Arizona Blockchain Law and Smart Contracts

Arizona blockchain lawOriginally released as a platform to transfer Bitcoins, blockchain protocols also accommodate “smart contracts.” What are smart contracts? Digital programs that automatically execute parameters of a transaction. This can range from placing a custom call or put option to making scheduled payments.  Smart contracts reliably run as programmed, substantially reducing the risk of fraud or third-party interference. Due to the rise of this cryptocurrency technology, state legislators passed an Arizona blockchain law.

Smart Contracts

HB 2417 (The “Signatures; Electronic Transactions; Blockchain Technology” statute) was signed into law by Arizona Governor Doug Ducey in late March. The regulation addresses blockchain enforceability and smart contract transactions involving product sales, leases, and documents.

The Arizona Blockchain Law: Amending AETA

The Arizona Electronic Transactions Act (AETA) establishes that digital signatures are legally enforceable.  HB 2417 clarifies that electronic records, signatures, and smart contracts — guaranteed via blockchain technology and governed by UCC Articles 2, 2A, and 7 — are treated as legal electronic signatures under AETA.  The new statute also stipulates that a transaction agreement shouldn’t be denied validity, legal effect, or enforceability just because it was executed via smart contract.

To avoid any legal uncertainty surrounding blockchain transactions and smart contracts, HB 2417 includes a number of interesting points.

  • The statute includes a very specific definition of “blockchain technology” as a “distributed, decentralized, shared and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless” and provides that the “data on the ledger is protected with cryptography, is immutable and auditable and provides an uncensored truth.”
  • HB 2417 includes a definition of “smart contracts” as an “event driven program, with state, that runs on a distributed, decentralized, shared and replicated ledger that can take custody over and instruct transfer of assets on that ledger.”
  • The law provides that a person that, in or affecting interstate or foreign commerce, uses blockchain technology to secure information that the person owns or has the right to use retains the same rights of ownership or use with respect to that information as before the person secured the information using blockchain technology.


Similar Laws In Other States

Arizona isn’t the only state to address evolving technologies, like blockchain.  Nevada has a bill pending; in 2016, Vermont made sure the state’s evidentiary rules treated blockchain-based digital records as business records; Hawaii, Maine, and Delaware all have bills pending or are considering amendments.

Kelly / Warner is a leading Internet law firm that works with businesses across the country and around the world.

Article Sources

Neuburger , J. (2017, April 20). Arizona Passes Groundbreaking Blockchain and Smart Contract Law – State Blockchain Laws on the Rise. Retrieved June 21, 2017, from

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