New Jersey Case Could Set Restrictive Precedent for Bitcoin Businesses

Though we have only hints at what regulation could result from last month’s NYDFS hearing in New York, members of both sides largely agree the dialogue did much to improve relations between New York regulators and the bitcoin community.
Despite the steps forward, however, recent actions taken by the state’s southern neighbor New Jersey suggest that US law enforcement is going the extra mile to try and prevent any potential bitcoin threats, no matter how dubious.
In a controversial move, the New Jersey Division of Consumer Affairs issued a subpoena this December against Jeremy Rubin, a 19-year-old bitcoin developer and MIT student, who, along with three other students, has created an innovative computer code called Tidbit.
Tidbit would allow web surfers to put their computer power toward bitcoin mining, providing a website with the proceeds of this activity in exchange for the ability to view content without advertising.
New Jersey doesn’t quite see the innovation, and the implications of its potential victory in court could have an impact on the wider bitcoin business community.
The Electronic Frontier Foundation, which is representing Rubin, told CoinDesk:

“The precedent that [it] would set is to validate the authority of a state to investigate and regulate conduct taking place online and outside of the state’s borders.
That means Bitcoin innovators will have to be very careful with what they do and understand that there is going to be scrutiny into their activities.”

Necessary action?

The subpoena isn’t just asking introductory questions about Tidbit.
Rather, law enforcement officials have moved aggressively to prompt Rubin to turn over all of Tidbit’s assets, including its source code, related bitcoin wallets, agreements with third parties, as well as the name and IP addresses associated with its development team, all of whom are undergraduates at MIT. Though, it should be noted it stopped short of accusing Rubin of criminal wrongdoing.
Looking more closely at recent headlines from the state, the action may not be surprising. Last November, E-Sports Entertainment settled for $1m after it was accused of using malicious software code to illegally mine bitcoin on the computers of state residents.
At peak power, the company was able to take control of 14,000 computers without users’ knowledge and generate $3,500 in profits over two-week span. It was eventually accused of violating the New Jersey Consumer Fraud Act and the New Jersey Computer Related Offenses Act.
Indeed, the language of the Tidbit subpoena suggests this interpretation as it asks Rubin to turn over “all documents and correspondence concerning all breaches of security and/or unauthorized access to computer”.

Source : http://www.coindesk.com/new-jersey-case-precedent-bitcoin-businesses/