I was traveling last Tuesday so didn’t post my weekly rundown here (but TDC members got access in our member’s only portal. So reminder to join TDC if you want all my updates/analysis). With Congress still on break last week, there was a lot of talk about what to expect regarding market structure legislation once Congress is back this week, but very little firm information as to exact language changes since the last draft bills were released around January. But there was a major win for the CFTC as the agency seeks to protect its regulatory turf, and a White House report on the stablecoin/yield discussion which has held up market structure for months now.
Also, since market structure talk is getting hot again, here’s a reminder to contact your Senator to tell them how important developer protections are to be included in the bill! We even created an easy form that will do most the work for you!
With that covered, here’s everything that happened last week in crypto law:
CFTC Gets Temporary Injunction Against Arizona on Prediction Market Dispute
The CFTC sued Arizona last week (along with Illinois and Connecticut for similar civil reasons) regarding Arizona’s attempt to bring criminal charges against CFTC-registered Kalshi based on Kalshi offering event contracts on the outcome of sporting events, which Arizona claimed was illegal gambling. Due to the immediacy of Arizona’s criminal threat in a related case by Arizona vs. Kalshi, the CFTC brought a Motion for a Temporary Restraining Order (“TRO”) to prevent Arizona from going forward with such criminal and civil charges, which the CFTC obtained on Friday. The parties now have the opportunity to brief on a more lasting Preliminary Injunction while the cases continue on the merits.
Tl;dr– It is obviously huge for the Court here to make the determination that “the CFTC has made a clear showing that it is likely to succeed on the merits of its claim that Arizona’s gambling laws are preempted by the Commodity Exchange Act” which goes beyond the requirement of a showing of more likely than not of winning on the merits and shows the judge is leaning towards a finding of CFTC exclusive jurisdiction to regulate what CFTC-regulated exchanges offer on CFTC-regulated markets (duh). But it’s worth reminding that this is just a TRO which has a limited duration, and the outcome of the cases pending in the 9th Circuit Court of Appeal could have a large impact on if this TRO is converted into a more lasting preliminary injunction. Still, great work by the CFTC and staff jumping on this so quickly to secure this important win for the prediction market industry. This comes on the heels of Kalshi also securing a major victory in the 3rd Circuit as the first federal appeals court to hear the issue landed in favor of CFTC exclusive jurisdiction.
OTHER STORIES
White House Stablecoin Report: The long-talked about report from the White House regarding forecasted effects of stablecoin yield on U.S. lending was released, and in a surprise to nobody, the talks of stablecoin yield leading to a demise in lending from banks was greatly exaggerated based on all available empirical data. I am just glad we appear to be past this issue (although the compromised language still isn’t public) so we can move onto the million other things that need to be solved for eventual passage.
Administration Pushes for Market Structure: Speaking of market structure, Treasury Secretary Scott Bessent lead the charge this week through an Op-Ed pushing for CLARITY to pass the Senate which was supported by many in the Administration through retweets and amplification efforts. Great to see this is still such an important issue despite all the other potential political distractions.
SEC New Director of Enforcement: The SEC has appointed David Woodcock as new enforcement director and by all accounts he is a great choice for the role with both SEC and private practice experience and seemingly the respect of the securities litigation bar. This comes as the agency seeks to regain its reputation after the prior SEC brought a ton of cases which “identified no direct investor harm from those violations, produced no investor benefit or protection, and demonstrate what the current Commission views as a misinterpretation of the federal securities laws, a misallocation of Commission resources, and a bias for volume of cases brought versus matters of investor protection.”
Crypto Mom Podcast Appearance: Really enjoyed this week’s Dex in the City podcast, which had both Commissioner Peirce and SEC Crypto Task Force Head of Operations Sumeera Younis. Great to get such an inside look into what these regulators are thinking about as we are knee deep in rulemaking szn.
Roman Storm Acquittal Hearing: The hearing on the motion for Roman Storm’s acquittal was heard last week, and I believe Judge Failla when she said her mind isn’t made up yet. Also, hard to read tea leaves on where she is leaning based on questions, but her discussions on retrial dates on the charges the jury couldn’t reach a decision on is suboptimal for Roman’s chances. As always, #FreeRomanStorm.
Satoshi Identity Solved Again!: For what seems like the hundredth time, another reporter (this time from the NYTimes) claims to know who Satoshi is (this time Adam Back) without any real evidence. I will state again that I think “Satoshi” was a group of people, primarily Hal Finney, and that’s why the mystery of who it is points to so many different people (because lots of them were likely involved in some way).
Yuga Labs Settles Trademark Dispute: The long and arduous trademark litigation by Yuga Labs against now self-admitted troll Ryder Ripps has come to an end. Ryder and his partner Pauly had already lost once and were facing even more in damages after the judgment was kicked back on appeal requiring Yuga to spend even more in legal fees against this troll, so glad to see it come to an end.
WLF Lending Drama: Lots of drama last week around World Liberty Financial which started after team governance tokens were used as collateral in Defi lending and resulted in Justin Sun continuing his complaint which has been the subject of a legal dispute between the parties for a while now. I have no information as to if this is just smoke or there is real fire with the lending activity but this and other news around the family’s crypto businesses are not exactly optimal timing when we should be focused on market structure.
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 