We got a head fake from the SEC on releasing rulemaking ahead of the Senate’s return in September. But it was still a busy week, especially at the CFTC as it continues to provide regulatory guidance to prediction market regulators while defending its jurisdictional turf from state regulatory overreach. Also, Custodia got some support in its request for SCOTUS to determine how much discretion the Fed has when granting or denying master account applications.
Here’s everything that happened in Crypto Law last week:
OTHER STORIES
SEC Meeting Canceled: The meeting where the SEC was anticipated to release its “Reg Crypto” framework along with potentially other rulemaking changes had a last minute “scheduling conflict” and had to be canceled. Apparently, there were some people behind the scenes pushing for cancelation to not disrupt Clarity Act progress? I would guess more information will come out this week on the issue.
Whitehouse Meeting: Around the same lines, the Whitehouse is hosting a meeting with industry executives ahead of the CFTC’s inaugural innovation panel meeting. It seems fairly unlikely that the SEC’s canceled meeting along this Whitehouse meeting popping up are just a coincidence.
CFTC Advisory Notices: The CFTC put out a pair of advisory notices to prediction market operators on self-certification of rewards programs and pricing displays which certain prediction market operators were dancing a little too close to the “gambling” line than the CFTC would like. Good move from the CFTC as it tries to protect its regulatory exclusivity over these financial markets.
Trezor Data Breach: The hits keep coming for self-custody as Trezor had a data breach which revealed the names and addresses of customers. As a reminder, if you are ever ordering a cold storage wallet, make sure it isn’t on a secondary market, and put as an option to pick up from a UPS store or other location to prevent doxxing your address. Never a bad time to improve your OpSec in crypto.
New York Prediction Market Fight: The CFTC, in an attempt to avoid another Michigan situation, preemptively issued an order in relation to the New York v. Kalshi lawsuit(s) directing Kalshi to maintain trading operations to avoid any market disruption that could come with a court order directing Kalshi to cease such operations. With a Washington order coming down last week as well as a Baltimore lawsuit, it is just a matter of time before SCOTUS weighs in.
Custodia Master Account Amicus: A trio of amicus were submitted in support of Custodia’s bid to have SCOTUS weigh in on the denial of master account access by the Kansas City Fed. I am biased, but The Digital Chamber’s was the best in the bunch in my humble opinion.
Ponzi Prosecution: Whenever I see people getting prosecuted for crypto ponzi schemes involving hundreds of millions of dollars for a project/person I have never heard of, it reminds me how crucial market structure legislation is. It isn’t the crypto-natives who need protection from these types of bad actors, it is the everyday American who is victimized by people like this who take advantages of lack of a single spot regulator to do harm to everyday citizens.
Rule 611 Comments: A couple of comments worth reading from Hyperliquid Policy Center and Douro Labs to both the SEC and FINRA on how to modernize best execution rules. These are the types of blocking and tackling which often are overlooked, but are necessary steps in enabling trading of tokenized securities through DeFi protocols (eventually).
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 