Hope everybody had a great Memorial Day weekend, despite the rainy weather we had here in D.C. to officially kick off summer. With Congress on break this week, lots of work by all the staffers working behind the scenes to get Market Structure ready for the Senate floor. In the meantime, last week we a busy week for the CFTC as it seeks to prevent a prediction market ban in Minnesota, and teamed up with the NHL to ensure league integrity and market integrity are both protected through information sharing arrangements.
Here’s everything that happened last week in crypto law:
OTHER STORIES
Commerce Hearing on Sports Integrity: The Senate’s Commerce committee held a hearing on sports integrity and, as could be expected, there was a clash between gaming organizations represented as witnesses and prediction market advocacy groups. It is clear this is an area that Congress is closely monitoring and even though timing is short on anything passing out of Congress this year on the topic, I would think next session we see bills with real chance of passing including retreads of bills which have currently been proposed but will have a difficult time gaining traction in an election year.
BSA Hearing: In another hearing, the House Financial Services subcommittee on national security held a hearing on the BSA and big shout out to Nick Anthony from Cato for saying the quiet part out loud: The BSA is a failed statute which creates warrantless civilian surveillance with virtually no demonstrated effectives in stopping actual crime despite massive price on consumers. Kill it with fire and start fresh with actually effective ways at detecting and preventing crime (which the BSA is not).
Crypto Mom Soon to Be Crypto Prof.: I am insanely jealous of all the students at the Regent University’s law school that will get to learn under the tutelage of SEC Commissioner Hester Peirce. Think I can audit one of her courses?
SEC Gag Rule Retracted: Not crypto-specific, but long overdue from the SEC removing a rule which prevented firms that settled with the SEC from denying they were liable for the actions they settled over. This was always an unfair rule, because settlement isn’t generally a liability concession but instead just a cost/benefit analysis of costs to fight, chances of winning that fight, potential outcome if lost, and cost to settle all being weighed to make a decision.
CFTC Sues Minnesota: The CFTC has sued to block a recent Minnesota law which would block access from Minnesota residents to CFTC-registered exchanges. This isn’t the first time a state has taken issue with CFTC-regulated products, but Congress and courts have consistently ruled this is an area where nationwide uniformity is good for U.S. markets, so good to see the CFTC enforcing its regulatory power here (despite what the latest NYT crypto hit piece has to say).
CFTC/NHL MOU: In another topic likely interesting to both people in Minnesota and people interested in prediction markets, the CFTC has entered into another Memorandum of Understanding with a major sports league, this time the NHL. These efforts are huge in ensuring fair and orderly markets.
Payment Account Executive Order: President Trump signed two executive orders regarding banking issues last week. The first is positive, and ordered updates to integrate “digital assets and innovative technology into traditional financial services and payment systems” which is great to see. The second is less great to see as it involves expansion of the failed BSA framework.
Warren Letter to OCC: Senator Warren is big mad that the OCC did not discriminate against companies she doesn’t like and granted trust banking charters to companies that meet the standards for such charters. Probably because she can’t say these entities are unregulated risks when they come and volunteer for added regulation and oversight under the same standards as traditional banking. You know what? I am starting to think she just dislikes this industry and doesn’t actually care about safety and soundness? Crazy, I know.
DeFi Vaults Stay Hot: Wintermute is now getting in the DeFi vault game. I honestly think after stablecoins and prediction markets, the next big crypto product/market fit will be tokenized equities being able to be deposited for trading, liquidity provision, and lending through vault structures allowing everyday Americans to earn yield in ways that have traditionally been reserved for highly sophisticated financial players.
RIP Nathan Allman: In sad news, Nathan Allman, founder and CEO of Ondo Finance, tragically passed away over the holiday weekend. A pioneer of tokenized financial products, he was undisputably a large reason why major players like Blackrock are so excited about the efficiencies that come from trading tokenized financial products. He will be missed.
ETH Foundation Drama: Lots of drama over the direction of the Ethereum Foundation which included prior ETH-Maxis like David Hoffman, to sell all their holdings. I don’t care how much it is illogical and causes me to miss out on more lucrative options, ETH will always be what I believe in most regarding delivering the promise of a trustless and censorship resistant form of finance.
Fenwick Settles FTX Dispute: Fenwick has agreed to pay $54 million to settle the claims against it in the FTX bankruptcy matter. I am always hesitant to blame lawyers for following the directions of its client, but following the directions of a meth’ed out Sam Bankman-Fried is something every lawyer should have known better than to do.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. Any typos or errors are intentional to prove I am not AI. 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.
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