When I first started at The Digital Chamber, I was asked if there was anything TDC wasn’t doing that it should be, and my answer was immediately prediction markets. Since then, I have been working with the team to build out what we finally were able to publicly announce as a new working group focused exclusively on prediction market regulatory issues (along with another working group on AI/Quantum issues). We have a lot of work to do, but the prediction market work is something I am personally passionate about, so exciting times!
Meanwhile, while I was focused on prediction markets, the rest of the digital asset ecosystem was forging ahead as well, with another White House meeting to try to reach an agreement and move on from the stablecoin/yield debate log jam holding up market structure, the SEC putting out what most would consider minor stablecoin guidance updates that will in fact have massive effects on adoption, and a new policy org comes to D.C.!
Here’s everything that happened last week in crypto law:
SEC Division of Trading Releases Updated Stablecoin Guidance
The SEC’s Division of Trading and Markets put out guidance that a 2% haircut on proprietary positions in a payment stablecoin when calculating its net capital is appropriate accounting. This is a way bigger deal than it sounds, as it opens the door “for broker-dealers to engage in a broader range of business activities relating to tokenized securities and other crypto assets.” Under the revised guidance, the 2% haircut on stablecoins would give those equal safety and soundness ratings as money market funds.
Tl;dr– I almost didn’t give this “major story” attention, because technically asset managers could have been doing this for a while now, but most were taking a conservative approach as a hangover from the Gensler-era and applying a 100% haircut which made stablecoins all but impossible to use by SEC-registered entities. Now, broker-dealers can take a more realistic approach to the asset and settle trades using stablecoins without destroying their operating capital budget. This also puts pressure on every major broker-dealer to build stablecoin infrastructure because their competitors will be doing so to the extent they haven’t already. Sometimes, the biggest hurdles to adoption don’t get solved by Congress or flashy innovation exemptions, but in putting out common sense guidance like this that is just long overdue.
OTHER STORIES
FED Research on Prediction Markets: New research from the Federal Reserve has found “Our results suggest that Kalshi markets provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers.” Which seems like a good thing we should encourage the growth of?
Prediction Market Win vs. Tenn: A District Court in Tennessee granted Kalshi’s request for an injunction against the Tennessee Sports Wagering Council from regulating the CFTC-regulated Kalshi event markets. “State law would directly affect trading on Kalshi by limiting who can trade with whom. Accordingly, Kalshi has shown a likelihood of prevailing on the merits.” This is just a preliminary ruling, so long way from a final decision, but while the CFTC’s amicus in the 9th Circuit matter is not cited here, it is hard to imagine district courts not taking note of that.
SEC ETH Denver Speech: This joint speech from Chair Atkins and Commissioner Peirce at the SEC reads like something we could only dream about during the dark times under Gensler. Bearish? The SEC is cracking jokes about vibe coding in solidity and the largest asset managers on earth are plugging into to DeFi and you’re bearish?
Third White House Stablecoin Summit: Hats off to the White House for continuing to push banks and crypto to reach a deal on stablecoin rewards and move on to more important things. From the reporting, I am not saying that it appears the deal presented by the White House is basically exactly what TDC advocated for in our Stablecoin Rewards Principles document. But I’m not NOT saying that, either.
Hyperliquid Policy Launch: Hyperliquid has established a policy arm, named the Hyperliquid Policy Center, which is funded with 1 million HYPE tokens and is led by crypto policy veteran Jake Chervinsky. This is a hugely positive development, as more voices for DeFi in D.C. is crucial right now. Hyperliquid.
Base Moves Off OP Stack: Coinbase’s L2 Base is moving off the OP stack using in-house coding going forward. This is huge, as base was paying tens of millions a year in fees to the Optimism Collective as a part of their revenue sharing agreement. Gotta imagine Vitalik’s statement on L2’s and Base’s own native token plans played a role in this decision.
BNP Money Market on ETH: BNP Paribas Asset Management is issuing a tokenised share class of a French‑domiciled money market fund on the Ethereum blockchain. Love to see this type of innovation from major banks.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.
Outro/Disclaimer: In late 2022, while I was at Polsinelli, I started preparing weekly updates for attorneys at the firm to stay abreast of the latest Web3 legal developments. I now post the weekly updates on my personal blog every Tuesday, where I also provide links to more obscure legal developments and otherwise discuss industry trends and stories. Please note, the views and opinions I express are solely my own. They do not reflect the official stance or endorsement of the Digital Chamber or any of its members.
The NFTtorney 