Cryptocurrencies remain highly volatile in the modern era, but they have now earned a place in the mainstream financial world. With the rise of new ETFs, investors from all walks of life are setting aside funds for various crypto assets. Some of these investors are married spouses, and crypto is becoming an increasingly central topic in property division discussions. One of the questions that remains mostly unresolved involves “willful dissipation of marital assets,” also known as “marital waste.” When does a risky cryptocurrency investment represent marital waste?
What is the Difference Between Crypto Investing and Gambling?
If a spouse takes their family’s life savings to the casino and loses it all, this is a clear example of marital waste. Family courts would inevitably see this as highly irresponsible, and this breach of fiduciary duty would likely affect property division. Courts would penalize the guilty spouse, and their ex would receive a more favorable settlement.
But what happens when a spouse invests in a risky cryptocurrency investment instead? What if the value of the token drops to zero? How is this any different from gambling away the family’s life savings at a casino?
What is the Difference Between Crypto Investing and the Stock Market?
Supporters of the crypto community might argue that investing in a crypto token is no different than buying shares in a company. Most traditional investors would reject claims that the stock market is the same as a casino, arguing that this is not simply a “game of chance.” The most efficient investors today use complex algorithms to assess data, and there is clearly some skill involved in this endeavor.
With all that said, there are a few notable differences between the stock market and the blockchain. First and foremost, many crypto tokens are not inherently linked to anything of real value. This includes Bitcoin, the most popular crypto asset in the world. Stock market investing gives you an ownership share of a company, but a single Bitcoin does not. One might argue that paper money is equally worthless, however. There are also fewer “fundamentals” to consider when investing in crypto. Unlike a corporation, a crypto token does not have any earnings or revenue data. The companies that mint cryptocurrencies do not produce any products.
Courts Use Their Own Discretion to Determine Whether Investments Were Reckless
Courts across the United States vary greatly in policies, procedures, and philosophies. There is also considerable variation between individual judges. Each judge may use their own discretion to determine whether a crypto investment represents marital waste or whether it was made in “good faith.” They may consider various factors, and both spouses will have a chance to argue their case.
Not All Crypto Tokens are Created Equal
It is worth noting that there are many different types of crypto tokens. The major tokens include names like Bitcoin and Ethereum, and these assets now have their own ETFs. The mainstream acceptance of BTC and ETH may make them more “respectable” in the eyes of family courts.
Slightly more obscure options include “Altcoins,” including Ripple and Solana. These are typically more volatile, and they have a higher chance of going under. Family courts may be less confident about whether these represent “good faith” investments.
At the bottom of the crypto ecosystem, there are “memecoins.” These include options like Pepe, Dogecoin, and “dogwifhat.” These tokens are intentionally ridiculous, and family courts are likely to look upon them with suspicion.
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