Hello, and welcome to Protocol Policy! Today I’m taking you inside a world of sex, mystery, and revelation. Lol, just kidding, we’re talking about corporate taxes, but they’re the kind that could cost you money and help pay for your children’s education. Plus, The Wire backs down in India, Meta has to put a “for sale” sign on Giphy, and employee attrition is eating into Amazon.

A taxing fight

A Maryland court struck down the state’s first-in-the-nation tax on Big Tech’s digital ads. Proponents had hoped the levies, as high as 10% on the largest companies, could generate $250 million in education funding. Instead, the ruling could well mean states that had been eyeing the measure — and the profits that Meta and Google bring in — have to go back to the drawing board.

From a political standpoint, there was a lot to recommend a digital ad tax, especially one that targeted the biggest companies.

• The industry has a ton of revenue to take a slice of, and even though Republicans generally don’t like taxes, there’s loads of bipartisan loathing for Big Tech companies.
• Back in 2018, states also prevailed — after years of fighting — in winning the right to make e-retailers collect sales taxes.

To many people, it just feels like the public deserves a cut for its unwilling part in the ecosystem, as California Gov. Gavin Newsom proposed back in 2019.

• After all, companies serve us ads we mostly don’t want, often based on intimate data we didn’t want to give up.

Newsom never went through with it, but he was hardly unique.

• Maryland alone tried out the tax, but more than a dozen other states have made similar proposals.
• Other countries, led by France, have also put in place somewhat similar digital services taxes, although those nations mostly paused the levies in the wake of an OECD deal that’s aiming to revamp the taxation of multinationals.

Political appeal aside, however, critics (often on the right) derided the basic soundness of the policy. Opponents especially disliked the law’s vague definition of advertising and the possibility that implementation would often reach outside Maryland.

• The state’s approach also arguably meant Big Tech would increase costs for Maryland’s small advertisers, which would then raise prices for their local customers in turn.

Ultimately, the Maryland judge said the state’s digital ads tax was illegal.

• She found the measure violated constitutional requirements that states keep their hands off interstate commerce as well as federal law against taxes that treat ecommerce differently.
• Even if the state appeals — which Maryland officials have suggested it could — the ruling may well bode poorly for a separate challenge to the tax in federal court, in which oral arguments are scheduled for November.

There are major lingering questions about how lightly states have to tread when trying to regulate the internet, because Congress is generally supposed to be in charge when an industry criss-crosses all the states.

• Rulings like the one in Maryland’s case telling states to back off have long been among the most dismaying defeats to would-be regulators in Sacramento, Albany, and other capitals.

In short, states that were eager to tap into a big pool of much-despised corporate revenue now probably need to find other ways to bring in cash.

• They had been willing to let Maryland take on the expense of fighting for its tricky plan, but if Annapolis had prevailed, it seems likely many of those states — and plenty of others, too — would have jumped back in.

Regulating tech is notoriously tricky, which is why Congress has stalled and states have gotten to play around with their own ideas. Perhaps a simple tax seemed to Maryland lawmakers like a faster way to bring tech low and shore up budgets than mucking around with content and the arcane rules of antitrust. There may be more favorable court rulings out there for the state, or for another state that tweaks the idea based on the judge’s concerns. The decision is still a reminder, though, that when it comes to tech, even easy ideas can often prove terribly difficult.

— Ben Brody (email | twitter)

In Washington

The Federal Trade Commission will consider whether home appliance manufacturers should include repair instructions on equipment. The move is intended to “strengthen consumers’ right to repair damaged products, without the need to go back to the manufacturer.”

A chip lobbying group doesn’t think the Chips Act gave them enough money for R&D. In an interview with POLITICO, the COO of NY Creates aired concerns over the “long-term sustainability” of the R&D plan that currently allocates $11 billion for subsidies. The group is understandably cautious about going to Congress and asking for more before proving it can do something with the initial infusion.

The Inflation Reduction Act tax credits could be a game changer for electrified trucks and vans. Analysis from Energy Innovation showed that the tax credits — $7,500 for light- and medium-duty vehicles and $40,000 for heavy-duty trucks — could double or triple the share of electrified vehicles in truck and van fleets by 2030.

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On Protocol

Protocol’s Climate team has a look at nonprofit Terraset, which exited stealth mode on Tuesday, as it plans to help channel private philanthropy into carbon dioxide removal services.

From our “How I Decided” series: How AI critic Meredith Whittaker decided to leave the FTC to become the president of Signal.

Around the world

The U.K. affirmed its order that Meta has to sell Giphy over competition concerns. The original ruling from last year, which the company had appealed, excited antitrust reformers for its close scrutiny of a smaller Big Tech deal.

Japanese regulators want to loosen crypto regulations. The Japan Virtual and Crypto Assets Exchange Association could allow companies to list coins without going through the country’s full screening process as soon as December.

There’s another chapter in the bizarre saga between Meta and Indian digital news outlet The Wire. On Tuesday, The Wire said it would withhold the stories it published alleging Indian politicians in the ruling BJP party had backdoor access to Meta platforms. Meta denied those allegations and said, “We hope that The Wire is the victim of this hoax, not the perpetrator.”

Apple halted plans to source flash memory from a Chinese manufacturer in response to the latest U.S. export controls, according to Nikkei Asia.

EU officials anticipate a wave of Big Tech lawsuits, according to Bloomberg. Since the Digital Markets Act and Digital Services Act are set to go into effect next year, EU digital platform regulator Gerard de Graaf said the companies are likely to sue — though de Graaf also said he favored a collaborative approach.

European ecommerce companies want the European Commission to take action against Google’s shopping business, based on the EC’s 2017 finding that Google abused market power in the shopping space.

In the media, culture, and metaverse

Internet service providers in several cities charge higher rates for worse service in predominantly Black and Latino neighborhoods than in nearby whiter, higher-income areas, an investigation by The Markup found.

In data

$8 billion: That’s how much money Amazon estimates it lost annually due to employee attrition, according to a leaked January 2022 report obtained by Engadget. Voluntary attrition occurred twice as often as involuntary attrition, according to the report, and “only one out of three new hires in 2021” would remain at Amazon beyond 90 days.

More than awkward

The Biden administration is planning for ways to avoid a run-in between the U.S. president and Russian President Vladimir Putin at the upcoming G-20 summit in Indonesia, according to POLITICO. U.S. officials also reportedly expect other Western leaders to avoid Putin. At the same time, U.S. officials are hoping to set up a meeting between Biden and Chinese President Xi Jinping.

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Thanks for reading — see you Friday!

Women want more from their workplaces, and they aren’t afraid to walk away to get it.

Women are leaving workplaces at higher rates than ever, the 2022 Women in the Workplace study by McKinsey & Company and nonprofit LeanIn.org found. The study, which surveyed 333 U.S. and Canadian companies and more than 40,000 employees, found that women’s voluntary attrition was 10.5% this year, compared to 9% for men. That’s up from 7.2% for women and 7.1% for men the year before.

Women are also still dramatically underrepresented in higher level and C-suite roles due to what the report calls the “broken rung”: For every 100 men promoted from entry level to manager, only 87 women are promoted, and only 82 women of color are promoted. This means that the higher you go, the fewer women there are to promote.

“We're really at risk of organizations unwinding the progress they've made on gender equity,” said Rachel Thomas, co-founder and CEO of LeanIn.org and co-author of the report. “And let's be clear, they weren't close to an equal distribution when it comes to leadership already.”

These talent gaps between men and women are wider in tech. In hardware, women make up 32% of entry-level positions and 26% of the C-suite. In software, women represent 41% of entry-level jobs and 27% of the C-suite. This includes tech roles at non-tech companies, Alexis Krivkovich, managing partner at McKinsey and co-author of the report, told Protocol. And the gap is only getting wider, Krivkovich said: “The difference between men and women holding tech roles is two-and-a-half times more men than women. In 2018, it was 1.9 times.” Because few women are in the tech workforce, few women want to join, she said.

“Women in tech disproportionately experienced being an ‘only’ in the workplace,” Krivkovich said. “You're more likely to be mistaken for someone junior, you're more likely to have someone take credit for your work, you're more likely to be challenged for why you're there and deserve to be at the table. Increasingly, women are saying they want an experience that is better than that.”

Women of marginalized communities often face compounded discrimination. Around 60% of Black, Latina, and Asian women reported having bad experiences with management, including receiving less support, more than 50% reported experiencing less advocacy from team and leadership, and more than 40% said they experienced discomfort and exclusion among employees. Women with disabilities reported having their competence and authority challenged, including others getting credit for their work (36%) and having their judgment questioned (47%).

Women aren’t just leaving for a higher paycheck or new title. Women often face more opposition, including microaggressions that undermine their authority or bias in promoting, according to the report. They’re also often overworked and under-recognized: Around 37% of women leaders reported having a co-worker get credit for their idea, compared to 27% of men in those positions.

Many who choose to leave are also looking for a better workplace culture. Nearly 50% of women in the study said flexibility is one of the top three things they consider when joining a company. Progress in diversity, equity, and inclusion initiatives — or lack thereof — also plays a big factor in whether they stay or go: Women leaders are 1.5 times more likely to have left a previous position because they wanted the company to be more committed to DEI.

Bridging the gap

The talent gap between men and women may be wide now, but it doesn’t have to stay that way.

One solution may be embracing flexible work styles. According to the report, only around 10% of women surveyed wanted to work mostly on-site. Though working from home is often helpful for women with families, many reported that it’s about more than just time constraints. While working from home, many said they experience less discrimination and fewer microagressions, especially women of marginalized groups.

Plus, remote work works as a hiring tool: More than 70% of HR leaders surveyed said remote work has helped their company hire more talent from diverse backgrounds. Speaking at a recent event attended by Protocol, Henrique Dubugras, the CEO of fintech company Brex, echoed this statement. Dubugras said the surge in remote work helped Brex with its diversity. “I felt like when we were in the Bay Area, every female engineer was getting hit with recruiters every single day,” Dubugras said.

But a flexible work plan has to be done with care to avoid “flexibility stigma” among managers, said Thomas.

“Flexibility stigma is the unfounded belief that if you're working atypical hours or you're working from home, that you're not as committed or you're not as productive,” said Thomas. “Those are some things organizations should think about as they continue to lean into flexibility.”

Some ways to do this are regularly gathering feedback from employees on their experiences, being intentional about employee connectedness and fostering camaraderie, and making sure that remote and hybrid employees get the same benefits and opportunities as those who work fully in-person, according to the report.

But remote work can’t be used as a crutch to avoid systemic change. Per the report, the key to gaining and retaining diverse talent is properly training managers to understand DEI initiatives and support employee well-being, Thomas said. This support can look like showing interest in a worker’s career, making sure that employees get proper credit, checking in on personal well-being, and encouraging respectful behavior among staff.

And expectations for this are on the rise. Seventy-eight percent of employees surveyed expect managers to be supportive of employees’ well-being, while 80% expect them to promote inclusion. A supportive manager is one of the top three factors in whether women surveyed joined or stayed at a company, the study found.

“Companies need to be doing more to set managers up for success,” Thomas said. “They're on the front lines of all employees' experiences, and that includes women's experiences. We know that companies are expecting them to do more to support employee well-being … and foster inclusion on their teams. And yet they're not always being trained effectively to do that.”

Good day, and welcome to Protocol Fintech. This Wednesday, Silvergate’s earnings, Dimon’s crypto hire, and more bucks for blockchain gaming.

Off the chain

Has anyone noticed Jamie Dimon’s habit of saying one thing about crypto and his bank doing another? Dimon recently called cryptocurrencies “decentralized Ponzi schemes.” But JPMorgan Chase just hired Aaron Iovine, recently of the now-bankrupt crypto lender Celsius, as executive director for digital assets regulatory policy, according to Bloomberg Law. It’s hiring for other crypto positions. There are two logical conclusions here: Either Dimon’s a hypocrite and doesn’t believe what he’s telling Congress about crypto, or he’s not really running his bank. We’ve noted Wall Street’s growing embrace of crypto as its infrastructure matures. We wonder if part of the problem is some growing up that needs to happen in the C-suite, too.

— Owen Thomas (email | twitter)

Banking crypto in winter

California bank Silvergate Capital greatly grew its deposits and prominence over the past decade by embracing crypto companies as customers. Its fortunes on Wall Street soared along with the price of bitcoin in 2021. But deep into a crypto winter, the firm is hoping to convince investors to think long-term about its potential.

Silvergate’s shares tumbled Tuesday. The 20% drop in its stock followed a double whammy of bad news.

• First, the bank reported third-quarter earnings per share of $1.28, against expectations from Wall Street of $1.45, according to Zacks Investment Research. The deposits Silvergate holds from digital asset companies fell to $12 billion on average during the quarter, down about 13% from the previous three months.
• There was also a slowdown for one of Silvergate’s key products, a network that allows crypto exchanges and other clients to instantly transfer funds. Payments on the Silvergate Exchange Network fell by 41% in the quarter to $112.6 billion, which the company said was driven in part by a decrease in stablecoin trading.
• On top of less-than-stellar earnings, Silvergate CEO Alan Lane also revealed on a call with analysts that the company will not meet its goal to launch a U.S.-dollar-backed stablecoin this year, owing to regulatory challenges. Silvergate earlier this year purchased the assets of Meta’s failed Diem blockchain project to power its stablecoin.
• Stablecoin regulation has stalled along with the rest of crypto regulation in Congress. The technology for Silvergate’s stablecoin is ready to go, Lane said, but the firm is “working with regulators and policymakers and making sure we get this right.”

Crypto-friendly banks are along for the industry’s ride, up and down. Silvergate shares peaked near $220 in November 2021, which was also a high point for crypto.

• The company beat expectations with its second-quarter earnings, but some analysts were expressing concern in the lead-up to Silvergate’s third quarter announcement. A downgrade from Wells Fargo two weeks ago questioned if outflows from crypto’s decline would outweigh the benefits Silvergate would otherwise get from rising interest rates.
• Notably, it wasn’t all bad news for crypto-serving banks. Signature Bank beat earnings estimates Tuesday, helped by deposit growth in the non-crypto parts of its business.
• Some analysts are looking more long-term for Silvergate. A BTIG report called the bank “undervalued, especially relative to company’s growth prospects given the key role that its banking infrastructure plays for crypto market participants.”
• Analysts with Wedbush called Silvergate’s results disappointing, but said the firm is “well-positioned to thrive when the crypto market rebounds from depressed levels, and should see revenue ramp up materially in the quarters following the pilot launch of its stablecoin,” which the report estimated could come by next summer.

So the question may be how long Silvergate has to hold on for that rebound. Lane, the firm’s CEO, argued that recent moves by Mastercard, BNY Mellon, and BlackRock to expand crypto offerings should be taken as a positive sign. “There is a lot of institutional adoption that is still coming — none of these things are live yet, they’ve all been an announcement about things to come — so we could not be more optimistic on the long-term trajectory,” Lane said. “But these things take time to play out.” As those new entrants may learn, it’s not always a smooth ride.

— Ryan Deffenbaugh (email | twitter)

A version of this story first appeared on Protocol.com. Read it here.

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On the money

The IRS wants to make it easier to file crypto taxes. In new draft instructions, the Internal Revenue Service gave more details on how taxpayers should list their crypto transactions, including switching the verbiage from “virtual currency” to “digital assets.”

On Protocol: Investors are still pouring money into NFT and blockchain gaming projects.

Also on Protocol: The European Commission says members should prepare to halt crypto mining in an energy crisis. The commission announced that EU member states must prepare to halt crypto mining “in case there is a need for load shedding in the electricity systems.”

JPMorgan Chase will match neobanks’ early direct-deposit access. The bank believes it can attract or retain customers for its Secure Banking product by adding the feature.

Goldman Sachs’ revamp is official — and plays down its consumer ambitions. CEO David Solomon said Goldman would focus on existing Marcus customers and market fintech products through its workplace and wealth management channels.

Fintech funding deals fell again last quarter. Global fintech venture funding slid 38% quarter-over-quarter to $12.9 billion, according to a CB Insights report.

​Overheard

Do Kwon resurfaced to give crypto podcaster and journalist Laura Shin a revealing interview. The Terraform Labs co-founder offered a bunch of not particularly persuasive explanations for Shin’s pointed questions — often backed up by on-chain evidence — about the messy implosion of luna and UST and Kwon’s background in the industry. Of his involvement in the failed Basis Cash stablecoin, “Essentially all I did was join Telegram rooms and shit-post,” Kwon said.

Denelle Dixon, the CEO of Stellar Development Foundation, isn’t as keen as others in the industry on crypto getting new, bespoke rules. “I would hate to see new laws written for crypto, because it’s all off of hype,” she said at a TechCrunch Disrupt panel Tuesday.

Just one question for …Jonathan Dharmapalan, CEO, eCurrency

Dharmapalan testified last year before the House Committee on Financial Services about implementing a central bank digital currency in the U.S. after helping establish one in Jamaica.

Are crypto tokens “currency”?

Crypto is maybe some form of asset, like a security, or you could even push it as far as stablecoins — some kind of accepted money. But they have no legal status at all. And because of that, cryptocurrencies in any form are not currency — they’re not legal tender, they’re not backed by the government, and they don’t perform the role that currencies, as in cash, plays.

There’s a huge reason for that. The legitimacy of a currency — let’s say the United States dollar — comes from the fact that the law in the United States supports the United States dollar. But it doesn’t stop there. It actually becomes a very powerful instrument because the United States is able to make its payments to its public and to its employees in the United States dollar, and are able to accept its receipts, as in taxes, in the United States dollar. These are things that cryptocurrencies don’t have the power to do.

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Thanks for reading — see you tomorrow!

You thought crypto winter was bad? Try the real, potentially harsh winter about to hit Europe. Shutting down a key segment of the crypto industry could be one solution to the crisis, officials believe.

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EU members should consider cracking down on crypto mining to help the region cope with a severe energy crisis caused largely by the disruption of the war in Ukraine, the body’s executive arm said this week.

“In case there is a need for load shedding in the electricity systems, the member states must also be ready to stop crypto-assets mining,” the European Commission said in a report.

Crypto mining energy consumption has “more or less doubled compared to two years ago,” the report said, adding that when "harnessing the use of cryptocurrencies and other blockchain technologies in energy markets and trading, care must be taken to use only the most energy efficient versions of the technology.”

The report called crypto’s proof-of-work consensus mechanism — which is used on the bitcoin blockchain, the most popular crypto ecosystem — “outdated.”

The commission cited the Ethereum network’s “long-awaited switch to proof-of-stake consensus mechanism,” which is expected to cut the second-largest blockchain’s energy consumption by 99%.

The switch, known as the Merge, was completed last month and "shows that the crypto world can move towards a more efficient system,” the report said.

Targeting crypto mining in a push to drastically cut energy consumption makes sense for the EU, given the difficulties of making similar reductions at major industries. Miners have cited the flexibility they have in shutting down and spinning up their operations based on the cost and availability of energy as an advantage compared to other industries, and argued that they can actually help stabilize grids and lower the cost of energy.

The EU has also been moving to introduce rules for the fast-growing crypto industry, highlighted by the recent approval of the Markets in Crypto-Assets Regulation, which is expected to become law in 2024.

Somewhat good news for the planet: Global carbon dioxide emissions are set to grow less than 1% this year, according to a new report from the International Energy Agency. The rise of renewable energy and electric vehicles are helping slowly bend the emissions curve, but there's still a lot of work to do.

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In actual numbers, carbon dioxide emissions are projected to increase by 300 million tons in 2022 to a grand total of 33.8 billion tons. That growth is a lot less than 2021, when they climbed nearly 2 billion tons. (Last year's rapid rise in emissions was due in part to the global economic recovery following pandemic lockdowns.)

The report credits this year's increase in emissions to power generation and the aviation sector, as travel continues to rise to pre-pandemic levels. Russia's invasion of Ukraine is also making natural gas more expensive. That's impacting the European Union's energy security, and the bloc and other countries are turning to coal as a cheaper (but dirtier) alternative. The IEA reported that coal use will rise 2% this year, resulting in 200 million more tons of carbon ending up in the atmosphere.

But this uptick in emissions tied to coal use is "considerably outweighed by the expansion of renewables." A total of 700 terawatt-hours of renewable generation came online in 2022, a record increase. The IEA said that offset 600 million tons of carbon pollution, an amount that's roughly on par with Canada's annual emissions.

The group forecast that the world is on track for "consistent improvement" when it comes to transitioning to clean energy and that last year's big emissions increase was a COVID-19-related blip. IEA executive director Fatih Birol said in a statement that "policy actions by governments are driving real structural changes in the energy economy. Those changes are set to accelerate thanks to the major clean energy policy plans that have advanced around the world in recent months."

The IEA highlighted the Inflation Reduction Act as one of a number of government policies that could transform how electricity is generated. Venture capital is also flowing toward climate solutions that could further speed up decarbonization in other sectors.

Some regions are doing better than others and are poised to make greater progress in the coming years. The EU is actually on track to see its carbon emissions fall this year, despite the increase in coal use. The IEA expects that to be a temporary uptick and that 50 gigawatts of renewable projects expected to come online in 2023 will help put coal on the decline again. China's emissions are set to stay flat, in part due to weaker economic growth and deployment of renewables (though this summer's hydropower-killing drought hurt zero-carbon energy generation).

It's not all good news, though. Oil-related emissions grew more than any other fossil fuel sector, in part because many countries lifted travel restrictions and commuters returned to the road. Nearly three-quarters of this increase is due to aviation, specifically international travel. And with sustainable aviation fuel still far on the horizon, that sector's path to decarbonization remains out of reach.

While smaller growth in emissions is a step in the right direction, the world ultimately needs emissions to fall rapidly to keep the Paris Agreement's targets in reach. Global carbon emissions need to drop 55% by 2030 to ensure the world has a decent shot at limiting global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit). Blowing past that target will put millions more people at risk of facing climate change-fueled disasters. The modest increase in carbon pollution this year means the amount that the world will need to cut in subsequent years this decade will be that much steeper.

Correction: An earlier version of this story misspelled Fatih Birol's name. This story was updated on Oct. 19, 2022.