The federal agency is examining the NFT market with an eye toward regulating certain types of assets as securities.

SEC attorneys have reportedly sent out subpoenas over the past few months to demand information on potentially illegal token offerings, with a focus on fractional NFTs .

The U.S. Securities and Exchange Commission is homing in on creators of certain NFTs and the crypto exchanges they trade on to determine whether the digital assets are being used to raise money like traditional securities, Bloomberg reported Wednesday.

SEC attorneys have reportedly sent out subpoenas over the past few months to demand information on potentially illegal token offerings, with a focus on fractional NFTs . NFTs would be considered securities if they passed the Howey test, a standard used by the SEC to determine if there is an “investment contract" involved in a transaction.

The SEC has been hinting at this inquiry for a while. Commissioner Hester Peirce, known as “Crypto Mom” for her industry-friendly stances, said last December that some NFTs could fall under the SEC’s purview.

“Given the breadth of the NFT landscape, certain pieces of it might fall within our jurisdiction,” Peirce said in an interview with Coindesk TV. “People need to be thinking about potential places where NFTs might run into the securities regulatory regime.”

Chairman Gary Gensler has been vocal on regulating the digital asset industry, and has been battling the Commodity Futures Trading Commission for regulatory oversight. While the CFTC has been regulating bitcoin as a commodity, agency chair Rostin Behnam had asked the Senate for an expanded role in regulating the crypto asset industry just last month, which could put a damper on the SEC’s ambitions.

Correction: This story has been updated to correct the spelling of the names of Rostin Behnam and Hester Peirce. This story was updated March 3, 2022.

A federal appeals court has once again backed a Texas law that would fundamentally remake social media by forcing companies such as Meta and Twitter to carry most content, including hate speech.

In a ruling released Friday, the Fifth Circuit vacated a trial court's preliminary injunction, which had paused the measure during a lawsuit over its constitutionality. The vast majority of scholars and civil liberties advocates say that, in telling a private company what content it must allow, the state's law violates both free speech protections and decades worth of legal precedent.

The judges argued in their Friday ruling, however, that Texas law regulated the platforms' conduct, not their views. The decision also asserts that Twitter is a "monopolist."

Earlier in the year, the same appeals court, after a hearing in which the judges revealed a poor grasp of technology, overruled the trial court and let the law go into effect. The Fifth Circuit is known as the most conservative circuit court in the U.S. Soon after that decision, however, the Supreme Court ruled that the appeals court's decision to let the law go into effect was inappropriate — albeit by a narrower margin than tech advocates were hoping to see — and put a pause on enforcement, pending the outcome of the appeal.

Many tech companies and proponents of free speech had expected the appeals court's ruling, which focused on the appropriateness of the trial court's initial injunction. The trial court can still find that the law is unconstitutional, but it will almost certainly set up a lengthy set of appeals that could prompt a major revision of the legal status quo underlying content on the internet.

Call it a reconnaissance mission to Europe’s future Silicon Steppe.

Eric Schmidt, Alphabet’s technical adviser and former Google CEO, just returned from a personal mission to Ukraine where he scoped out its military tech operation and met with the country’s minister of defense. A tireless advocate and funder of emerging tech for defense and national security uses, Schmidt sees the war in Ukraine as a launch pad for fast-moving tech implementation.

“For me, the war answers a central question: what can technology people do to help their government, and the answer is a lot,” Schmidt wrote in a dispatch of what he called “the first networked war.”

Schmidt’s case in point: Elon Musk’s contributions of Starlink internet terminals from SpaceX to Ukraine.

Schmidt praised Musk from the stage at an event underway on Friday, held by the Special Competitive Studies Project, a group Schmidt created to carry on the work of the National Security Commission on AI, a now-defunct government commission.

“Elon [is] a real hero in the story," Schmidt said. "They got a whole bunch of Starlinks, which allowed them to avoid the attacks that Russia had done on the internet.”

“Today, there are about 20,000 Starlinks. I was on a train — brand new, built in May, in Ukraine — where as a passenger on the train, I had 200 megabits coming down. Imagine if that were true on Amtrak, right?” Schmidt continued.

Starlinks may be just the beginning. As Schmidt and others watch Ukraine for clues about how AI and other emerging tech can be used in a military setting, he expects the country to be a force for tech in general.

“The reason this is important is the war will end,” Schmidt said. "And at that point, Ukraine is going to have one heck of a tech industry. Because it's war-hardened, smart. They understand how this stuff works. I was really impressed.”

We're living in the midst of a carbon capture boom.

A new PitchBook data analysis released on Friday shows a record amount of venture capital investment poured into post-combustion carbon capture companies and startups in this year's second quarter. VCs invested a stunning $882.2 million across 11 deals, which easily set a record for the sector. For context, total investment in the sector for the previous four quarters combined totaled $432.1 million.

Post-combustion capture involves removing carbon dioxide after it's been released. That includes point source capture — that is, removing carbon dioxide at the smokestack or wherever its emitted — or direct air capture, which involves removing carbon from the ambient air. The advantage both forms have over other forms of carbon capture is that they "can readily integrate with (and capture carbon from) existing infrastructure," according to analysis from PitchBook's senior analyst for emerging technology John MacDonagh.

Clearly, climate tech investors are taking note. The biggest contributors to the major jump in investment were two big deals: Climeworks' $634.4 million Series F round and Carbon Clean's $190.7 Series C raise, the former being the largest-ever investment in direct air capture technology. Carbon Clean also said its funding round was the largest ever for a point source carbon capture company.

Carbon removal has an essential role to play in a net zero world, though how much it's needed depends on how fast we cut emissions starting now and into the coming decades. Industries like aviation, which rely heavily on fossil fuels and for which renewable energy alternatives are currently hard or impossible to procure, are part of the reason direct air capture has picked up steam.

Point source carbon capture will also be crucial for industries like cement, which is responsible for 8% of global carbon emissions. Wiping them out from the manufacturing process will be extremely challenging, making carbon capture a near necessity for the industry.

While there are a growing number of companies looking to pull carbon from the sky or smokestacks that are attractive to VCs, regulations and policies are also lining up to make them a particularly enticing investment. Changes to the 45Q tax credit as part of the Inflation Reduction Act, in particular, have made capturing carbon more appealing. The IRA bumped the value of carbon captured and used to pull more oil from the ground — a process of dubious climate benefit — from $35 per ton to $60 per ton. And it increased the tax credit for a ton of carbon gathered by direct air capture from $50 to as high as $180.

The changes to the tax credit also lowered the project eligibility threshold, making it easier for smaller startups to qualify. That's big "considering the relative immaturity of the DAC space," MacDonagh wrote, and it could help more startups gain a toehold and grow.

Beyond venture capital funding, major tech companies have offered up hundreds of millions in advance commitments to buy carbon removal services. That includes Frontier — Stripe, Alphabet and Meta are among its members — which committed to spending $925 million on carbon removal over the course of this decade. (The group made its first purchases this summer.)

While money is pouring into the space, the technologies remain unproven at scale. And while regulations that could spur the growth of carbon capture and removal are in place, oversight is still relatively sparse. Parts of the carbon removal community are working on frameworks to ensure the technology does no harm, but a huge gap remains and any commitments would be voluntary at best.

There are also real concerns that the promise of carbon removal working at some point down the road could slow emissions cuts in the near term. This despite the fact that a ton of carbon not emitted today doesn't need to be removed tomorrow. Oil companies are investing heavily in carbon capture, which could give fossil fuels a lifeline or serve as greenwashing window dressing. (Carbon Clean's Series C investment round was led by Chevron.)

Ultimately, VC investments are one piece of the puzzle in bringing the industry to maturity and ensuring that it's used in a judicious and fair manner.

The Biden administration offered a deeper look into its crypto game plan Friday, unveiling a strategy that focuses more closely on the risks posed by the controversial industry. It released nine reports that came in response to the president’s crypto executive order issued in March.

The Biden order was praised by the crypto industry for stressing the need for the U.S. to play a leading role in the growth of crypto and blockchain technologies, while protecting consumers, investors and the financial system.

A fact sheet on the reports released by the White House underscores the Biden administration’s concern about the risks posed by the fast-growing crypto sector. The reports, prepared by federal agencies led by the Treasury, Justice and Commerce departments, stressed the importance of law enforcement and strengthening the country’s financial and monetary systems:

The Federal Trade Commission on Thursday signaled rising concern with manipulative digital interfaces, including subscriptions that auto-renew without disclosure, countdown clocks that falsely suggest deals will go away if customers don't buy quickly and the steering of consumers toward privacy options that give "away the most personal information."

As part of its open meetings series, the FTC voted unanimously to make public a staff report on the concerns, which includes examples of what are often called dark patterns. While multiple commissioners said that some practices in the report might not violate the law, and the two Republicans on the FTC suggested they'd be uncomfortable with enforcement seeking to rein in certain practices cited, such research often signals the direction of future cases or rule-making. Democrats also hold the majority on the commission.

A 2021 FTC report on repair restrictions, for instance, was followed two months later by a formal statement on prioritizing the issue, which itself set the stage for several tech companies to open up repair options to some device owners. The dark patterns report also cited several past cases that included similar conduct. And two Democratic commissioners, Rebecca Kelly Slaughter and Alvaro Bedoya, urged the public to send comments to the FTC as part of a separate agency effort examining the possibility of privacy rules on dark patterns that extend how long children and teens spend online.

Dark patterns are pervasive online, and more FTC interest in them could result in probes or action against an array of companies, including Amazon. The ecommerce giant's process for canceling Prime has come under criticism from consumer groups as being full of nudges and design features that make it difficult to complete, and it's under investigation by the FTC.

In addition, on Thursday the three Democratic commissioners voted to issue a policy statement about the gig economy, making clear the FTC would prioritize actions to rein in deceptive "claims to prospective gig workers about potential earnings" and costs. The statement also said there would be increased scrutiny of wage-fixing and the use of "artificial intelligence or other advanced technologies to govern workers’ pay, performance, and work assignments" if the "automated boss" was breaking promises.

As part of the open meeting, which allows for public comment, the FTC also heard from at least two DoorDash drivers who praised gig work and urged the commissioners not to come down too hard on the industry. In addition, commissioners referred again to Amazon, specifically its $62 million settlement over withholding tips from Flex drivers.

The FTC, which is led by longtime Amazon critic Lina Khan, has long been on a collision course with the company, with a years-long probe of the retailer's competitive practices still ongoing. Amazon has also gone on a buying spree that has attracted the attention of the FTC, which helps oversee merger law.

During the meeting, the commissioners also agreed unanimously to propose a rule that would make it easier to tackle fraudsters who impersonate representatives of legitimate businesses or government agencies.

ByteDance VR subsidiary Pico is getting ready to unveil its new headset next week: The company is holding an online event on Sept. 22, it revealed on social media Thursday. "We can’t wait to show you what we have in store for you," Pico teased in a posting on LinkedIn that promised a "new product announcement" and featured the silhouette of a VR headset.

The company didn't share anything else about the upcoming device, but a number of additional details have leaked over the past few weeks. The device, which may be branded either Pico 4 or Pico Phoenix, will come in two configurations, with a Pro version offering face- and eye-tracking functionality. It will run Android Q and is being powered by a Qualcomm processor, according to an FCC filing first reported by Protocol.

Pico's headset will also be equipped with an inside-out RGB camera that will be used for color video pass-through for mixed reality experiences. That's similar to Meta's upcoming Project Cambria headset, which will be officially unveiled in October. The new Pico headset will be smaller than the company's current Neo 3 device, and will feature a higher-resolution display and clearer optics. It will also have automatic hardware IPD adjustment to adapt to a person’s pupillary distance for a “more accurate and comfortable vision experience,” according to a submission to the Bluetooth SIG that was first reported by Protocol.

ByteDance is clearly positioning the Pico 4 as a competitor to Meta's VR hardware and has made efforts in recent months to reposition Pico from a company primarily focused on enterprise VR to a mass-market consumer hardware maker. This has included striking content deals and building out an internal studio organization focused on VR games and experiences.

Adobe is buying Figma. After Bloomberg reported the deal Thursday morning, both companies released announcements confirming the news. "With access to @Adobe's deep expertise and technology, we believe @Figma will be able to achieve our vision of 'making design accessible to all' even faster," Figma CEO Dylan Field tweeted.

According to Figma's announcement, the deal has been in the works for several months. Bloomberg reported the deal may be for more than $15 billion. Figma's goal is to use Adobe's resources to "to make design and developer tools more collaborative and accessible." Adobe pointed to Figma's early bet on browser-based collaboration and its ability to bring Adobe's design tools into the future. "The productivity tools of the future will be web-based, multi-player, and infused with a new generation of capabilities," Adobe chief business officer David Wadhwani wrote in his announcement.

Figma has been steadily eating away at Adobe's user base since its inception in 2012. Even Microsoft, a loyal Adobe customer for decades, couldn't keep employees away from Figma. Figma became the most popular tool across the tech design community and jumped into more general collaboration with whiteboard FigJam in 2021. Meanwhile, Adobe has faced dropping shares and grave concerns from investors on its ability to grow with upstarts like Figma and Canva in the mix. The old tech giants are showing their age — perhaps Adobe realized it was time for some new blood.

TikTok made a rare appearance before Congress on Wednesday afternoon. Specifically, TikTok COO Vanessa Pappas testified on a panel alongside high-ranking executives from YouTube, Meta and Twitter. The group appeared before the Senate Homeland Security and Governmental Affairs Committee to answer questions about how their respective platforms could be used to promote extremism and civil unrest.

In her opening remarks, Pappas assured the committee that TikTok had adequate data security measures in place to protect U.S. users. Even then, Pappas noted that some China-based employees could access U.S. user data “subject to a series of robust cybersecurity controls and authorization approval protocols overseen by our U.S.-based security team.”

Pappas was repeatedly asked about the BuzzFeed report that found engineers in China had access to nonpublic U.S. user data. She called the reports “not found” and specifically denied the claim that a master administrator account gave at least one Beijing engineer access to virtually all platform data.

In a heated exchange with Sen. Josh Hawley, Pappas also denied ever sharing data with the Chinese government or the Chinese Communist Party. The two then engaged in a long back-and-forth over whether any ByteDance employees held CCP affiliations.

“We have thousands of people that work at the company, so I’m not going to vouch on the political affiliation of any particular individual,” Pappas said of China-based employees with potential CCP ties.

“You have no way to assure me that they don’t have access to our citizens’ data, and you won’t answer my question in a straightforward way about whether a CCP member has ever gained access,” Hawley retorted.

This exchange is indicative of the kind of charges Pappas and TikTok faced throughout the hearing. Even to kick things off, Sen. Rob Portman expressed concerns over TikTok operating in the U.S. since “Chinese law requires all companies operating under its jurisdiction to in essence allow the CCP to access every piece of data collected.”

The focus on TikTok made for a quiet outing for the other tech executives — at least relative to hearings of years past.

Meta, in particular, was able to escape the usual scrutiny it has faced in D.C. appearances. Chief product officer Chris Cox said Meta’s ranking goal is simply to “help people see what they find most valuable,” denying that the company tries to keep users on the platform for a specific length of time.

For Meta, the time away from the spotlight isn’t all good. Of course, there’s an obvious benefit to not being the prime target, and TikTok’s ties to China finally gave Congress bigger fish to fry. But the change in spotlight isn’t just about China — Congress is also paying more attention to TikTok because it’s passing Meta as the most influential social platform in the U.S.

California Attorney General Rob Bonta has sued Amazon, alleging the company prevents price competition by punishing merchants and third-party sellers when they offer lower prices anywhere aside from Amazon's website, including with competitors such as Best Buy and Walmart.

The suit, following in the footsteps of similar investigations in the U.S. and internationally, alleges that customers pay artificially high prices because Amazon is creating a restraint against natural market competition on cost. The suit also claims that Amazon gains an unfair market advantage because no other commerce site can compete on price, making Amazon a one-stop shop for consumers and further cementing the company's market dominance.

The press release announcing the suit claimed sellers would like to offer lower prices on other sites, because those sites charge lower listing fees and often vendors pass along fee savings to the consumer when they can afford to do so. But Amazon uses its market dominance to enforce rules that make doing so impossible, the suit claims, even though Amazon's fees are allegedly higher than competitors'.

"Merchants that do not comply face sanctions such as less prominent listings and even the possibility of termination or suspension of their ability to sell on Amazon," the AG's office wrote in the press release.

The suit follows a similar complaint from Washington, D.C., in May 2021. A court dismissed that claim in March 2022, although the district's attorney general is appealing the decision. Bonta sued under California's unfair competition law and another state statute that may give the state more leeway. The Federal Trade Commission, currently helmed by a longtime Amazon critic, is also investigating the company and is expected to a file a competition lawsuit, and European authorities are seeking a settlement that would assuage concerns about the company's competition against outside merchants on the platform.

"Sellers set their own prices for the products they offer in our store. Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively. The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law," an Amazon spokesperson wrote in a comment to Protocol.

Ben Brody contributed additional reporting. The story was updated at 4:57 p.m. to add comment from Amazon.

A core theme emerged in a Senate committee meeting on Wednesday morning: Social media companies are optimizing for attention — and until or unless government rules change, they’ll keep doing so.

Members of the Senate Homeland Security & Governmental Affairs Committee seemed to arrive at the same conclusion as they heard from a panel that included former high-level engineering executives from both Twitter and Meta.

“Today the algorithms are doing exactly what they’re intended to do, which is maximize attention on the platform,” Alex Roetter, a former senior vice president of engineering at Twitter, told the committee. “If companies were penalized for sharing certain types of content, these algorithms would no longer promote that content, because it would no longer be optimal for them to do so.”

The hearing was intended to discuss the impact of social media on homeland security. TikTok predictably received the most scrutiny, with Sen. Mitt Romney going as far to say it was “a huge risk” to allow “an authoritarian regime to have a social media capability of the scale they have in our country.”

But for the U.S.-based social media companies, the group homed in on the Platform Accountability and Transparency Act as a potential remedy for the perceived online polarization problem. PATA would require digital communication platforms such as Twitter, YouTube, Instagram and Facebook to comply when university researchers request data for projects approved by the National Science Foundation. If the platforms fail to do so, they will lose their Section 230 liability protections for hosting third-party content (which they really can’t afford to lose). Any shared data would also need to comply with privacy safeguards.

Near the end of the session, Sen. Rob Portman asked Roetter a leading question about whether PATA would have been helpful "to at least get behind the curtain and figure out why decisions are being made.”

Roetter responded that PATA could be “extremely valuable” by allowing for a better understanding of “what sort of content is promoted and what the internal algorithms are that drive both decision-making and usage of the products.”

Brian Boland, a former vice president of strategic operations and analytics at Facebook, described PATA to the committee as “one of the most important pieces of legislation that is before you all.” Boland took issue with having to take tech companies at their word when they tell the public about operations. “In order to understand the issues that we’re concerned about with hate speech and the way that these algorithms can influence people, we need to have a public understanding and a public accountability of what happens on these platforms,” Boland said.

Though the legislative session is nearing its final days before the midterm election, PATA has a few things going in its favor: It was introduced at the end of 2021 by a group of bipartisan senators, including Republican Sen. Portman and Democratic Sen. Amy Klobuchar. Perhaps more importantly, PATA doesn’t ask all that much of social media platforms, at least relative to some of the antitrust bills still under consideration. Meta and Twitter already provide at least some data to university researchers. And PATA by itself wouldn’t require them to change their algorithms — it would just give the public greater visibility into them.

BitGo has made good on a promise to sue Galaxy Digital for abandoning its plan to buy the crypto asset custody and management company for $1.2 billion.

In a lawsuit filed Tuesday, BitGo accused the crypto financial services company of “improper repudiation and intentional breach of its merger agreement. BitGo said it is seeking more than $100 million in damages.

Galaxy Digital hit back, saying in a statement that BitGo’s claims are “without merit and we will defend ourselves vigorously.”

Galaxy reaffirmed that the company abandoned its acquisition bid because BitGo “did not provide certain BitGo financial statements needed by Galaxy for its SEC filing,” a spokesperson said in an email.

Galaxy Digital had said that it “exercised its right to terminate” the deal, originally struck in May 2021, after BitGo failed to deliver 2021 financial records “that comply with the requirements of our agreement.” The company also said no termination fee has to be paid. BitGo denied Galaxy Digital’s claim. Brian Timmons, a partner with Quinn Emanuel who represents BitGo, called Galaxy Digital’s bid to “blame the termination on BitGo absurd.”

The legal battle illustrates how complicated rypto merger deals can become in an industry where some players have been criticized for a lack of financial transparency.

The legal complaint was filed under seal in the Delaware Court of Chancery. Timmons said BitGo “does not believe that the complaint contains any confidential information,” but it was filed under seal “in an abundance of caution in the event Galaxy contends otherwise and wishes to redact some of the allegations before the complaint becomes public.”

The Blockchain Association has launched a political action committee to support “pro-crypto” candidates seeking congressional office, the group said Monday.

The move by the crypto lobby organization underlined the industry’s bid for a stronger presence in Washington, where it faces heightened scrutiny from lawmakers and regulators.

The Blockchain Association said it will support candidates “from across the political spectrum” noting in a statement that “crypto is, by nature, nonpartisan.” The organization said it plans to endorse candidates in the upcoming November midterm elections. The Blockchain Association’s “hope is to donate roughly 50% of the committees’ funds to Democrats and 50% to Republicans,” a spokesperson told Protocol.

“Crypto has arrived in D.C. and, as an industry, we plan to fortify and expand our presence as lawmakers and regulators continue their engagement on core questions of economic freedom, digital privacy, and financial inclusion,” executive director Kristin Smith said in a statement.

The Blockchain Association includes some of the crypto industry’s most important players, including Circle, Anchorage Digital and Ripple.

The launch of the PAC comes at a time when the crypto industry is dealing with growing concerns about its impact on the financial system in the wake of a stunning cryptocurrency market crash that wiped out about $2 trillion in value. The industry has also reeled from a wave of breaches and ransomware attacks.

The crypto industry has found allies in some lawmakers, such as Sen. Cynthia Lummis, who owns bitcoin and co-authored a bill that seeks to provide more regulatory clarity on crypto. But the industry is also facing tough questions from other legislators led by Sen. Elizabeth Warren, who has warned against the use of crypto in illicit finance and sanctions violations.

The crypto industry is also facing growing pressure from the SEC, whose chairman, Gary Gensler, has argued that most cryptocurrencies should be regulated as securities, a view largely rejected by the industry.

The world's leading EV is angling to get into the lithium refining game.

In a letter to the Texas Comptroller’s Office, Tesla said it is “evaluating the possible development of a battery-grade lithium hydroxide refining facility” in the state in order to supply its own battery factories with the mineral critical for battery-making. Prices of lithium, as well as of other minerals needed for the energy transition, have skyrocketed in recent years.

Getting into lithium refining has been on the mind of Tesla CEO and founder Elon Musk for a while. In April, he tweeted that the “price of lithium has gone to insane levels” and that Tesla “might actually have to get into the mining [and] refining directly at scale” if things do not improve. On a company earnings call in July, he encouraged entrepreneurs to explore lithium refining and described it as a “license to print money,” given the dearth of capacity.

If the company’s application is approved and the facility gets built, it would be “the first of its kind in North America,” Tesla said. Construction on the facility could begin as soon as the fourth quarter of this year, and could be ready for commercial operations by the end of 2024, the company added.

While Tesla explicitly stated that it is still evaluating the project’s feasibility and it remains in very early stages, the application represents the company’s attempt to get the state to offer a break on local property taxes for the potential plant. Tesla is evaluating a site in Nueces County, Texas, though the company said in the letter that it is also looking at one in Louisiana. The only necessity, Tesla said, is Gulf Coast shipping channel access.

Tesla certainly is not alone in prioritizing lithium access. As legacy automakers crowd into the EV market that Tesla has dominated for more than a decade, securing battery supplies has been top of mind industrywide.

In light of Ford’s goal of building 2 million EVs per year by the end of 2026, the company made a number of agreements in July to buy raw materials for its batteries. The bulk of these are with Chinese and Korean companies, including one particularly prominent deal with the Chinese company Contemporary Amperex Technology Co. Limited, the largest battery-pack supplier in the world. A mere week later, GM followed suit with its own slew of agreements with its own suppliers.

The lack of U.S. representation among these large suppliers of battery raw materials underscores the fact that the country lacks a domestic supply chain for battery materials and components that major automakers are increasingly demanding. While there are small mining operations, refining (especially for lithium) currently happens exclusively overseas.

Wolfspeed, which produces chips that make electric vehicles considerably more efficient, said Friday it has embarked on a plan to build a new facility in North Carolina that will enable a 10-fold increase in the company’s manufacturing capacity.

“We make semiconductors or chips, but we use the base technologies called silicon carbide,” Wolfspeed CEO Gregg Lowe said in an interview with Protocol. “Semiconductors for the last 50 years have been dominated by silicon, and there’s a whole little valley a bit south of you named after it. And this new technology is more efficient than silicon.”

Formerly known as Cree, the silicon carbide chips Wolfspeed produces are much harder and hardier — they're bulletproof — than the typical silicon used to produce chips destined for iPhones and servers. A silicon carbide chip is capable of operating above 500 degrees Fahrenheit, and at electric voltages that are roughly 10 times what a traditional piece of silicon can handle.

Silicon carbide-based chips have found a niche in electric vehicles. After Tesla said that it was using such chips in one of its designs, much of the rest of the auto industry followed. Wolfspeed has inked a deal to supply chips to GM, and Lowe says the rest of the traditional automakers are following suit.

EV makers are interested in chips based on silicon carbide because they can use them in a component called an inverter, which transmits power from a car’s battery to the motors that make the wheels turn. The silicon carbide chips are considerably more efficient than using other materials, which can help increase the range of a vehicle.

“And what that means for high-power applications, is you’re going to waste less energy when you use it,” Lowe said. “That translates to an electric car — that it will go five to 15% farther using silicon carbide.”

The silicon carbide-based chips can also be used to speed electric vehicle charging, and Lowe said that the energy savings enable superior fast-charging capabilities because they can transfer considerably more power.

The new North Carolina facility will grow the raw silicon carbide ingots and transform them into 200-millimeter wafers to supply the company’s recently completed factory in New York. That factory is the first one capable of making silicon carbide chips with 200-millimeter wafers, Wolfspeed said.

“We figured out how to make an economic return going from 150 to 200,” Lowe said. “In silicon carbide, it may stop at 200, it may never go to 300. We definitely think we’ve got a whole decade of 200.”

Silicon carbide wafers are difficult to make, Lowe said. To grow the ingots the wafers are derived from, Wolfspeed built its own furnaces that generate roughly half the heat — 4,500 degrees Fahrenheit — at which the sun burns. Wolfspeed then slices the ingots into a slightly smaller version of the wafers that are the basis of the chip manufacturing process.

The company says it is the world’s largest producer of silicon carbide to begin with, and this expansion will increase its capacity to produce the raw material by tenfold.

Wolfspeed said it expects the first phase of construction to wrap up in 2024, and the second phase to end in 2030. All told, the facility will be more than a million square feet. Based on the state and local government incentives Wolfspeed says it will receive, the completed factory will require at least a $4.8 billion investment from the company.

Correction: This story was updated on Sept. 9, 2022 with the correct spelling of Gregg Lowe's name, and after the company corrected the size of the capacity increase provided by the new facility.

A bipartisan bill intended to help local newsrooms bargain for higher payouts from online news distributors failed to make it out of the Senate Judiciary Committee on Thursday morning.

Sen. Ted Cruz successfully introduced a contentious amendment to the Journalism Competition and Preservation Act that subsequently split the already-tenuous bipartisan coalition. As a result, Sen. Amy Klobuchar asked to hold the legislation for a future committee meeting, explaining “the agreement we had was blown up.”

Introduced by Klobuchar in March 2021, the JCPA brought together an unusual cohort of co-sponsors that included Republican Sens. John Kennedy, Rand Paul and Lindsey Graham alongside Democratic Sens. Cory Booker, Dianne Feinstein and Richard Blumenthal.

The bill attempted to create a temporary antitrust carveout that would allow small media organizations to collectively bargain for advertising rates against Big Tech companies. The carveout would last eight years, and it would only apply to companies with fewer than 1,500 full-time employees. If the two sides couldn't negotiate a deal in good faith, the media cohort could force Big Tech firms into arbitration.

Media conglomerates that acquired dozens of local news organizations would still be able to bargain under the exemption, which became a contentious issue. Sen. Klobuchar said she preferred a version of the bill that didn’t place any restrictions on the size of a newsroom, such that it would include even the New York Times and Washington Post, both of which were excluded under the current draft. Several conservative senators expressed concerns that the antitrust carveout would allow media organizations to exclude right-leaning media organizations from negotiations.

“These self-appointed mainstream left-wing media cartels are allowed to exclude based on the usual, totally subjective factors they always do, such as trustworthiness, fake news, extremism, misinformation, hate speech, conspiracy, correction policy, expertise, authoritativeness, etc,” Sen. Mike Lee said in the committee meeting.

Lee said he didn’t intend to vote for the bill, in part because of the way it skewed media incentives. “This version of the JCPA would inextricably link the financial incentives of Big Tech and the news industry by requiring tech platforms to share their monopoly rents with news publishers,” Lee said. This dynamic would incentivize news publishers to cover up and defend Big Tech rather than hold it accountable, he said.

Cruz’s amendment revoked antitrust protections if the news organizations discussed content moderation in negotiations. The amendment passed along party lines by a single-vote margin.

Klobuchar retorted by telling Cruz the JCPA already included provisions that ensured content-neutral negotiations; tech platforms would only be forced to pay for content they were already accessing.

“Since news outlets depend on the antitrust exemption — other covered platforms do not — the platforms could then raise content moderation at the first opportunity and attempt to avoid the joint negotiations,” Klobuchar said.

Sen. Klobuchar told POLITICO she’s still committed to passing a bipartisan bill to protect local journalism. Still, given the failed committee vote this morning, the legislation faces even longer odds to pass. Cruz said several times that he had a hard time seeing how it would pass on the floor, even if it made it through the committee.

The stalled negotiations show the fragility of any bipartisan efforts to rein in Big Tech. The JCPA had a unique set of issues, however, and even organizations typically critical of Big Tech found flaws in its approach. The EFF, for instance, published a response to the JCPA in June that said it would allow “large corporations and investment vehicles that dominate online journalism” to “reap the rewards of buying up, laying off, and click-baiting these newsrooms.”

Even as this bipartisan coalition dissolved, some of the senators maintained an optimistic note on antitrust efforts overall. Sen. Josh Hawley, for instance, commended Sen. Klobuchar for her work on the American Innovation and Choice Online Act, though he said he wouldn’t vote for her proposal this time around.

Correction: This story has been updated to correct Senator Josh Hawley's name. This story was updated Sept. 8, 2022.

The White House on Thursday praised "bipartisan interest in Congress in passing legislation to protect privacy" — even as California lawmakers including House Speaker Nancy Pelosi have sought to slow this Congress' main data protection bill.

The statement from President Joe Biden's administration came with a package of six proposals for tech policy reform aimed at competition, algorithms and safety on social platforms. The White House also advocated for an end to "special legal protections for large tech platforms" — hinting at a future push to limit the tech liability shield known as Section 230.

The move on privacy builds on Biden's call earlier in the year for legislation and protections for teens online. Since then, a bipartisan group of lawmakers has sent the American Data Privacy and Protection Act to the House floor — further than any prior modern comprehensive data legislation has gotten. The bill has support from many in the civil rights and consumer advocacy community, but California lawmakers including Pelosi have worried about the extent to which it would preempt their states' tough rules.

Last week, Pelosi told colleagues, "It is imperative that California continues offering and enforcing the nation’s strongest privacy rights," adding that states should be empowered "to address rapid changes in technology" in the future. She said she would work to address her home state's concerns. A rollback of the preemption provisions, however, might well doom any Republican support for the bill, which would be necessary to pass it in the Senate. Sen. Maria Cantwell, the chamber's top Democratic negotiator, also opposes the legislation.

In addition to the proposals around privacy, the White House suggested that most powerful tech companies shouldn't benefit from Section 230, which limits the liability of platforms of all sizes for content that users post. Both Democrats and Republicans have complained in recent years about the provision, suggesting that the administration might be willing to back a legislative push to amend it even if the GOP retakes control in the House next year. Recent efforts to amend Section 230, however, have collapsed because Democrats tend want to incentivize more content moderation and Republicans want less. Biden criticized Section 230 when campaigning in 2020, and the administration had previously suggested that there should be a fix to counter health misinformation, but it has pursued little action on the issue.

The White House on Thursday also reiterated a call for more competition in the tech sector, and said companies should be "prioritizing safety by design standards and practices for online platforms, products, and services" to protect kids and teens. The administration also urged an increase in transparency by social media companies about their algorithms.

Correction: An earlier version of this story cited Pelosi's statement to colleagues as occurring in August instead of September. This story was updated Sept. 8, 2022.

Coinbase is funding a lawsuit against the U.S. Treasury Department's Office of Foreign Asset Control for sanctions against Tornado Cash issued last month.

The lawsuit, filed Thursday in a Texas federal court, alleges that the government exceeded its authority to block financial transactions benefitting terrorists. According to a blog post published by the company Thursday morning, the Treasury Department’s sanctions instead “harm innocent people, remove privacy and security options for crypto users, and stifle innovation.” Six individuals are plaintiffs, two of whom are Coinbase employees.

The Treasury Department sanctioned Tornado Cash on Aug. 8, arguing the cryptocurrency mixing tool, which the company says is useful for ensuring users' privacy, was used to launder over $7 billion. At least $455 million of that money was stolen by the Lazarus Group, a North Korean state-sponsored project, the government said.

But the lawsuit has since raised numerous questions and concerns for those working in and holding cryptocurrency. It is the first time Treasury's OFAC has sanctioned a decentralized entity for which there is no clear ownership, raising the question of whether other services whose transactions could be traced to the mixer — like cryptocurrency exchanges, for example — are themselves in violation of U.S. sanctions. This type of activity, many cryptocurrency advocates say, is impossible to prohibit in a decentralized marketplace where some major overseas exchanges have been criticized for playing fast and loose with know-your-customer principles and where currencies are transacted along immutable ledgers.

In the weeks since, entities like stablecoin issuer Circle have frozen accounts tied to Tornado Cash, surprising many users who did not predict they could be in violation of U.S. sanctions. The arrest of a developer in the Netherlands who helped build Tornado Cash has also made many working in the industry fearful their projects could also be in some way tied to Tornado Cash, and their own work found to be in violation of sanctions.

Coinbase is certainly one of those entities that may be in OFAC’s crosshairs, particularly after the forthcoming Ethereum merge. Many have wondered whether the platform, slated to be the third biggest validator on the ETH network, could be in violation of sanctions should any of the transactions it validates be found to have passed through Tornado Cash. Haseeb Qureshi, managing partner at Dragonfly Capital, argued last week that there was a “very high likelihood” Coinbase would freeze transactions traced to Tornado Cash.

But others pointed out that the company has already hinted at taking legal action against the sanctions, with CEO Brian Armstrong tweeting about his opposition to them. Now, it is clear that the company is taking the offensive.

“At Coinbase, we’ve been fighting illicit activity since the very beginning, and while we share Treasury’s commitment to fighting crime, we believe this action harms innocent people and threatens the future of decentralized finance (DeFi) and web3 specifically,” the company’s blog post reads.

SEC chair Gary Gensler said it is time for firms facilitating crypto transactions to register with the Securities and Exchange Commission — but indicated he is open to the view that some cryptocurrencies are commodities that should be regulated elsewhere.

Speaking to a conference of attorneys, Gensler made clear his view that most crypto tokens are securities that fall under the SEC's jurisdiction. The SEC's oversight role "should not change just because the issuance and trading of certain securities is based on a new technology," he said.

"Some in the crypto industry have called for greater 'guidance' with respect to crypto tokens," Gensler said. "Not liking the message isn’t the same thing as not receiving it."

The SEC has asserted through legal actions that the XRP cryptocurrency and several tokens offered by Coinbase are securities — prompting a rebuke from some within the crypto industry that the SEC is regulating by enforcement rather than creating new rules that clarify the status of crypto. Gensler countered that point Thursday by stating that most crypto tokens qualify as securities under the Howey test established by a 1946 Supreme Court ruling.

"Given that many crypto tokens are securities, it follows that many crypto intermediaries are transacting in securities and have to register with the SEC in some capacity," Gensler said.

Those intermediaries include broker-dealers, custodians and lenders. "If you fall into any of these buckets, come in, talk to us and register," Gensler said.

Bitcoin, he acknowledged, may be an exception. Next week a Senate committee will hold a hearing on a bill that would declare both bitcoin and ether as commodities, under the purview of the Commodity Futures Trading Commission.

"To the extent the Commodity Futures Trading Commission needs greater authorities with which to oversee and regulate crypto non-security tokens and related intermediaries, I look forward to working with Congress to achieve that goal," Gensler said.

But he added that any action from Congress should maintain "the robust authorities we currently have."

"Let’s ensure that we don’t inadvertently undermine securities laws underlying $100 trillion capital markets," Gensler said. "The securities laws have made our capital markets the envy of the world."

Surprise, surprise. Big Oil is spending hundreds of millions of dollars on marketing and PR to promote a green image. A new report shows that image, though, is totally inconsistent with oil companies' actual climate-related actions.

The nonprofit InfluenceMap analyzed 3,421 pieces of public communications materials from BP, Shell, Chevron, Exxon and Total and found that 60% of them contained at least one "green" claim, while only 23% promoted oil and gas. Examples of green claims include companies promoting efforts to transition their energy mix to include more renewables as well as emissions reductions. Some materials even falsely promoted fossil fuels as green energy, calling liquefied methane gas "low carbon."

Yet as companies have increasingly presented themselves as holders of solutions to the climate crisis, InfluenceMap's report published on Thursday shows their actions beg to differ.

Only 12% of the five companies' 2022 capital expenditures are forecast to be spent on actual low-carbon technology or no-carbon renewables. Additionally, none of these companies are on track to meet the International Energy Agency's Net Zero by 2050 target. In fact, nearly all of them are planning on increasing oil and gas production between 2021 and 2026. (BP is the outlier, and it's forecast to maintain similar levels of production.) A special report from the Intergovernmental Panel on Climate Change shows oil and gas use need to fall 37% and 25%, respectively, in order to have a decent shot at limiting global warming to 1.5 degrees Celsius.

A 2019 InfluenceMap analysis found that these five companies had invested over $1 billion in misleading climate-related branding. Its analysis found that Exxon and Chevron were both engaged in lobbying that was predominantly oppositional to the goals of the Paris Agreement. The five companies are members of trade associations, including the American Petroleum Institute and FuelsEurope, that have been vocally opposed to Paris Agreement-aligned climate policies.

Today's report shows that these companies are spending around $750 million annually on climate-focused communications, a number InfluenceMap based on the number of communications and PR staff the companies employ. The organization emphasized the estimates are conservative since they don't include external PR, marketing and advertising agencies, which Big Oil also relies on heavily.

The group graded the companies based on their messaging compared to, among other things, their actual investments and whether their policies align with the Paris Agreement. Of the five, Chevron received the lowest grade, a D-, with 49% of its public communications making green claims, while only 5% of its total spending is forecast to be directed toward green investments.

Meanwhile, all these companies are making a concerted effort to distance themselves from their bread and butter: fossil fuels. Only 23% of the communications analyzed by InfluenceMap included pro-oil and -gas claims. Examples include highlighting the benefits of oil and gas for the economy, energy independence and maintaining a high quality of life.

In fact, analyses of the companies' "About Us" pages revealed major rebranding efforts, with sparse references to the words "oil" and "gas" and a much greater reliance on the terms "energy" and "integrated energy."

"The research suggests a systematic misalignment between the companies’ business models and how these are being representing to the public, with the supermajors seemingly misrepresenting their primary business operations by overemphasizing energy transition technologies," report authors wrote.

Irish authorities have fined Meta $400 million for its handling of children's data on Instagram. According to the Irish Data Protection Commission, Instagram made the accounts of teenagers public by default and displayed the email and phone numbers of teenage users, potentially allowing adults online to contact them. Instagram requires users to be at least 13 years old.

A spokesperson for Meta told POLITICO that the inquiry "focused on old settings that we updated over a year ago," noting that the company has since added features to protect teens' privacy. "Anyone under 18 automatically has their account set to private when they join Instagram, so only people they know can see what they post, and adults can’t message teens who don’t follow them," the spokesperson told POLITICO. "We engaged fully with the DPC throughout their inquiry, and we’re carefully reviewing their final decision.”

Meta plans to appeal the decision, The New York Times reported.

Since Meta’s European operations are headquartered in Ireland, it falls on officials there to regulate and implement the EU's GDPR privacy rules, which went into effect in 2018. This makes the country also responsible for enforcing privacy rules for other tech giants including Amazon, Apple and Twitter that are also based in Ireland. Some have criticized Dublin for being soft on its implementation four years in, but in recent months, it has been willing to investigate and impose hefty penalties for alleged violations.

The current fine is the third and the biggest one yet imposed on Meta after it was fined roughly $223 million for violations on WhatsApp and nearly $17 million for breaches on Facebook. There are at least six other investigations into Meta in Ireland, POLITICO reported.

Instagram's ability to protect its youngest users has also been the subject of widespread scrutiny in the United States. Last year, former employee and whistleblower Frances Haugen shared internal documents that suggested Instagram was negatively impacting teen girls' mental health, launching a flurry of congressional hearings and outrage over Instagram's plans to launch a product for kids.

The negative attention forced Instagram to — temporarily, at least — shelve that project. "I have to believe parents would prefer the option for their children to use an age-appropriate version of Instagram — that gives them oversight — than the alternative," Instagram head Adam Mosseri tweeted, announcing the decision to pause the project. "But I'm not here to downplay their concerns, we have to get this right."

Cloudflare blocked access through its infrastructure to Kiwi Farms on Saturday after a major online protest over the company's role in protecting a forum that has been blamed for harassment campaigns that have led to several suicides.

The company's co-founder and CEO, Matthew Prince, said in a blog post Saturday that the action was taken because "the rhetoric on the Kiwifarms site and specific, targeted threats have escalated over the last 48 hours."

As recently as Wednesday, Prince had resisted calls to stop providing services to the site, which has long been linked to hate and harassment. Earlier this month transgender activist and Twitch streamer Clara Sorrenti was forced into hiding by a campaign organized on Kiwi Farms. Sorrenti was also swatted and later tracked down at hotels by users of the site.

The main page of the site showed a message Saturday: "Due to an imminent and emergency threat to human life, the content of this site is blocked from being accessed through Cloudflare’s infrastructure."

"We're happy with the decision that Cloudflare came to, and this deals a big blow to Kiwi Farms and their community, one they may never recover from," Sorrenti said in a statement posted to Twitter. "If we want to see the end of Kiwi Farms and communities like theirs, we must continue fighting."

Cloudflare had been providing Kiwi Farms with anti-DDoS protection, which blocks attempts to flood a website with traffic in order to knock it offline. The online protest had urged Cloudflare customers to switch to other service providers.

In the blog post, Prince contended that blocking Kiwi Farms was not a response to the online protests, which have included calls by many in the cybersecurity community for Cloudflare to halt its services to the site.

Cloudflare is "not taking this action directly because of the pressure campaign," Prince wrote in the post, saying that the company has "empathy" for the organizers of the protest but is "committed as a security provider to protecting our customers even when they run deeply afoul of popular opinion or even our own morals."

In a post Wednesday, Prince had suggested that Cloudflare was not likely to terminate services for controversial customers in the future, despite having done so twice in recent years.

The Wednesday post was widely panned by activists and cybersecurity industry leaders, including for a claim that Cloudflare had donated fees from an anti-LGBTQ+ site to an organization that supports LGBTQ+ rights.

In the post Saturday, Prince did not apologize or indicate that he felt Cloudflare's leadership had done anything wrong in its handling of the situation. In fact, he called the decision to withdraw its services from Kiwi Farms "a dangerous one that we are not comfortable with."

"The policy we articulated last Wednesday remains our policy," Prince said in the Saturday post. "We continue to believe that the best way to relegate cyberattacks to the dustbin of history is to give everyone the tools to prevent them."

"This is a hard case and we would caution anyone from seeing it as setting precedent," he wrote.

A recent report in Time cited research showing that “although just one in five websites across the mainstream internet are hosted by Cloudflare, it hosts one in three websites known primarily for spreading hate speech or misinformation.”

Cloudflare previously cut off service to the neo-Nazi site Daily Stormer in 2017 and 8chan, a forum linked to hate crimes and conspiracy theories, in 2019.

This story was updated with a statement from Sorrenti.

TikTok owner ByteDance is taking some cues from Meta for its upcoming VR headset: The device will feature an RGB camera to offer color pass-through video of one’s surroundings, according to information included in a recent Bluetooth certification document.

That’s very similar to a key feature of Meta’s upcoming Project Cambria headset. Both companies are expected to announce their new devices in the coming weeks.

In a listing with the Bluetooth SIG, Bytedance subsidiary Pico describes the new device as a “premium VR all-in-one headset” that will be smaller than the company’s current-gen Neo 3 headset. Codenamed Phoenix, the headset will feature a higher-resolution display than its predecessor and clearer optics, according to the listing.

Codenamed Phoenix, the headset will feature a higher-resolution display than its predecessor and clearer optics, according to the listing. Image: Pico/FCC

The entry doesn’t reveal any detailed specs about the device, but it does mention that it will have “a high quality RGB camera to unlock a new level Mix-Reality [sic] experience.” It also notes that integrated face and eye tracking will make for “a more real avatar.” Protocol was first to report in July that Pico plans to launch a Pro model of its upcoming headset with face and eye tracking functionality.

According to the Bluetooth SIG listing, the device will include four cameras “and many other sensors.” It will support dual 6DOF controllers as well as hand tracking, and the controllers will feature “wide band” linear resonant actuators “to make the haptic experience more immersive.” The headset will also have automatic hardware IPD adjustment to adapt to a person’s pupillary distance for a “more accurate and comfortable vision experience.”

ByteDance acquired Pico in 2021, and has since been working to reposition the startup with a broader consumer focus. Pico began selling its current Neo 3 Link headset to consumers in Europe this spring, and started to build out a content unit called Pico Studios in the U.S. this year — all moves that indicate it is looking to directly compete with Meta’s VR hardware.

The Diablo Canyon nuclear plant will live to deliver power to the grid another day.

In a bipartisan vote, California lawmakers backed Gov. Gavin Newsom’s pitch to lend utility PG&E $1.4 billion to keep the plant open for five more years. Assuming PG&E’s bid to extend its operations wins federal approval, the plant will run at least through 2030.

Located on the state’s central coast, the plant was slated to close in 2025 due in part to concerns that its location adjacent to a fault line left it vulnerable to earthquakes. However, in the midst of dangerous heat waves that led to rolling blackouts in 2019 and subsequent years, Newsom began to reconsider the plant’s fate.

Diablo Canyon is California’s single largest source of electricity, generating 6% of the state’s power in 2021. Not only that — that electricity comes without carbon emissions. Because nuclear plants can run 24/7, it also means that carbon-free power doesn’t come with the intermittency concerns that solar and wind do.

Newsom said this week that keeping Diablo Canyon “is critical in the context of making sure we have energy reliability going forward,” which echoes what the nuclear industry has been saying as it tries to chart a course to being part of the climate solution.

“That energy provides baseload and reliability and affordability that will complement and allow us to stack all of the green energy that we’re bringing online at record rates,” Newsom said of nuclear power more broadly.

However, in addition to the potential safety concerns that led to PG&E’s decision to ultimately shutter Diablo Canyon six years ago, some environmental advocates worry that relying on nuclear power could put the state’s renewable energy goals in jeopardy. The nonprofit Friends of the Earth described Newsom’s now-successful attempt to keep the plant open as “reckless beyond belief.” The group has cited the risk of earthquakes and the cost of nuclear power — which is generally more expensive than renewables and fossil fuels — as reasons for the state and PG&E to move forward with shuttering the plant.

While Newsom initially raised the idea of bailing out Diablo Canyon in May, he officially introduced the proposal to lend PG&E money two weeks ago, and lobbied the legislature throughout August. Central to his plea was the argument that a shutdown could prompt more rolling blackouts, which put vulnerable Californians at risk.

The vote in support of Newsom’s plan comes as yet another brutal heatwave is expected to torch California, and potentially test the grid’s reliability yet again. The state legislature also set a new target of reducing carbon emissions at least 85% by 2045. Diablo Canyon may be shuttered by then, but it will help buy time for renewables and battery storage to come online.

The U.S. has begun to impose fresh restrictions on exports of advanced chips necessary for AI-related applications to Russia and China, blocking the sale of the semiconductors that power systems sold by the likes of AMD and Nvidia without a license.

Nvidia disclosed Wednesday that it had received a notification from the U.S. government that new licensing requirements are being implemented that affect sales of its advanced line of server GPUs to Russia or China. AMD confirmed that it received a similar notification from the U.S. for its line of GPUs that are suited for performing AI-related computing.

Nvidia’s disclosure indicates that the fresh export controls are not aimed at the specific chips themselves but at the performance thresholds that are closely associated with Nvidia A100 processors — the current generation of chips deployed in the field. The controls affect AMD’s competing product, the MI200.

Wednesday’s disclosure is another sign that the U.S. is undergoing a significant shift in its approach to China and its ability to make and use advanced chips. Under the Biden administration, the U.S. Commerce Department has implemented a new rule that could block the export of chip design software that’s necessary to build the next generation of chips. Part of the administration’s thinking revolves around its plan to choke off access to technology needed for AI-related applications.

"While we are not in a position to outline specific policy changes at this time, we are taking a comprehensive approach to implement additional actions necessary related to technologies, end-uses, and end-users to protect U.S. national security and foreign policy interests," the Commerce Department said in a statement. "This includes preventing China’s acquisition and use of U.S. technology in the context of its military-civil fusion program to fuel its military modernization efforts, conduct human rights abuses, and enable other malign activities."

The administration also plans to hamper China’s ability to manufacture chips with a current generation of transistors called FinFETs — known as "fin field-effect transistors" — by choking off access to the equipment needed to fabricate such chips. FinFET designs have been common for years and are currently found in the latest smartphone and server processors.

China represents a significant portion of Nvidia’s sales and, according to an SEC filing, could affect as much as $400 million in quarterly sales. In a statement, Nvidia said that it was working with customers in China to divert its purchases to alternative products, and may seek a license where replacements wouldn’t work. AMD sells far fewer AI chips into China and does not believe the restrictions would have a material effect on its revenue.

This story was updated with a statement from the U.S. Commerce Department.

Arm launched a lawsuit against Qualcomm Wednesday, alleging that the semiconductor giant violated a license agreement that governed the use of Arm's chip designs by its recently acquired Nuvia unit.

Nuvia had been developing new Arm-based chips as an independent company and had purchased a license from Arm to use its technology in server processors. But after it was acquired by Qualcomm in 2021, Arm alleged that Qualcomm failed to secure the proper permission to transfer Arm’s tech and the chip schematics based on it, or make its own chips based on what Nuvia was developing.

“These technological achievements have required years of research and significant costs and should be recognized and respected,” Arm said in a statement. “As an intellectual property company, it is incumbent upon us to protect our rights and the rights of our ecosystem.”

“Arm’s lawsuit marks an unfortunate departure from its longstanding, successful relationship with Qualcomm. Arm has no right, contractual or otherwise, to attempt to interfere with Qualcomm’s or NUVIA’s innovations. Arm’s complaint ignores the fact that Qualcomm has broad, well-established license rights covering its custom-designed CPU’s, and we are confident those rights will be affirmed," said Ann Chaplin, general counsel of Qualcomm, in a statement.

Arm’s lawsuit said that it terminated the licenses Nuvia had in March 2022, which ended Qualcomm’s right to develop chips based on what Nuvia had made or market such processors as based on Arm's technology. The lawsuit seeks to force Qualcomm to destroy several designs based on Nuvia’s processors.

The litigation also asks for compensation for trademark infringement, and injunction to prevent further use of Arm’s trademarks related to the chip designs that Nuvia developed. Arm is asking for an unspecified amount of damages related to its allegations.

Qualcomm bought Nuvia for over $1 billion in 2021. Nuvia was founded by several former Apple and Google chip engineers in 2019 and was developing a number of Arm-based server chips ahead of the acquisition.

At the time of the acquisition, Qualcomm said Nuvia would shift its focus to consumer chips, and Qualcomm has announced its intention to make a desktop processor that would rival Apple’s in-house M series processors .

But a recent report suggested that Qualcomm had once again revived its server-chip efforts — a previous attempt to crack the server market died years ago — leading to speculation among chip industry insiders that it planned to update Nuvia’s original efforts based on Arm designs.

This story was updated throughout as additional information became available, and later to include comment from Qualcomm.