Missed the morning edition, so apologies for the subscribers expecting this in their inbox this morning. Working for The Digital Chamber is easily my favorite job I’ve ever had. Unfortunately, it may also be the only career path capable of making me nostalgic for BigLaw’s work-life balance. Apologies for the delay. As compensation, this update won’t be going on social media. Consider this a subscriber exclusive. Those don’t come around often.
In legal news, crypto perps are coming to the United States! While I was busy on the hill most of the week and had to go back through my timeline to try to piece the last week of news together instead of how I usually track and draft throughout the week (reminder to share our Call to Action on passing Clarity Act) the news waits for nobody and despite the short holiday week it was a busy one in terms of legal developments.
Here’s everything that happened last week in crypto law:
CFTC Approves Crypto Perps
The CFTC released a slate of materials regarding an exceedingly limited approval of “perpetual” futures products, starting with Bitcoin and expected to be expanded in short order to contracts which track the price of other crypto assets with deep existing liquidity and 24/7 spot trading. Staff Statement here; Policy Statement here; Chair Selig Op-Ed here; Kalshi Approval here. When Chair Selig was first put into his position, his opening speech contained a promise that “the CFTC will use the tools at its disposal to onshore perpetual and other novel derivative products so that they can flourish across both centralized and decentralized markets, subject to appropriate safeguards.” This is a step in that direction, predictively starting with centralized entities. It is worth noting that the CFTC advised against registered entities using this as open season to self-certify other types of perpetual futures products, noting not all markets are fit for 24/7 trading.
Tl;dr– Despite all the claims that the CFTC is understaffed, the agency is continuing to push out materials meaningfully moving financial markets under its jurisdiction forward. This thread from Katherine Kirkpatrick is worth a read, but she astutely points out these products were approved as futures contracts, not swaps. This has real structural implications for margining and counterparty risks. It is certainly worth noting that the first to receive approval form their products are crypto-native companies like Kalshi and Coinbase despite not requiring blockchain technologies for these particular products on DCMs. While long-dated contracts have been available for a while and in some cases function like perps, there are still issues regarding settlement on the expiry of those contract which are not issues for true perps products. Looking forward to this Law of Code podcast on the topic coming shortly! Also, since this is an update on perps (even if about onshore/centralized providers) I need to say the following: Hyperliquid.
OTHER STORIES
Make Financial Privacy a Priority: Commissioner Peirce starting a speech on privacy with a Pet Shop Boys quote wasn’t on my bingo card, but she crushed this one. “We cannot let a legitimate desire for security from reprobate nation states and criminal organizations steal the freedom that defines this nation and its people.” Unfortunately, neither side has shown the courage to take back financial privacy for citizens and risk being labeled soft on terrorism, so this is something we will likely need to get back through litigation vs. legislation.
Prediction Market Rulemaking Imminent: There is proposed rulemaking relating to Prediction Markets currently undergoing executive legal review. The Digital Chamber submitted its own areas of focus, so looking forward to seeing what the CFTC took from ours (and the over 3,000 other) responses to the call for input on potential rulemaking for this area which President Trump called critically important. Crazy how much work product the CFTC staff are pumping out right now. Super impressive.
Google Insider Trading Case: Speaking of prediction markets, both the DOJ and CFTC have brought a case against an individual alleged to have improperly insider traded on Google Search stat prediction markets. I still hate how these cases are pleading jurisdiction and may have more to say on that on another date, but good to see there is a cop on the beat here.
Banks Still Mad About Clarity: JPMorgan CEO Jamie Dimon has been open with his hostility as to where the Clarity Act text landed re: stablecoin rewards and his plans to continue fighting it. They can continue trying to fight progress, we will continue to advocate for it.
Treasury Secretary Bullish Speech: Scott Bessent gave a briefing to the media where he called for Congress to pass market structure legislation, cut off any discussion of a U.S. Central Bank Digital Currency (“CBDC”), and noted that crypto enabled the U.S. to seize $1 billion in funds from Iran. Maybe the banks above should get in line with their primary regulator or risk getting left behind.
Saylor Sells Bitcoin: I never thought I would see the day, but Strategy has finally sold some Bitcoin (~$2.5 million from their multi-billion stockpile, so a drop in the bucket). Still something worth covering from the company whose CEO famously advised people to sell their house or kidney before selling their bitcoin.
SEC Sues Privvy Founder: The SEC has brought a civil complaint against the founder of Privvy (not the wallet you are probably thinking of; this was an AI trading scheme) showing that “crypto-friendly” doesn’t mean “crime season.” You can’t raise money for a venture based on lies and get away with it. Nothing about crypto changes that basic rule.
Base Layer-2 (“L2”) Closer to Decentralization: The Coinbase-funded Ethereum L2 blockchain, Base, has advanced further towards full Stage 2 decentralization. Love to see it. There has been a lot of poo-pooing on the timeline about the value (or lack thereof) for true decentralization, which I agree it is fair to say not everything needs to or should be decentralized. But if we aren’t working forward that for true infrastructure layers, what are we even doing here?
Kalshi Gets in on Minnesota Lawsuit Action: One week after the CFTC brought its case against Minnesota regarding a proposed prediction market ban in the state, Kalshi has also entered the litigation bringing its own suit as well. This is some of the most interesting litigation going on in the space right now, so something I am personally closely monitoring.
Stablecoin Updates: In payments/stablecoin news, Mastercard has received a bitlicense for their crypto-enabled payment processing plans in New York, and one of the fastest going banks in the Country, SoFi, announced its own planned stablecoin. TradFi isn’t coming; it’s here. This is combined with crypto entities coming to TradFi (much to the disappointment from a certain Senator yelling at clouds) Pretty soon we will just need to going back to calling it all just finance?
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.
The NFTtorney 