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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 1357 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  1st Session
                                S. 1357

 To address advertising by digital asset intermediaries, and for other 
                               purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             April 27, 2023

Ms. Sinema (for herself and Ms. Lummis) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
 To address advertising by digital asset intermediaries, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Responsible Digital Asset 
Advertising Act of 2023''.

SEC. 2. DEFINITIONS.

    In this Act:
            (1) Commissions.--The term ``Commissions'' means the 
        Securities and Exchange Commission and the Commodity Futures 
        Trading Commission, acting jointly.
            (2) Covered advertisement.--The term ``covered 
        advertisement''--
                    (A) means a communication that--
                            (i) relates to--
                                    (I) the desirability of purchasing 
                                or entering into a transaction for a 
                                digital asset; or
                                    (II) the availability of digital 
                                asset-related services; and
                            (ii) is widely available to the general 
                        public, as specified by rule of the 
                        Commissions; and
                    (B) includes any script, slide, handout, or other 
                written (including electronic) material used in 
                connection with a public appearance with respect to a 
                digital asset or the availability of digital asset-
                related services.
            (3) Digital asset.--The term ``digital asset'' means a 
        natively electronic asset that--
                    (A) confers economic, proprietary, or access rights 
                or authorities; and
                    (B) is recorded using cryptographically-secured 
                distributed ledger technology, or any similar analogue.
            (4) Digital asset intermediary.--The term ``digital asset 
        intermediary'' means a person that--
                    (A) holds a license, registration, or other similar 
                authorization pursuant to the Commodity Exchange Act (7 
                U.S.C. 1 et seq.), the Securities Act of 1933 (15 
                U.S.C. 77a et seq.), the Corporation of Foreign 
                Bondholders Act, 1933 (15 U.S.C. 77bb et seq.), the 
                Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), 
                the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
                seq.), the Securities Investor Protection Act of 1970 
                (15 U.S.C. 78aaa et seq.), the Investment Company Act 
                of 1940 (15 U.S.C. 80a-1 et seq.), the Investment 
                Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.), or the 
                Omnibus Small Business Capital Formation Act of 1980 
                (title V of Public Law 96-2); and
                    (B) engages in market activities relating to 
                digital assets.

SEC. 3. ADVERTISING BY DIGITAL ASSET INTERMEDIARIES.

    (a) Approval by Officer.--Before a digital asset intermediary may 
make a covered advertisement available to the public, an officer of the 
digital asset intermediary shall be required to approve that covered 
advertisement and certify compliance with the requirements of this 
section.
    (b) Procedures.--
            (1) In general.--Each digital asset intermediary shall 
        establish written procedures, which are appropriate and 
        reasonable to the business, size, structure, and customers of 
        the digital asset intermediary, for the review of covered 
        advertisements, as required under subsection (a), which shall 
        include--
                    (A) provisions for the education and training of 
                applicable employees of the digital asset intermediary 
                regarding the procedures of the digital asset 
                intermediary governing covered advertisements;
                    (B) documentation of the education and training 
                required under subparagraph (A); and
                    (C) surveillance and follow-up measures to ensure 
                that the digital asset intermediary implements and 
                adheres to those procedures.
            (2) Recordkeeping.--
                    (A) Period of maintenance.--Each digital asset 
                intermediary shall maintain the records required under 
                this subsection for not less than 5 years.
                    (B) Types of records.--The types of records that a 
                digital asset intermediary is required to maintain 
                under subparagraph (A) include, with respect to each 
                covered advertisement made by the digital asset 
                intermediary--
                            (i) a copy of the covered advertisement;
                            (ii) the dates of the first and, if 
                        applicable, last use of the covered 
                        advertisement;
                            (iii) the name of the officer of the 
                        digital asset intermediary who approved the 
                        covered advertisement, as required under 
                        subsection (a), including the date on which the 
                        officer gave that approval;
                            (iv) information concerning the source of 
                        all data, statistical tables, charts, graphs, 
                        or other illustrations or outside sources used 
                        in the covered advertisement; and
                            (v) for a covered advertisement that 
                        includes or incorporates a performance ranking 
                        or comparison with another digital asset 
                        intermediary, a copy of the ranking or 
                        performance used.
    (c) Requirements for Covered Advertisements.--Each covered 
advertisement shall adhere to the following standards:
            (1) The covered advertisement shall--
                    (A) be based on principles of fair dealing and good 
                faith; and
                    (B) provide a sound basis for evaluating the facts 
                with respect to any particular digital asset or type of 
                digital asset, industry, or service that is the subject 
                of the covered advertisement.
            (2) The covered advertisement may not omit any material 
        fact or qualification if that omission, in light of the context 
        of the material presented, would cause the covered 
        advertisement to be misleading.
            (3) The covered advertisement may not make any false, 
        exaggerated, unwarranted, promissory, or misleading statement 
        or claim.
            (4) Information may be placed in a legend or footnote 
        within the covered advertisement only if that placement would 
        not inhibit understanding of the covered advertisement.
            (5) The covered advertisement shall be consistent with 
        risks that are present with respect to the subject matter of 
        the covered advertisement, including volatility with respect to 
        the value of digital assets, the amount of potential returns, 
        and operational risks for digital asset intermediaries.
            (6) The covered advertisement shall--
                    (A) consider the nature of the audience to which 
                the covered advertisement will be directed; and
                    (B) provide details and explanations that are 
                appropriate for the audience described in subparagraph 
                (A).
            (7)(A) The covered advertisement may not predict or project 
        performance, imply that past performance will recur, or make 
        any exaggerated or unwarranted claim, opinion, or forecast.
            (B) Nothing in subparagraph (A) may be construed to 
        prohibit the use of--
                    (i) a hypothetical illustration of mathematical 
                principles, if that illustration does not predict or 
                project the performance of a particular strategy;
                    (ii) an analysis tool, or a written report produced 
                by an analysis tool; or
                    (iii) a price target contained in a research 
                report, if the target has a reasonable basis, the 
                report discloses the valuation methods used to 
                determine the price target, and the price target is 
                accompanied by a disclosure concerning the risks that 
                may impede achievement of the price target.
            (8) Any comparison in the covered advertisement between 
        digital assets, digital asset intermediaries, or digital asset-
        related services shall disclose key material differences 
        between the applicable items, including, as applicable, 
        differences with respect to return objectives, costs and 
        expenses, liquidity, safety, guarantees or insurance, 
        volatility, and tax features.
            (9) The covered advertisement shall prominently disclose 
        the following:
                    (A) The fact that the covered advertisement is 
                governed by this section and is subject to Federal law.
                    (B) The name of the applicable digital asset 
                intermediary.
                    (C) The name of the officer who made the 
                certification with respect to the covered 
                advertisement, as required under subsection (a).
                    (D) Any relationship between the applicable digital 
                asset intermediary and any person that appears in the 
                covered advertisement or any compensation offered by 
                that digital asset intermediary to such a person.
                    (E) Registrations, licenses, or other 
                authorizations in good standing that are held by the 
                applicable digital asset intermediary.
            (10)(A) In the covered advertisement, any reference to tax-
        free or tax-exempt income shall indicate which taxes apply, or 
        which do not, unless income is free from all applicable taxes.
            (B) For the purposes of subparagraph (A), the covered 
        advertisement may not characterize income or returns as tax-
        free or exempt from income tax if tax liability is merely 
        postponed or deferred, such as when taxes are payable upon 
        redemption.
            (C) The Commissions may, by rule, adopt further standards 
        regarding tax considerations that appear in covered 
        advertisements.
            (11) The covered advertisement shall disclose the amounts 
        of the following fees with respect to the digital asset or 
        digital asset-related services that are the subject of the 
        covered advertisement, which shall be set forth prominently 
        and, in any print advertisement, in a prominent text box that 
        contains only such information:
                    (A) Custody fees.
                    (B) Account fees.
                    (C) Applicable bank fees.
            (12) If any testimonial in the covered advertisement 
        concerns a technical aspect of purchasing or otherwise entering 
        into a transaction for digital assets--
                    (A) the person making the testimonial shall have 
                the knowledge and experience to form a valid opinion 
                regarding the issue; and
                    (B) the testimonial, if the testimonial concerns 
                the advisability of purchasing digital assets or the 
                performance of a digital asset, shall prominently 
                disclose--
                            (i) the fact that the testimonial may not 
                        be representative of the experience of other 
                        customers;
                            (ii) the fact that the testimonial is no 
                        guarantee of future performance or success; and
                            (iii) if more than $1,000 in value is paid 
                        for the testimonial--
                                    (I) the fact that the testimonial 
                                is a paid testimonial; and
                                    (II) the amount and type of 
                                compensation paid, which shall include, 
                                if compensation was paid in digital 
                                assets, an identification of each 
                                specific digital asset.
            (13) If the covered advertisement includes a recommendation 
        to purchase, or otherwise transact in, a digital asset, the 
        covered advertisement shall--
                    (A) have a reasonable basis for the recommendation; 
                and
                    (B) if applicable, disclose--
                            (i) that, at the time the covered 
                        advertisement was published or distributed, the 
                        applicable digital asset intermediary was 
                        conducting trading activities in the digital 
                        asset;
                            (ii) that the applicable digital asset 
                        intermediary--
                                    (I) is directly and materially 
                                involved in the preparation of the 
                                content of the covered advertisement; 
                                and
                                    (II) has a financial interest the 
                                digital assets being recommended; and
                            (iii) the nature of any financial interest 
                        disclosed under clause (ii), including whether 
                        that financial interest consists of any option, 
                        right, warrant, future, or long or short 
                        position, unless the extent of that financial 
                        interest is nominal.
            (14)(A) Except as otherwise provided by subparagraph (B), 
        the covered advertisement may not refer, directly or 
        indirectly, to past specific recommendations made by the 
        applicable digital asset intermediary that were or would have 
        been profitable to any person.
            (B) The covered advertisement may set out or offer to 
        furnish a list of all recommendations as to the same type of 
        digital assets made by the applicable digital asset 
        intermediary during the 1-year period preceding the date on 
        which the covered advertisement is released, if the 
        communication or list--
                    (i) states the name of each digital asset 
                recommended, the date and nature of each such 
                recommendation (such as whether to buy, sell, or hold 
                the digital asset), the market price (as of the date of 
                the recommendation), the price at which a person was 
                meant to act upon the recommendation, and the market 
                price of each such digital asset, as of the most recent 
                practicable date; and
                    (ii) contains the following warning, which shall 
                appear prominently within the communication or list: 
                ``it should not be assumed that recommendations made in 
                the future will be profitable or will equal the 
                performance of the digital assets in this list.''.
    (d) Sources Supporting a Recommendation.--
            (1) In general.--A digital asset intermediary shall 
        provide, or offer to provide upon request, available 
        information or sources supporting any recommendation described 
        in subsection (c)(13).
            (2) Price disclosure.--When a digital asset intermediary 
        recommends a digital asset in a covered advertisement, as 
        described in subsection (c)(13), the digital asset intermediary 
        shall provide the price of the digital asset, as of the date on 
        which the recommendation is made.
    (e) Information Provided in Public Appearances.--
            (1) In general.--When an officer or employee of a digital 
        asset intermediary is sponsoring or participating in a seminar, 
        forum, or radio or television interview, or when such an 
        individual is otherwise engaged in a public appearance or 
        speaking activity, paragraphs (1), (2), and (3) of subsection 
        (c) shall apply to that appearance to the same extent as those 
        provisions apply to a covered advertisement.
            (2) Recommendations.--If an officer or employee of a 
        digital asset intermediary recommends a digital asset in a 
        public appearance, that individual shall--
                    (A) have a reasonable basis for the recommendation; 
                and
                    (B) disclose, as applicable--
                            (i) whether the individual has a financial 
                        interest in the digital asset recommended;
                            (ii) the nature of the financial interest 
                        disclosed under clause (i), including whether 
                        that financial interest consists of any option, 
                        right, warrant, future, or long or short 
                        position, unless the extent of that financial 
                        interest is nominal; and
                            (iii) any other actual, material conflict 
                        of interest of which the individual knows or 
                        has reason to know at the time of the public 
                        appearance.
    (f) Procedures for Public Appearances.--Each digital asset 
intermediary shall establish written procedures that are appropriate 
and reasonable to the business, size, structure, and customers of the 
digital asset intermediary in order to supervise the public appearances 
of the officers and employees of the digital asset intermediary, which 
shall include--
            (1) provisions for the education and training of employees 
        of the digital asset intermediary regarding those procedures;
            (2) documentation of the education and training required 
        under paragraph (1); and
            (3) surveillance and follow-up measures to ensure that the 
        digital asset intermediary implements and adheres to those 
        procedures.
    (g) Enforcement by Commissions.--
            (1) In general.--The Securities and Exchange Commission, 
        the Commodity Futures Trading Commission, or any applicable 
        self-regulatory organization operating under delegated 
        authority by the appropriate commission, as applicable to a 
        digital asset intermediary, shall regularly ascertain the 
        compliance with this section by the digital asset intermediary 
        (and applicable individuals) at the time of each regular 
        examination of the intermediary by the applicable entity.
            (2) Investigations.--The appropriate commission or self-
        regulatory organization, as applicable, may conduct an 
        investigation into a suspected violation of this section and 
        take enforcement action outside of a regular examination of a 
        digital asset intermediary, which shall be comprised of the 
        following:
                    (A) With respect to such a violation by that 
                digital asset intermediary, the following:
                            (i) For an initial violation of this 
                        section, the imposition of a civil monetary 
                        penalty in an amount that is not more than 
                        $100,000.
                            (ii) For any subsequent violation of this 
                        section, the imposition of a civil monetary 
                        penalty in an amount that is not more than 
                        $1,000,000.
                            (iii) The enjoinment of future violations 
                        of this section by the digital asset 
                        intermediary and the requirement that the 
                        digital asset intermediary submit to the 
                        enforcing entity appropriate remediation plans.
                    (B) For repeated, knowing violations of this 
                section by an individual, the imposition of a temporary 
                or permanent bar from the digital asset industry with 
                respect to that individual.
    (h) Applicability to Disclosures.--A document filed with the 
Securities and Exchange Commission, as otherwise required by law or 
regulation, is not subject to the requirements of this section.
    (i) Rules.--The Commissions, after not less than a 120-day comment 
period, shall adopt rules to implement this section.
    (j) Authorization of Appropriations.--For the purposes of 
appointing employees to enforce the requirements of this section, and 
for other costs relating to the enforcement of this section, there is 
authorized to be appropriated, for fiscal year 2023, to remain 
available until September 30, 2024--
            (1) $25,000,000 to the Securities and Exchange Commission; 
        and
            (2) $25,000,000 to the Commodity Futures Trading 
        Commission.

SEC. 4. OFFSETTING THE COSTS OF DIGITAL ASSET ADVERTISING SUPERVISION.

    (a) Recovery of Certain Costs of Annual Appropriations.--
            (1) In general.--Beginning October 1, 2024, the Securities 
        and Exchange Commission and the Commodity Futures Trading 
        Commission may, jointly, by rule, collect fees--
                    (A) to fund expenses relating to the supervision of 
                advertising by digital asset intermediaries; and
                    (B) that are designed to recover the costs to the 
                Federal Government of the annual appropriation to each 
                commission by Congress for the cost of the supervision 
                of advertising by digital asset intermediaries.
            (2) Registered entities.--A fee shall be imposed under 
        paragraph (1) only--
                    (A) on an entity that--
                            (i) is licensed, registered, or similarly 
                        authorized pursuant to a provision of law 
                        described in section 2(4)(A); and
                            (ii) is engaged in activities relating to 
                        digital assets, including a digital asset 
                        intermediary that is registered with either 
                        commission as otherwise may be provided by 
                        Federal law; and
                    (B) in relation to the regulation of those 
                activities under a provision of law described in 
                section 2(4)(A).
            (3) Fee rates.--A fee imposed under paragraph (1) shall--
                    (A) be strictly related to the cost to the 
                Commissions relating to the supervision of advertising 
                by digital asset intermediaries;
                    (B) minimize negative impacts on market liquidity; 
                and
                    (C) maintain the efficiency, competitiveness, and 
                financial integrity of digital asset markets.
            (4) Collection of fees.--The Commissions shall collect fees 
        under this subsection in such manner and within such time as 
        may be specified by the Commissions, by rule.
    (b) Fee Rate Orders.--
            (1) In general.--Each fiscal year, the Commissions shall 
        jointly adopt an order setting rates for fees that are 
        collected under subsection (a) during that fiscal year.
            (2) Publication.--The Commissions shall publish in the 
        Federal Register each order adopted under paragraph (1), which 
        shall include--
                    (A) projections on which the fees are based; and
                    (B) an explanation of the method used for 
                calculating applicable fee rates.
    (c) Deposit of Fees.--
            (1) Offsetting collections.--Fees collected under 
        subsection (a) for any fiscal year shall--
                    (A) be split evenly between the Commissions;
                    (B) be deposited and credited as offsetting 
                collections to the accounts providing appropriations to 
                each respective commission; and
                    (C) not be collected or available for obligation 
                for any fiscal year except to the extent provided in 
                advance in appropriation Acts.
            (2) General revenues prohibited.--No fee collected under 
        subsection (a) may be deposited and credited as general revenue 
        of the Treasury.
    (d) Lapse of Appropriations.--If a regular appropriation to a 
commission has not been enacted on the first day of a fiscal year, the 
commission shall continue to collect fees under this section at the 
rates in effect on September 30 of the preceding fiscal year until the 
regular appropriation for the fiscal year has been enacted and the 
commission has published fees based on the appropriation under 
subsection (b)(2).
    (e) Limitations.--
            (1) Leveraged, margined, or financed transactions.--Nothing 
        in this section may be construed to authorize the imposition of 
        fees on a registered entity relating to leveraged, margined, or 
        financed transactions under this Act, including those 
        activities relating to digital assets.
            (2) Other appropriations.--Notwithstanding any other 
        provision of law, a commission may use appropriations otherwise 
        made available by law to fund expenses relating to the 
        supervision of digital asset advertising under section 2.
    (f) Ceiling on Fees.--Unless otherwise provided by law, the total 
amount of fees collected under this section shall not exceed 
$50,000,000.
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