For most states that have already approved the 2022 amendments, the countdown to July 1, 2025, has begun.

When the Uniform Law Commission and the American Law Institute published the proposed Uniform Commercial Code Amendments (2022) relating to digital assets, they contemplated a gradual phase-in of the rules over a period of at least a year, but no earlier than July 1, 2025. This period was designed to give secured parties time to assess their perfection and priority in such assets under the current UCC and the new changes and to take any necessary actions to preserve or obtain such status under the 2022 amendments.

For most states that have already approved the 2022 amendments, the countdown to July 1, 2025, has begun. However, more than half of the states have not yet approved, or in many cases even introduced, the 2022 amendments. The effects of a nonuniform start date can be confusing, especially for a multistate lender. This Alert will survey the adoption of the 2022 amendments by the states and their effect on the start date rules. 

Passed

Based on a review of state bills and statutes, as of July 1, 2024, 24 states have passed the 2022 amendments: Alabama, California, Colorado, Delaware, Georgia, Hawaii, Indiana, Iowa, Kentucky, Louisiana, Maine, Minnesota, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Tennessee, Virginia and Washington. Arguably the most important jurisdiction also passed the 2022 amendments, but it’s not a state―it’s the District of Columbia.

Iowa and Nebraska were such early adopters of the 2022 amendments that they approved them twice: the initial draft of the amendments in 2022 and the final changes to the 2022 amendments that were published in 2023.

Other states only adopted the 2022 amendments just before the informal one-year deadline, such as Rhode Island on June 10, 2024, and Louisiana on June 26, 2024.

The Pennsylvania version of the 2022 amendments was signed by both the House and the Senate of the state on June 27, 2024, and rushed to the governor on June 28 (the last business day of the month). It was signed on July 1. 

Pending

Five states have introduced the 2022 amendments, but they are still pending as of July 1, 2024: Arizona, Illinois, Massachusetts, Missouri and New York. Some of these states are very close to passage. In Illinois, the 2022 amendments were passed by both houses of the Legislature on May 23, 2024, and were sent to the governor on June 21.

Not Introduced

From public searches, it appears that 15 states have not yet introduced the 2022 amendments in legislative session: Alaska, Connecticut, Florida, Kansas, Maryland, Michigan, Mississippi, New Jersey, North Carolina, Ohio, Oregon, South Carolina, Utah, Vermont and Wisconsin.

Introduced and Failed

Legislatures in four states have considered the 2022 amendments, but the bills were either withdrawn (Arkansas) or failed to move forward (Montana, Texas and West Virginia). In the case of West Virginia, the bill was considered in 2023 and was not carried over or reintroduced in the 2024 legislative session, delaying it until at least the 2025 legislative session. In Texas and Montana, House and/or Senate bills in 2023 also failed to get out of committee. Since the Texas and Montana legislatures only meet for regular sessions in odd numbered years, consideration of the bills will have to wait until at least 2025 (unless the governor deems the 2022 amendments so critical as to warrant convening a special session before then).

Idaho and Wyoming

That leaves just two states: Idaho and Wyoming. These states have been on the forefront of digital asset adoption and made changes to their UCC before the 2022 amendments came out (2019 in the case of Wyoming, and March 2022 in the case of Idaho). Although these two statutes address some of the same issues covered by the 2022 amendments, there are substantial differences, and in general, the changes in the 2022 amendments are more comprehensive. It does not appear that the Idaho or Wyoming legislatures have considered conforming the UCC in their states to the 2022 amendments.

Effective Date vs. Adjustment Date

Under the transitional provisions of Section A-302(b) of the proposed 2022 amendments, a security interest that is enforceable and perfected under the pre-2022 amendment rules, but would no longer be enforceable or perfected on the effective date of the 2022 amendments if those rules were applied, remains enforceable without further action until the “adjustment date” and remains perfected without further action until the earlier of the adjustment date or the date on which perfection would lapse under the pre-2022 amendment rules.

Section A-102(a) of the proposed 2022 amendments defines “adjustment date” as the later of (1) one year after the effective date of the 2022 amendments in a particular state or (2) July 1, 2025.

For states that have already passed the 2022 amendments, the start date rules might seem easy enough—a year would have passed by July 1, 2025, making the first prong above moot. This analysis applies to most, but not all, such states. In particular, Nebraska, Louisiana, Minnesota, Pennsylvania, Oklahoma and Kentucky all passed the 2022 amendments in 2024, but they established staggered effective dates of July 19, 2024; August 1, 2024; August 1, 2024; August 30, 2024; November 1, 2024; and January 1, 2025, respectively.

In terms of honoring the recommended minimum time period of one year, these states took different approaches. Nebraska used the fixed, standard adjustment date of July 1, 2025, perhaps considering that 19 days is not a big time difference. Louisiana and Minnesota used the one-year standard and set a fixed adjustment date of August 1, 2024. Pennsylvania and Oklahoma kept the proposed definition above, resulting in August 30, 2025, and November 1, 2025, adjustment dates. Kentucky took yet a different path and applied the fixed, standard adjustment date of July 1, 2025, even though it is only six months after the effective date (but still more than a year after the bill passed). 

Maine and Virginia both passed the 2022 amendments in April 2024 and took a slower, wait-and-see approach. Both statutes provide for an effective date of July 1, 2025, with an adjustment date fixed one year later of July 1, 2026. The extra year can give secured parties lending in these states more time to prepare for the changes.

For the states that have not yet passed the UCC Amendments or that have not even introduced them in legislative session, it remains to be seen what effective dates and adjustment dates will be used. The examples above provide a road map, but states are not bound to follow either the proposed time frames or the approaches used by other states. The bill that the senate approved in Illinois has a proposed effective date of January 1, 2025, with a standard “later of” adjustment date. 

All of these differences can make lending in multiple states with multiple debtors more complicated until the 2022 amendments are effective in all or most of the states. The effective date of the 2022 amendments in each state carries less significance than the adjustment date, since the changes that are effective on the effective date do not result in an adjustment of perfection or priority among secured parties until the adjustment date (unless perfection would lapse prior to the adjustment date). Nonetheless, a secured party needs to be mindful of both dates, and if multiple states are involved, potentially different dates for each. 

For More Information

If you have any questions about this Alert, please contact Roger S. Chari, any of the attorneys in our Banking and Finance Industry Group, any of the attorneys in our Financial Technology Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.