On February 19, a U.S. District Judge ruled that certain sports events contracts are swaps in a case regarding a potential enforcement action with Kalshi. In a memo granting Kalshi’s motion for a preliminary injunction, the judge blocked an enforcement action by the Tennessee Attorney General and the director and chairman of the Tennessee Sports Wagering Council because Kalshi is likely to succeed with its claims that its contracts are federally regulated swaps.
On February 18, a prominent trading and cryptocurrency company announced that Florida’s Attorney General investigation into its crypto activities has closed. The investigation was covering whether the marketing of its cryptocurrency was deceptive when considering “all-in” prices of competitors.
In response to the CFTC’s recent announcement that it has exclusive authority to regulate prediction markets, Utah’s Governor Spencer Cox said CFTC Chair Selig’s comments were a “joke.” In an interview at Politico’s Governors Summit, Cox reiterated his support of state regulation of innovative financial products, saying that he is “concerned about these new technologies” and that the “Supreme Court is going to back me up.”
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The CFTC has continued to focus on events contracts. On February 25, the CFTC issued an advisory and released two enforcement actions regarding insider trading and fraud in prediction markets. Though the entity subject to the enforcement actions handled the matters in its internal enforcement program, the CFTC emphasized that it has “full authority to police illegal trading practices occurring on any [Designated Contract Market], including those . . . related to prediction markets.”
On February 18, the Treasury Department announced the Artificial Intelligence Executive Oversight Group, a partnership between the Financial and Banking Information Infrastructure Committee and the Financial Services Coordinating Council, that brings together members of the private and public sectors to address AI in financial services. Together, participants focus on addressing identified gaps in the financial sector’s use of AI and developing practical tools that financial institutions can use to manage AI-specific cybersecurity risks. The Treasury Department will release six publications from this partnership throughout February.
On February 19, the Treasury released two resources as part of this collaboration. Developed to support President Trump’s AI Action Plan, the AI Lexicon and the Financial Services AI Risk Management Framework adapt the National Institute of Standards and Technology’s AI Risk Management Framework for financial services considerations in an attempt to provide practical tools for the financial sector.
In the first weeks of February, both Arizona and Missouri legislatures have advanced bills to establish digital asset reserve funds in their states. Both proposed funds would be comprised of assets appropriated by the legislature, seized by the state, or surrendered to the state, and the funds would be managed by the state treasurer. In Missouri, the fund has more restrictions on uses, requires a biennial report and regular audits, and establishes a minimum period of custody, among other things.
On February 25, the Office of the Comptroller of the Currency (“OCC”) released a notice of proposed rulemaking to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act (“GENIUS Act”). Specifically, the 376-page proposal sets forth a framework for payment stablecoin issuing, reserve assets, redemption, custody, capital backstop, and supervision of foreign issuers. Additionally, it establishes a standard for state qualified payment stablecoin issuers to transition to federal registration. Comments on the proposed rule are due 60 days after publication in the Federal Register.