Here’s a question that has arisen more frequently as we’ve litigated cryptocurrency cases: What does it mean to “own” a crypto token? While blockchain technology offers revolutionary financial possibilities, it simultaneously challenges traditional concepts of ownership and accountability.
Identifying the true controller of crypto assets requires technical expertise, cooperation from specific entities and evolving legal mechanisms that may not yet exist in every state but that are necessary to address the gap between digital anonymity and real-world accountability.
Determining cryptocurrency ownership poses a significant challenge due to the decentralized, pseudonymous nature of blockchain technology. Unlike traditional banking systems, cryptocurrencies are not always directly linked to real-world identities and are not always subject to the same government regulations and oversight. Instead, ownership is represented by cryptographic keys, with transactions recorded on decentralized public ledgers. This structure, while promoting privacy and autonomy, makes identifying the true owners of cryptocurrency wallets and other digital assets more elusive.
A major issue arises from the use of pseudonyms—wallet addresses that don’t inherently reveal user identities. While blockchain transactions are transparent and traceable, linking these addresses to specific individuals often requires off-chain information, such as Know Your Customer data from crypto exchanges. However, not all platforms enforce strict KYC protocols, and privacy-focused coins (e.g., Monero or Zcash) further obscure transactional details, making attribution even more difficult. Additionally, users often employ multiple wallets, mixing services or decentralized exchanges to fragment or anonymize their holdings. This deliberate obfuscation impairs investigations, especially in cases involving fraud, tax evasion or asset recovery during legal disputes.
Furthermore, legal frameworks globally are still adapting to digital asset realities, with varying standards for ownership verification, asset seizure and inheritance. The lack of centralized oversight and inconsistent regulation only deepens the complexity.
A Brief History of Property Ownership
Today’s modern concepts of title and ownership are the result of centuries of legal evolution, driven by economic growth, individual rights and institutional development. Ownership is now typically determined through centralized formal registration systems that provide legal proof and protection of property rights.
Historically, ownership was established by possession, use and force. If you could take or defend it, it was considered yours. The Babylonians were the first to recognize the notion of private rights of ownership. Hammurabi’s Code (circa 1754 BCE) was the first known law to formally recognize ownership by punishing theft, fraud and illegal transfers or denials of rightful inheritance.
During the feudal era in Europe, land was controlled by monarchs and distributed in a hierarchy through vassalage, with no absolute private ownership. Again, much of what you owned was essentially conferred by control — that which you controlled and could defend from expropriation is what you owned. Transfer of property ownership was frequently symbolic — remember “livery of seisin” from Property Law 101? Over time, legal systems in Europe gradually began to establish and formalize ownership rights. In Roman law, concepts like dominium (absolute ownership) emerged, influencing later European legal traditions.
Protections for intangibles like intellectual property evolved during the Renaissance in Europe. Early laws like England’s 1624 Statute of Monopolies granted exclusive rights to inventors. Copyright followed in 1710 with the Statute of Anne. Over time, global treaties like the Paris and Berne conventions standardized protections internationally.
The Napoleonic Code further systematized and uniformly enshrined private property rights — real, tangible and intangible alike — as a sacred and inviolable right, giving individuals full legal title over their possessions through legal rights and a system of centralized and formal documentation and recordation. The Industrial Revolution and urbanization further heighted the necessity for reliable records of ownership, eventually extending to even intangible assets such as intellectual property.
The Problem
Crypto and blockchain technology in particular serve the purpose of recordation and ensuring that property stays where it belongs. They are difficult to breach or counterfeit. And all transactions remain on the blockchain forever and are moderately easy to track. However, these strengths are accompanied by a weakness: The wallets themselves are not necessarily owned by any individual. Crypto ownership operationally focuses on control, much like in the feudal era. Wallets that exist “on chain” are visible — but who does a wallet belong to? Other than access and control, how do you prove a wallet is yours? Most wallets are what’s referred to as “on chain.” They are not registered in a person’s name. There is no contract designating a wallet (or its contents) as belonging to a specific person.
Terrestrial accounts like a stock trading accounts — or even an E-trade, Binance or Robinhood account that will let you trade crypto — have visible entity sponsors who have accountability, have “know your customer” requirements and generally situate an account that essentially is the wallet. This creates what is more familiarly recognized as proof of ownership. If you own the account, you own the contents. And a contract with one of these entitles basically says you own the account and the contents (subject to some laws and rules).
Without these, the notion of ownership is murky at best. The question of “who owns” crypto becomes an even more complex notion when it comes to the fact that humans typically control wallets, but what if they wanted to transact on behalf of a limited liability entity? How does one show that while they control the wallet, someone else actually “owns” the contents?
What the Courts Have Said So Far
Shin v. ICON Foundation, out of the U.S. District Court for the Northern District of California, is one of the first decisions to address the issue of ownership in the context of cryptocurrency tokens. The plaintiff argued that he became the owner of ICX tokens by exercising possession over them, relying on the natural law principle adopted into common law that “that which belongs to nobody is acquired by the natural law by the person who first possesses it.”
The court noted that ICON did not require the plaintiff to allege consideration to establish a possessory interest, suggesting that possession and control over cryptocurrency can be sufficient to assert ownership. This principle aligns with traditional property law concepts, such as those applied to unowned property or wild animals. Cryptocurrency tokens, unlike tangible property or natural resources, exist within a controlled digital ecosystem governed by software protocols and blockchain technology.
In this case, the plaintiff exploited a software glitch to mint millions of new cryptocurrency tokens, which materially diluted the value of the tokens held by the defendant. The court recognized that the creation and transfer of digital assets are not governed by natural possession or physical control but by the rules embedded in the digital ecosystem. This distinguishes digital assets from traditional property, where ownership is often tied to physical possession or first appropriation. The court also rejected the course application of natural law principals of ownership, res nullius or ferae naturae, explaining that minting tokens was not the same thing as taking control over them or capturing them and that digital ownership was more akin to other intangible assets.
The court upheld the defendant’s counterclaim for unjust enrichment, recognizing that the plaintiff’s actions somehow disrupted the controlled digital ecosystem and caused harm to other participants. This focus on economic harm and ecosystem integrity further illustrates why traditional property law analogies were insufficient in this context.
By contrast, in In re Celsius Network LLC, the U.S. Bankruptcy Court for the Southern District of New York found that cryptocurrency assets deposited in Celsius’ Earn Accounts were presumptively property of the estate and not the account holders, based on the unambiguous terms of the contracts. However, the court reserved judgment on assets in other programs, such as Custody and Withhold Accounts, where ownership might depend on the specific terms and conditions of those accounts within the Celsius network.
Similarly, in Gemini Tr. Co., LLC v. Genesis Glob. Cap., LLC (In re Genesis Glob. Holdco, LLC), the same court examined ownership of cryptocurrency in the context of lending agreements. Under the Gemini Earn Program, users loaned their digital assets to Genesis Global Capital through master loan agreements. These agreements governed the transactions and established the terms under which GGC held the assets. The court’s analysis highlights that ownership of cryptocurrency can be determined by the terms of contractual agreements, which may transfer ownership or create custodial relationships.
These cases highlight the stark contrast between what we are accustomed to thinking about ownership — I can own the money in “my” bank account — and a new world where I have a wallet that I can never physically control or possess, and that I am at the mercy of a virtual ecosystem to maintain control over but cannot really prove is “mine” without better ideas and rules about what it means for something to “belong” to someone under the law.
Broader Implications for Digital Asset Regulation
The courts’ reasoning emphasizes the need for new legislative and regulatory clarifications. Otherwise, courts will be making law ad hoc. Much like in the 1910s before the passage of blue sky laws and the securities laws, there currently is no “law” that really applies, and courts’ piecemeal muddling through the bramblebush is unlikely to keep up.
Emerging statutory frameworks that treat digital assets as distinct from traditional property are just the beginning. For example, under California Financial Code § 3503, digital financial assets held in trust for customers are protected from attachment or seizure, reflecting the unique legal treatment of such assets within a regulated framework. Similarly, 12 U.S.C. § 5901(22) defines “payment stablecoins” based on their intended use and the issuer’s obligations, further highlighting the departure from traditional property concepts in the regulation of digital assets.
As a slight contrast is Texas’s patchwork of statutes that appear to try and make crypto subject to Texas’s laws. The Texas Virtual Currency Act, enacted in 2021, defines a “virtual currency” as “a digital representation of value that is used as a medium of exchange, unit of account, or store of value” that is not legal tender.” The TVCA subjects cryptocurrency transactions and issuances to existing Texas law, such as the state’s Business & Commerce Code and the Texas Securities Act. The Act also gives purchasers other rights, such as being a qualifying purchaser, acceding to the rights of the seller and only the rights of the seller, and makes purchasers able to defend themselves as good faith purchasers for value without notice, a la the UCC. Interestingly, the TVCA does not appear to appear to apply to meme coins — think “$Trump” or “$Milania” coins — as they are not stores of value. The Texas Department of Banking also issued a revised supervisory publication known as Memorandum 1037, “Regulatory Treatment of Virtual Currencies Under the Texas Money Services Act.”
All of these attempts to provide a framework are laudable. But how well do they apply and adapt? Not very well, given the issues identified above. And like the California and federal statutes, they leave an enormous gap in that they don’t address decentralization and anonymization, or the notion of ownership and obligation.
In Other Areas, Established Property Principles Should Be More Than Sufficient to Adequately Protect and Provide Certainty to Investors.
Early district-court opinions, such as Gaponyuk v. Alferov and Jacobo v. Doe from the Eastern District of California, granted broad prejudgment freezes of digital wallets on the theory that the “speed and anonymous nature” of crypto transactions posed a unique risk of dissipation. Those decisions — rendered largely ex parte — rested on policy intuitions rather than on the historical limits of equitable power acknowledged by the U.S. Supreme Court. Two controlling authorities now make clear that there is no “crypto carve-out” from traditional equitable doctrine:
1) In Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., the Supreme Court held that federal courts lack authority to issue prejudgment asset-freeze injunctions in actions seeking money damages, absent statutory authorization or a historically recognized equitable interest in specific property.
2) This term, in Trump v. CASA, Inc., the Supreme Court reaffirmed Grupo Mexicano, emphasizing that federal equitable power extends only to “those remedies traditionally accorded by courts of equity at our nation’s founding.” CASA further condemned attempts to provide relief to nonparties outside Rule 23, signaling that modern exigencies — however novel — cannot trump historical limits.
Against that backdrop, the early crypto cases are doctrinal outliers. Their reasoning — that technological novelty itself justifies extraordinary relief — cannot survive Grupo Mexicano’s historical test as reiterated in CASA. By contrast, more recent decisions like Schiermeyer on behalf of Blockchain Game Partners, Inc. v. Thurston and JustM2J LLC v. Brewer restore doctrinal coherence:
- In Schiermeyer on Behalf of Blockchain Game Partners, Inc. v. Thurston, the U.S. District Court for the District of Utah denied a TRO freezing allegedly stolen tokens, explaining that fungible digital assets are economically compensable and thus do not constitute irreparable harm. Relying on Grupo Mexicano, the court refused to brandish “a nuclear weapon of the law” absent a specific equitable interest in traceable property.
- In JustM2J LLC v. Brewer, the same Eastern District of California District Judge that decided Jacobo mentioned above revisited his prior reasoning and, instead, likewise declined to impose an ex parte freeze, stressing the plaintiff’s delay and the availability of damages. The court rejected arguments that crypto’s “anonymity” created a per se risk of dissipation, holding that traditional equitable factors — not technological fear — govern preliminary relief.
These decisions illustrate the “better view”: Cryptocurrency should be analyzed under the same equitable framework that governs any other fungible, readily monetizable asset. To obtain prejudgment remedies, a party should avail itself of Rule 64’s state law attachment remedies as laid out in Grupo Mexicano. CASA cements that approach by foreclosing universal injunctive relief untethered to historical equity.
In sum, courts should resist invitations to craft sui generis crypto doctrines and look instead to the traditional notions of property ownership and control, jurisprudence governing commercial transactions as well those in securities and commodities, and the courts’ ordinary exercise of equitable power.
Mazin A. Sbaiti is the founding partner of Sbaiti & Company. He represents CEOs, senior executives, investors, business owners, inventors, and injured individuals in complex litigation.
George M. Padis is a former deputy civil chief at the U.S. Attorney’s Office for the Northern District of Texas. He focuses his practice on practice spans Federal Tort Claims Act matters, commercial disputes, healthcare fraud matters, anti-kickback statute litigation, breach of fiduciary duty, fraud, corporate-governance, and securities disputes.