Good morning. The Securities and Exchange Commission thought it had a way to regulate crypto—a 77-year-old Supreme Court test that created a catchall definition for obscure securities.

The SEC applied the so-called Howey test to go after crypto startups that issued tokens, exchanges that traded them, and even parties that pool investors’ coins and lend them out. The test became the linchpin of the SEC’s strategy to regulate cryptocurrencies, even though the laws the agency enforces are decades older than the internet.

That strategy backfired on the SEC this past week when U.S. District Judge Analisa Torres decided the test doesn’t cover more than $1.4 billion in sales of a token known as XRP. Whether the tokens are securities depends on how they are sold, she said.

• The Howey test: A 1946 Supreme Court case regarding investments in orange groves defined an investment contract as an agreement under which buyers expect to earn a profit based on the efforts of others. In the court case, a company sold interests in an orange grove to investors. People who bought the investment contract expected to earn a profit on the eventual sale of oranges, with the work done by the company that managed the land and citrus trees, the court reasoned.
   
• What the judge said: Tokens aren’t intrinsically, or always, an investment contract, Torres wrote. The judge said it is how tokens are sold that matters. One sale can be an investment contract, while another isn’t.

Iraq tests U.S. sanctions with oil-for-gas deal with Iran.

For a decade, Iraq has procured Iranian natural gas in an arrangement that powered millions of Iraqi homes but pushed Baghdad into billions of dollars in debt to Tehran because U.S. sanctions restricted payments for the fuel.

Now Iraq says it has found a way around sanctions: Paying Iran for gas with Iraqi oil. The agreement injects uncertainty into the Biden administration’s attempts to cool tensions with Iran and contain its nuclear program.

Director of CFTC’s whistleblower program steps down.

Christopher Ehrman, the director of the Commodity Futures Trading Commission’s whistleblower program since 2013, is leaving the agency effective immediately and will begin representing whistleblowers as a lawyer in private practice.

The derivatives-market regulator said Christina McGlosson, who recently returned to her role as associate director of the whistleblower office after two years in the private sector, will serve as acting director.

• Binance, the giant crypto exchange, is cutting a big chunk of its workforce during a federal crackdown in the U.S.
   
• An appeals court on Friday denied a last-ditch bid by the Federal Trade Commission to halt Microsoft’s planned $75 billion acquisition of videogame publisher Activision Blizzard.
   
• The U.S. Virgin Islands said it is seeking at least $190 million in damages from JPMorgan Chase in its lawsuit alleging that the bank facilitated Jeffrey Epstein’s sex trafficking.

A buoyant global economy is starting to sag.

The global economy’s brief run of good luck may be ending.

Manufacturing activity is weakening across the world. Europe slid into a mild recession earlier this year. China’s much-anticipated rebound from Covid-19 lockdowns is sputtering. Many emerging markets continue to struggle with heavy debt burdens and high interest rates.

• What Markets Are Saying About the Fight Against Inflation
• China’s Economy Barely Grows as Recovery Fades
• Europeans Are Becoming Poorer. ‘Yes, We’re All Worse Off.’

Weeks of extreme heat strain small businesses and economy.

Heat waves stretching across large parts of the globe are straining power grids and shutting businesses that can’t keep their workers cool. Some of the hardest-hit areas will face hotter temperatures in the coming days, forecasters say, adding to risks that infrastructure will fail.

More than 100 million Americans are being affected by the heat barrage, according to the National Weather Service. A streak of 110-degree days is frying Phoenix, and an unrelenting heat wave is punishing Texas and other parts of the South.

• Northeast Rain Prompts Flood Warnings as Flight Cancellations Grow

• As companies race to incorporate artificial intelligence into their operations, many are wrestling with a more fundamental corporate concern: Who should manage such efforts?
   
• AT&T shares sank as a research analyst downgraded the stock following a Wall Street Journal investigation that revealed that U.S. phone companies have left behind a network of cables covered in toxic lead.
   
• Russia has unexpectedly seized the local operations of Carlsberg and Danone, two of the world’s largest consumer-goods companies, in a move that escalates economic hostilities with the West. It also said it was withdrawing from an international agreement that allowed Ukraine to resume much of its Black Sea grain exports.

Microsoft email hack shows greater sophistication, skill of China’s cyberspies.

The hack of email accounts of senior U.S. officials including the commerce secretary is the latest feat from a network of Chinese state-backed hackers whose leap in sophistication has alarmed U.S. cybersecurity officials.

The espionage was aimed at a limited number of high-value U.S. government and corporate targets. Though the number of victims appeared to be small, the attack—and others unearthed in the past few months linked to China—demonstrated a new level of skill from Beijing’s large hacker army, and prompted concerns that the extent of its infiltration into U.S. government and corporate networks is far greater than currently known.

All three lawyers join from Hughes Hubbard & Reed. Fayhee, a former federal prosecutor and national security official, has advised on recent matters involving Swedish telecommunication company Ericsson and French cement firm Lafarge.

Along with Liu, the former head of Hughes Hubbard’s China practice, and Grove, Fayhee will advise clients on a range of criminal and regulatory matters, including sanctions and exports controls compliance and cross-border investigations.

• The Republican-controlled House narrowly passed a $886 billion defense-policy bill loaded with measures restricting abortion access, transgender healthcare and diversity efforts in the military.
   
• Former President Donald Trump has asked Georgia’s highest court to effectively shut down the criminal investigation into efforts to overturn his November 2020 election defeat in the state.
   
• New campaign-finance data show that Republican presidential contenders are drawing from a broad base of donors and could challenge President Biden’s fundraising prowess.
   
• Americans’ growing paychecks surpassed inflation for the first time in two years, providing some financial relief to workers, while complicating the Federal Reserve’s efforts to tame price increases.
   
• Compared with much of the world, China has been reporting solid headline growth in its economy this year. But for many people on the ground, it feels more like a recession.
   
• A presumed Ukrainian strike disabled the only road bridge connecting Russia with the occupied Crimean Peninsula, hitting once again a major symbol of President Vladimir Putin’s rule and constricting Russian supplies to its troops in southern Ukraine.

Follow us on Twitter at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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