The other day I posted a comment on Professor Pierluigi Matera's article, Delaware’s Dominance, Wyoming’s Dare. New Challenges, Same Outcome? (March 1, 2021). Professor Matera responded with a very thoughtful email, in which he explains:
I agree with you about Wyoming’s chances to succeed. I do believe that Delaware’s dominance will remain intact. In my paper (I mean, in the extended draft version which is on SSRN https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3763106 ), I argued:
... to the extent that Wyoming’s strategy pays off, it will secure this jurisdiction a leading position only in that segment of the corporate charters market, whilst Delaware will continue to dominate the rest of it. That said, it is currently uncertain whether Wyoming’s policy is a calculated risk or an unreasonable hazard.
….
However, to the extent that Wyoming’s tactic proves to be effective, it will earn this jurisdiction a leading position only in a segment of the corporate charters market, whilst Delaware will continue to dominate the rest of it. Clearly, the significance of this segment will depend upon the growth of cryptocurrencies.
In light of all this, Wyoming’s approach might look like a dare. In fact, this new challenge is likely to end up with the same result: Delaware’s dominance.
I also contend that Federal legislature is likely to intervene and end Wyoming’s ambition. But I doubt that Delaware would be able to follow Wyoming on the path of relaxing and liberalising laws on blockchain for the same reason which suggested Delaware not to follow Nevada.
Comparing Nevada’s market segmentation approach and Wyoming’s challenge, I argued:
In this respect, Wyoming is replicating the market segmentation strategy already conceived and put in place by Nevada for small firms. This implies some similarities. As in Nevada’s case, Delaware is unlikely to follow Wyoming in adopting such liberal laws for virtual currencies. Should Delaware introduce laws that are too lax, federal legislature might intervene.
Unlike Nevada, Wyoming is creating a safe harbour by introducing exemptions or custom-made provisions in multiple fields of regulation, including state securities regulation. This is consistent with the aims of the cryptocurrency sector.
My response was premised on the assumption that to the extent the Wyoming statue was a move to the top, Delaware--as the leader in the so-called race to the top (to be sure, as I have said elsewhere, the race is more of a leisurely stroll, but it's still towards the top)--would simply copy the Wyoming statute--as Delaware has done with other developments--and thus trounce Wyoming.
As Professor Matera points out in his email, however, the Wyoming statute can be seen as a move to the bottom. If that proves to be the case, I suspect he is correct that Delaware would opt not to follow Wyoming, just as Delaware has opted not to follow Nevada.
But then the question becomes whether Nevada might not steal Wyoming's thunder by copying the Wyoming rules and coupling them with Nevada's lax corporate governance regime to create create a very attractive package for those who wish to lead an accountability free life?
In any case, strongly urge you to read Professor Matera's article, which captures some very important insights about a very interesting development.
Recommended reading.
