Trump Shreds Emoluments Clause with New Memecoin while Norms Fairy Weeps (and Melania Joins the Fun) | naked capitalism

By Lambert Strether of Corrente.

On the Friday before inauguration day at 9:00pm, President-elect Donald Trump released a memecoin, $TRUMP, that by Sunday was valued at $58 billion, making him one of the world’s 25 richest people. Felix Salmon summarizes:

The $TRUMP memecoin — a financial asset that didn’t exist on Friday afternoon — now accounts for about 89% of Donald Trump’s net worth.

The coin (technically a token that’s issued on the Solana blockchain) has massively enriched Trump personally, enabled a mechanism for the crypto industry to funnel cash to him, and created a volatile financial asset that allows anyone in the world to financially speculate on Trump’s political fortunes….

Some 200 million of the 1 billion total coins have already been released and are being actively traded. The rest, which are owned by Trump-controlled entities, will be able to be sold at various points over the next three years, starting in April.

Not to be outdone, Melania Trump launched her own coin MELANIA Sunday night, almost immediately achieving a market capitalization north of $5 billion.

Here is a handy chart:

These sudden, lightning strike-like events strike me as remarkable, extraordinary, potentially signaling a change to the Constitutional order. And yet they aren’t front page news at the New York Times or the Washington Post[1] (being exclipsed by the inaugural itself, TikTok, the coming winter storm, etc.). What can they mean? In this post I’ll try a sketch a preliminary answer to that question.

Let me concede immediately that I loathe Bitcoin and its “community” (and loathe them despite any raised hands saying “I personally profit from it!”). See Bloomberg, “Joseph Stiglitz: Bitcoin ought to be outlawed“:

Nobel Prize-winning economist Joseph Stiglitz said “bitcoin is successful only because of its potential for circumvention, lack of oversight.” “So it seems to me it ought to be outlawed,” Stiglitz said Wednesday in a Bloomberg Television interview with Francine Lacqua and Tom Keene. “It doesn’t serve any socially useful function.”

However, this is not the post to give my loathing analytical form (here is a partial list of NC posts on bitcoin; the headlines will give you an idea of the general tenor of our coverage[2]). What I will do first is define some terms for those who came in late: Blockchain, for example. After that I will consider the Constitutional, even existential, questions raised by Trump’s memecoin.

Definitions: Blockchain, Bitcoin, Shitcoin, Memecoin

The world of so-called[3] “decentralized finance” has an extensive vocabulary all its own, seeminly spawned in imitation of — and I can’t believe I’m saying this — genuine finance. Our purpose, however, is to understand Trump’s memecoin, and for that we need four terms: Blockchain, Bitcoin, Shitcoin, and Memecoin.

Bitcoin (and Crypto (and Blockchain). From the Monthly Review (2022):

Bitcoin was launched a few months after the collapse of Lehman Brothers as a prototype for a secure, permissionless digital currency that would be created, without the guarantee of a financial intermediary as the basis for its credibility, by ‘mining’—the energy-intensive process of deploying a large amount of computing power to solve a cryptographic puzzle (also called proof of work) validating a transaction[4]. While currencies are conventionally underpinned by trust in a powerful central authority, Bitcoin relies on this cryptographic proof, drawing on open-source software and a network of servers sharing data to verify and record transactions so that a multitude of users can anonymously validate the cryptocurrency. Time-stamped, cryptographically proven transactions, immutably recorded in ledgers, are shared and replicated across servers, forming the blockchain—the technological bedrock of the decentralized logic of the cryptoverse. A limit on the maximum number of bitcoins that can be mined (21 million) is built into the trustless mechanisms on the grounds that this technologically imposed scarcity acts as a bulwark against inflation and the profligate impulses of the state. But perversely, this artificial scarcity ensured the allure of Bitcoin as a speculative asset.

Bitcoin has now been joined by a vast number of other cryptocurrencies. Crypto coins are subject to stomach-churning price swings, a painfully slow settlement process, and a huge environmental footprint, undermining their utility as a stable, liquid, and efficient means of settlement.

Shitcoin. From Investopedia: “The term shitcoin refers to a cryptocurrency with little to no value or no immediate, discernible purpose. The word is a pejorative term often used to describe altcoins or cryptocurrencies developed after Bitcoin became popular.” (Of course, Stiglitz would argue, and I would assert, that all bitcoins are shitcoins.) And a subtype of the shitcoin is–

Memecoin. From The Motley Fool:

Meme coins are cryptocurrencies that originate from internet memes or have a humorous or viral aspect. Unlike Bitcoin (BTC -0.4%) or Ethereum (ETH 1.29%), which are backed by robust blockchain technologies and have clear utility in [fraud] digital transactions and decentralized applications (dApps), meme coins often lack a specific purpose beyond the community and cultural value they hold.

Dogecoin (from which Musk’s DOGE derives, Musk being a DOGE holder, naturally) is a meme coin derives from the DOGE meme (see Know Your Meme). Another example from the Daily Mail:

Meme coins are generally considered to be incredibly risky investments, since they are prone to insider-trading and extreme volatility.

There are thousands of them available for purchase through many different platforms, but the most recent meme coin that has gotten negative media attention was Haliey Welch’s.

Welch, better known as the ‘Hawk Tuah Girl,’ launched $HAWK with the help of a shady foundation on December 4.

The token cratered by over 90 percent just hours after it reached a $490 million market cap, prompting accusations of fraud from the crypto community and a lawsuit against the creators of the coin.

Trump signals that his coin is a memecoin in his URL (“gettrumpmemes.com”) and in the verbiage on the page:

Trump Memes are intended to function as an expression of support for, and engagement with, the ideals and beliefs embodied by the symbol “$TRUMP” and the associated artwork, and are not intended to be, or to be the subject of, an investment opportunity, investment contract, or security of any type. GetTrumpMemes.com is not political and has nothing to do with any political campaign or any political office or governmental agency.

We’ll see about that “not political” in the next section.

Issues Raised by Trump’s Memecoin

There are at least four.

First, executive unity. I struggled to think of a good reason for Trump’s spectacular autogolpe as a top-tier, world-class oligarch immediately before he took the oath of office, a reason not involving lust for power or open corruption, and this is what I came up with. In Federalist #70, famous for the discussion of “energy in the executive,” Madison writes (I have marked the two key portions [A] and [B]):

Those politicians and statesmen who have been the most celebrated for the soundness of their principles and for the justice of their views, have declared in favor of a single Executive and a numerous legislature. They have with great propriety, considered energy as the most necessary qualification of the former, and have regarded this as most applicable to power in a single hand, while they have, with equal propriety, considered the latter as best adapted to deliberation and wisdom, and best calculated to conciliate the confidence of the people and to secure their privileges and interests.

That unity is conducive to energy will not be disputed. Decision, activity, secrecy, and despatch will generally characterize the proceedings of one man in a much more eminent degree than the proceedings of any greater number; and in proportion as the number is increased, these qualities will be diminished.

This unity may be destroyed in two ways: either by vesting the power in [A]two or more magistrates of equal dignity and authority; or by vesting it ostensibly in one man, subject, in whole or in part, to the control and co-operation of others… The experience of other nations… [a]s far, however, as it teaches any thing, it teaches us not to be enamoured of [B]plurality in the Executive.

[A] “two or more magistrates.” I think I was one of the first to joke about “President Musk,” but the jokes had a basis in reality, as Musk really did seem to be an independent actor. By increasing his personal wealth overnight to $35 billion dollars, Trump shows fellow billionaire Musk, in the crudest way possible, who the big dog on the block really is.

[B] “plurality in the Executive.” Trump’s experience in his first administration must surely have given him the sense of “plurality in the executive,” given for example that he ordered withdrawal from Syria, and it didn’t happen, which can only mean there are people in his administration just as powerful as he is. Now, I don’t think Trump becomes “the big dog” in our enormous Federal government as easily as he does in a one-on-one with Musk, but the sense of Trump’s dominance can only increased (importantly, within Trump himself).

Second, the emoluments clauses. Article I, Section 9, Clause 8 (foreign emoluments):

No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.

Article II, Section 1, Clause 7 (domestic):

The President shall, at stated Times, receive for his Services, a Compensation, which shall neither be encreased nor diminished during the Period for which he shall have been elected, and he shall not receive within that Period any other Emolument from the United States, or any of them.

And the Legal Information Institute’s commentary:

For most of its history, courts have rarely substantively analyzed or interpreted the Foreign Emoluments Clause. During the administration of President Donald Trump, however, a number of private parties, state attorneys general, and Members of Congress sued the President based on alleged violations of both the Foreign Emoluments Clause and the Domestic Emoluments Clause (collectively, the Emoluments Clauses). Three major federal lawsuits concerning the Emoluments Clauses were filed against President Trump. Over nearly four years, these cases progressed through the lower federal courts, resulting in the first significant judicial decisions on the Emoluments Clauses.

In late 2020, the Supreme Court denied review in one of these cases, and—after the end of President Trump’s term in January 2021—instructed two federal appellate courts to vacate their judgments and dismiss the other two cases as moot.

So Trump’s memecoin puts us in uncharted territory. More:

The final litigated issue was the meaning and scope of the term “emolument” as used in the Emoluments Clauses—particularly, whether it includes private, arm’s-length market transactions. In the litigation, President Trump argued that ’emoluments’ included only benefits received by an officeholder in return for official action or through his office or employment. Plaintiffs urged that ’emoluments’ be defined more broadly to apply to any ‘profit, gain, or advantage’ received by the President from a foreign or domestic government. The two district courts that reached the issue adopted the plaintiffs’ broader definition of ’emolument,’ although the appellate courts subsequently vacated those decisions.

Trump’s memecoin, then, would seem to be barred by the district courts broader definition, but not barred by the appellate courts. To put the matter in very simple terms:

(This article argues that Trump’s memecoin is carefully crafted to win a Supreme Court case legalizing the practice, but the technical basis on which it does so is beyond me. Perhaps some kind reader can explicate.)

Third, a cult of personality. Once again, from Trump’s site:

“Celebrate Our Win & Have Fun!”

Note the word “our” (and how the heck is owning a memecoin fun? I genuinely don’t get it. More:

Join the Trump Community. This is History in the Making!

I genuinely don’t get the “community” aspect either, though it’s often used by coin touts. And once more:

Trump Memes are intended to function as an expression of support for, and engagement with, the ideals and beliefs embodied by the symbol “$TRUMP” and the associated artwork , and are not intended to be, or to be the subject of, an investment opportunity, investment contract, or security of any type. GetTrumpMemes.com is not political and has nothing to do with any political campaign or any political office or governmental agency. See Terms & Conditions Here, See Card Allocation Here.

On one level, “is not political” is just silly. “Celebrating the win” is obviously political, given that an election was won; “community” is political as well, by definition (even more so when forming the community is “history in the making”). Presumably that’s all boilerplate that Bud From Legal insisted be in there. However, the part that concerns me is this:

… an expression of support for, and engagement with, the ideals and beliefs embodied by the symbol “$TRUMP” and the associated artwork…

I hate to invoke Godwin’s law, and heaven knows I don’t think MAGA are Nazis. But the idea that one pays to express “support” seems like a phase shift to me; it reminds me uncomfortably of the fact that Nazi brownshirts had to buy their own uniforms; a level of commitment, especially in bad times, far greater than going to rallies or voting. “If this goes on,” if the level of commitment is escalated, drawing more and more relentlessly in, then I am even more uncomfortably reminded of what I have always regarded as the dividing line between fascist adjacency and outright fascism, the line we have never crossed: “a mass-based party of committed nationalist militants.”

Fourth, financialization of the body politic. Felix Salmon writes:

Trump’s fans believed it made sense to stand by him through the scandals and the victories, because they thought his leadership would provide them with opportunities down the road.

But now holders of TRUMP have a direct financial incentive to amplify his message and defend his presidency, because the token is sure to rise in value whenever sentiment moves in his favor.

I suppose if money is speech….

Conclusion

I’ve never been one to worship, with Democrats, at the altar of the Norms Fairy. But it does seem to me that a President using the imminence of his inauguration to transform himself into an instant multi-billionaire is a norms violation on a colossal, a gargantuan scale, a mountain so huge that we cannot see its peak from where we stand. Felix Salmon writes:

Trump has just delivered a masterclass in the ability of a president to turn power into wealth.

(Or social capital into economic capital). Can anybody really believe that a sitting President should have the power to teach that lesson? Can anyone believe that the Constitution’s framers intended it? Does this mean every future President can do the same thing? Why not every politician? Will Bitcoin prices replace polling? Why not? Heck, why not voting? Meanwhile, even the tech bros are aghast. From Web3 Is Going Great:

[S]ome in the crypto world are reacting with horror at Trump’s decisionmaking. While they hoped that Trump’s administration would be crypto-friendly, they did not seem to anticipate that the Trump family would openly embrace some of the ecosystem’s worst parts to enrich themselves at everyone else’s expense.

(Again, I think the “worst parts” of crypto “ecosystem” are the “ecosystem” itself, but it’s telling that even true believers have problems with the grossness of Trump’s act.) And what on earth can Susie Wiles think? Or did she find out about it from Trump’s post?

NOTES

[1] RealClearPolitics, which I had thought was a reliable, albeit conservative aggregator, hasn’t mentioned the story at all:

[2] Naked Capitalism on Bitcoin:

What Happens If Bitcoin Succeeds? (2021)

Crypto Crackdown: Only the Beginning? (2021)

Nassim Nicholas Taleb Shellacks Bitcoin and Cryptocurrencies (2021)

The Only Crypto Story You Need? A Response to Matt Levine’s The Crypto Story (2022)

Jim Chanos: “The Crypto Ecosystem Is Well-Suited for the Dark Side of Finance.” (2023)

Feds Bust $3.4 Billion Crypto Theft, Demonstrating Ability to Penetrate Supposed Secrecy (2023)

What Does Mustard Gas Have in Common with Crypto and Blockchain? (2023)

[3] As it turns out, decentralized finance has turned out to be extremely concentrated. The creation of bitcoins (“mining”) is very concentrated, because it’s capital intensive; it takes a lot of electrical and processing power. So is bitcoin ownership (see list of whales here). Interestingly, the mythical Bitcoin founder, Satoshi Nakamoto “could be a single person or a group of people. Either way, the identity remains a successfully guarded secret.” Nakamoto is said to own 1.1 million Bitcoins, making him one of the 30 richest people in the world. (Speaking of “groups of people,” it’s interesting to consider whether there are any institutions that would find the anonymity enabled by bitcoin of practical use.)

[4] Some blockchain vendors have replaced “proof of work” with “proof of stake.” See here.

NOTES

[1] RealClearPolitics, which I had thought was a reliable, albeit conservative aggregator, hasn’t mentioned the story at all:

[2] Naked Capitalism on Bitcoin:

What Happens If Bitcoin Succeeds? (2021)

Crypto Crackdown: Only the Beginning? (2021)

Nassim Nicholas Taleb Shellacks Bitcoin and Cryptocurrencies (2021)

The Only Crypto Story You Need? A Response to Matt Levine’s The Crypto Story (2022)

Jim Chanos: “The Crypto Ecosystem Is Well-Suited for the Dark Side of Finance.” (2023)

Feds Bust $3.4 Billion Crypto Theft, Demonstrating Ability to Penetrate Supposed Secrecy (2023)

What Does Mustard Gas Have in Common with Crypto and Blockchain? (2023)

[3] As it turns out, decentralized finance has turned out to be extremely concentrated. The creation of bitcoins (“mining”) is very concentrated, because it’s capital intensive; it takes a lot of electrical and processing power. So is bitcoin ownership (see list of whales here). Interestingly, the mythical Bitcoin founder, Satoshi Nakamoto “could be a single person or a group of people. Either way, the identity remains a successfully guarded secret.” Nakamoto is said to own 1.1 million Bitcoins, making him one of the 30 richest people in the world. (Speaking of “groups of people,” it’s interesting to consider whether there are any institutions that would find the anonymity enabled by bitcoin of practical use.)

[4] Some blockchain vendors have replaced “proof of work” with “proof of stake.” See here.