With Congress away, federal agencies play at crypto rulemaking

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America’s federal authorities appear ready and more than willing to make life easier for crypto operators, whether or not Congress wants them to.

• As CLARITY stalls, SEC takes matters into its own hands
• CFTC says prediction markets aren’t betting, they just offer betting lines
• CFTC orders Kalshi not to back down in face of New York lawsuit
• CFTC, SEC (eventually) file complaints against crypto Ponzi schemers
• OCC says bank charters are so hot right now

Compared with the frenzied activity that has surrounded the Senate’s digital asset market structure legislation (the CLARITY Act) in recent months, D.C. has been effectively mute on this subject since the Senate left town for its traditional summer holiday last weekend.

This silence extends to the White House, which has yet to offer any public comment regarding the most recent bipartisan proposal to revise CLARITY’s ‘ethics’ language aimed at reining in President Trump’s ability to profit off crypto ventures.

On August 10, White House crypto adviser Patrick Witt tweeted that “the administration remains fully committed to getting the Clarity Act across the finish line in September. Durable rules, the kind only legislation can provide, are needed now more than ever. But we also can’t afford to wait forever.”

Witt was responding to a tweet referencing an open meeting that the Securities and Exchange Commission (SEC) has scheduled for Friday, August 14. The meeting’s agenda is “to consider whether to issue a release proposing new rules to create a tailored offering regime for certain investment contracts involving crypto assets.”

(The SEC also scheduled a closed meeting for August 13 to discuss injunctive actions, administrative proceedings, resolution of litigation claims, and “other matters relating to examinations and enforcement proceedings.”)

On August 11, Bloomberg reported that Friday’s meeting could see the SEC release further details on its ‘innovation exemptions,’ including plans to allow the tokenization of publicly traded stock and 24/7 trading of blockchain-based shares.

The SEC paused its tokenization plans in May, but that was when confidence in CLARITY’s passage was much higher. Concerns were also voiced at the time over the SEC’s willingness to allow third-party trading of tokenized equities even if the issuers of those stocks weren’t on board with their shares being traded in this fashion.

Bloomberg’s sources claimed the SEC’s revised plan could include an opt-out for share issuers. Other potential revisions could include tighter controls on international access to tokenized equities, as well as “additional anti-money laundering protections such as requiring that platforms that trade digital tokens are U.S. entities.”

Democrats are already crying foul over this attempt to do an end-around Congress. Sen. Chris Van Hollen (D-MD) told Politico that if the administration chooses to “go down this path—putting the crypto industry before everyday investors and consumers—you can be sure we’ll fight back.”

Van Hollen added that the financial sector needs “a level playing field—not special carveouts from the rulebook that gut investor protections and undermine the markets businesses rely on.”

Traditional securities platforms have previously complained that the SEC appears to offer crypto platforms greater regulatory leeway than to incumbents. While not all Wall Street firms oppose tokenization, those firms that do could inject sand into these gears by mounting legal challenges to any SEC moves.

Potentially worse, an anonymous Senate Democratic aide warned that any effort by the SEC to go it alone “could potentially poison the well,” aka convince Dem senators not already opposed to passing CLARITY to embrace a ‘no’ position.

Sen. Elizabeth Warren (D-MA), a reliably strident crypto opponent, expressed her own concerns over the SEC’s plans. Warren claimed Paul Atkins and Michael Selig, chairmen of the SEC and the Commodity Futures Trading Commission (CFTC), respectively, “have made clear that they’re in crypto’s pocket and want to do whatever they can to facilitate whatever it is that crypto wants to do.”

CFTC: Prediction markets aren’t betting, they just use betting lines

The CFTC has targeted August 20 for the inaugural meeting of its Innovation Advisory Committee (IAC), whose members include over a dozen crypto CEOs, alongside senior execs from tech-focused venture capital groups, prediction markets, and more traditional security/commodity trading platforms.

The IAC’s mandate is to offer advice “on complex issues at the intersection of technology, law, policy, and finance” and to “provide insights and recommendations to the Commission to help ensure its regulations keep pace with the rapid speed of innovation on the new frontier of finance.”

On August 6, Selig penned an op-ed for The Economist that claimed The New Era of Finance Needs Innovation More Than Consensus. Selig declared the death of the “assumption that regulatory priorities would emerge through broad consensus among global institutions and regulators from different countries. Instead, America is once again a hub of financial innovation.”

Selig listed some of the crypto regulatory guardrails he’s helped demolish during his brief time in office, arguing that “the future of financial markets will belong to those willing to push boundaries while preserving market integrity.”

Selig warned that access to the U.S. derivatives market “is a privilege” and other countries need to modernize their own regulatory regimes “to reflect evolving market structures and technology advances.” Selig didn’t add ‘or else,’ possibly because retaliation is now just accepted as a given.

Selig went on to heap disdain on European regulators who dared to argue that “event contracts traded on prediction markets should be treated as gambling rather than financial instruments.”

And yet, just one day later, the CFTC published a letter it sent to its registered ‘designated contract market’ (DCM) operators urging them to stop displaying their sports-based event contracts using “pricing information in the ‘American’ odds format used by casino gambling bookmakers.”

Yes, it seems that instead of using probability percentages to convey the likelihood of you making bank on your ‘prediction,’ DCMs have been eagerly promoting what ‘casino gambling bookmakers’ refer to as ‘money lines.’ (The resulting memes wrote themselves.)

Recall that in April, during a hearing of the House of Representatives Agriculture Committee, Rep. Gabe Vasquez (D-NM) challenged Selig to distinguish between traditional sportsbook odds and prediction market ‘contracts’ involving the same baseball game. Selig hedged, saying he was “not an expert on identifying betting lines.” (Apparently, he’s boned up on the material since then.)

Vasquez then challenged Selig on the chairman’s oft-stated rationale that prediction markets offer a way to hedge economic risk. (Selig’s Economist article cited “the role these markets play in aggregating information, improving forecasting, and enhancing price discovery.”)

Citing an example of prediction markets offering ways to ‘trade’ on whether a specific baseball player hits a home run in a given game, Vasquez asked: “Does a contract on a single player’s performance on a single statistic hedge any real economic risk?” Here too, Selig avoided specifics, saying only that “there are many risks that could be hedged through various contracts in our markets.”

Vasquez repeatedly stressed that his objection to the CFTC allowing prediction markets to engage in sports betting was due to the threat to the tribal gaming interests in his home state. To illustrate his point, Vasquez detailed the many state-level regulations that both tribal and commercial gaming operators must abide by that CFTC-registered platforms are skirting. Speaking of…

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CFTC tells Kalshi to grow a pair and tell New York where to go

Under Selig’s leadership, the CFTC has sued nine U.S. states (so far) that dared to challenge prediction markets’ right to offer sports betting without a state gambling license. One of those states was New York, and on August 11, the CFTC “exercised its emergency authority” to order Kalshi to ignore the lawsuit filed by New York Attorney General (NYAG) Letitia James on July 31.

The CFTC’s order to Kalshi said New York’s damage claims would amount to “more than $36 billion.” Selig was quoted in the release saying New York “intends to make event contract derivatives waste away under its iron curtain of state gaming laws before the courts get the chance to issue final rulings … New York has no business regulating these interstate financial markets. The Commission is required by law to ensure order in these markets, and that is what we have done today.”

This isn’t the first time the CFTC has directed its DCMs to ignore state law. Last month, the CFTC ordered Kalshi to ignore a Michigan state court order requiring the platform to geofence Michigan-based customers. The CFTC claimed that Kalshi would violate its CFTC-mandated responsibility to fulfill all open trades if it canceled bets placed by Michigan residents.

Selig has stated that he intends to go on fighting states in court, appealing all the way to the U.S. Supreme Court if necessary. That seems likely, as the unofficial ‘state v prediction markets’ court ruling tracker has the states prevailing over 83% of the time.

And the hits just keep on coming. On Wednesday, the New York City Council (NYCC) announced its investigation into “Deceptive and Predatory Marketing Practices by Prediction Market Platforms.” The probe was sparked by a Wall Street Journal report in June that Polymarket had paid social media influencers to post videos of themselves winning bigly on the platform, despite the bets being fake and the site depicted in the videos being an in-house test environment for Polymarket engineers.

The NYCC probe focuses on four platforms— Kalshi, Polymarket, Coinbase (NASDAQ: COIN), and Gemini (NASDAQ: GEMI)—and seeks to know whether any of the sites have engaged in “potentially false, deceptive, or abusive marketing tactics, with particular concern for marketing directed towards young people.”

The goal is to determine “whether additional consumer protection legislation, enforcement, public education campaigns, health measures, and funding are necessary to protect New York City consumers from abusive marketing.”

Selig has yet to respond to the NYCC probe, but we’re sure it’s difficult to constantly come up with new ways to say ‘you’re not the boss of me,’ so maybe give him another day or so.

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CFTC, SEC proudly slam cow-free crypto barn doors shut

On August 11, the CFTC announced it had filed a complaint in federal court in Florida against Goliath Ventures Inc and its CEO, Christopher Delgado. The CFTC accuses the defendants of “fraudulently soliciting and accepting funds” from individuals who were told Goliath would use the cash to trade tokens like BTC and ETH on decentralized exchanges (DEX’s).

But the defendants “deployed no customer funds to crypto asset liquidity pools,” instead using the funds to fuel “Delgado’s lavish lifestyle.” In classic Ponzi-scheme behavior, funds received from newer victims were used to pay ‘profits’ from non-existent trades to earlier customers.

Around 1,600 customers ante up “at least $397 million” to the fraud, which often involved “extravagant events” organized by the defendants to portray their business as legitimate and successful.

The SEC filed its own complaint against Goliath/Delgado the same day as the CFTC, putting the total number of victims at “over 1,300” and the total cash raised by the schemers at $425 million. The SEC also featured a Goliath presentation slide citing Uniswap as the DEX on which Goliath claimed to be investing customer funds.

In the CFTC’s press release, Selig claimed the complaint “further underscores our commitment to rooting out misconduct in these markets.” Okay, but the CFTC’s fiscal 2025 Enforcement Report showed that the agency launched just 13 enforcement actions in its fiscal 2025, down from 58 new actions in FY24 (when Joe Biden was still president).

And while 2024’s enforcement list featured several crypto-related actions, the CFTC has since purged senior career staff who raised concerns over crypto and prediction market shenanigans.

The SEC’s first year under Trump 2 also saw enforcement actions fall by nearly half, and the decline likely would have been much greater except that the fiscal year’s first three months were still under the SEC’s less-forgiving previous management.

It’s worth noting that the U.S. Attorney’s Office for the Middle District of Florida filed wire fraud and money laundering charges against Goliath/Delgado in February, and Goliath filed for bankruptcy in March. Delgado pleaded guilty to federal charges in June.

Still, it’s nice to know that the CFTC and the SEC will continue to tackle crypto fraudsters, albeit long after other federal authorities act first.

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OCC says if you’re not busy this weekend, maybe apply for a bank license

We’ll conclude our federal government whip-round at the Treasury Department’s Office of the Comptroller of the Currency (OCC), the agency in charge of issuing new U.S. bank charters. On August 11, OCC chief Jonathan Gould indicated that his office’s rush to dole out de novo (new) crypto-related bank licenses was only getting started.

In a statement, Gould said “de novo chartering is a sign of a healthy banking system,” helping to “drive innovation and expand consumer choice.” Following the 2008 global economic crisis, the number of de novo applications (and approvals) tumbled, but Gould proudly declared that “America and the OCC are once again open for business.”

According to Gould, for the past 15 years, regulators “signaled that those seeking a federal bank charter and federal deposit insurance need not apply. Entities that engage in legally permissible activities, including those involving digital assets and other novel technologies, should have a path to becoming a national bank.”

Since Trump took office in January 2025, the OCC has received 40 de novo applications, 21 of which have received at least initial approval. Last month, USDC stablecoin issuer Circle (NASDAQ: CRCL) received final approval for its First National Digital Currency Bank (d/b/a Circle National Trust).

Several other crypto-related applications received initial approvals over the past year, and Gould’s announcement suggests additional final approvals are imminent. And some may prove more controversial than others.

There are 13 pending license applications from “entities planning to offer digital asset products or services, including crypto-assets.” Among these is World Liberty Trust Company N.A., the would-be bank of the Trump-linked token-issuing project World Liberty Financial (WLF). WLF wants a bank license to exert greater control over its USD1 stablecoin rather than share the wealth with third-party custodians.

Some senators have accused Gould and the OCC of ‘rubber-stamping’ applications for “seemingly ineligible companies,” including crypto firms “that intend to engage in activities that appear to go far beyond the narrow set of activities permitted by law.” Possibly, but there are new sheriffs in town, and they have very different ideas about what the law says and means.

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