proceeding challenging the regulation (Chino Aff. in Opp. To Cross-Motion, at ¶ 16). CPLR § 7803 provides a petitioner with a means to challenge "whether a determination was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion" (CPLR § 7803 [3]). Moreover, "one who objects to the acts of an administrative agency must exhaust available administrative remedies before being permitted to litigate in a court of law" (DiBlasio v Novello, 28 AD3d 339, 341, 814 N.Y.S.2d 51 [1st Dept 2006] [citations and internal quotation marks omitted]). Courts cannot "interject themselves into ongoing administrative proceedings until final resolution of those proceedings before the agency" (Id.). In the proceeding at hand, DFS did not [*20]  reach a final decision. Indeed, it did not reach any decision. Accordingly, there is nothing for this Court to review."

No Loss, No Standing. "In the proper [*23]  circumstances, the argument that a regulation imposes "an unacceptable burden" on an individual or business is sufficient to establish standing (See Doe v Axelrod, 136 AD2nd 410, 527 N.Y.S.2d 385 [1st Dept 1988] [concerning regulations on pharmaceutical and medical professions that allegedly interfered with ability to provide medical case, invaded patients' privacy, and violated interstate commerce clause]). If, for example, this matter involved the issue of organizational standing, or, as in Doe v Axelrod, a large coalition of business owners who showed harm to their business under the regulation, or an individual or business that could show the probability of financial harm, there might be a strong argument in favor of standing. Here, however, petitioner did not apply for certification,8 and has not shown sufficient economic loss. Any argument as to the $5,000 application fee was waived because petitioner did not pay the fee or pursue the application. His economic loss argument is otherwise insufficient because LTD has never made a profit and petitioner showed proof of only one $279.41 sale. Moreover, its losses in 2016, once petitioner thought LTD was subject to the regulation, are not inconsistent with LTD's prior financial history.

Christopher Meatto