On March 17, the Connecticut Department of Banking temporarily barred a cryptocurrency exchange from transmitting money and threatened possible civil penalties of up to $100,000 per violation over accusations that it charged transaction fees exceeding the 15% statutory cap. The Department stated that it has reason to believe the exchange violated more than a dozen separate state statutes and one federal regulation for charging fees above the statutory cap on over 1,000 transactions and not following proper Know Your Customer procedures. Connecticut is the latest of several states to take legal action against the entity for issues ranging from consumer protection to failures in scam prevention.
In a major step towards providing clarity in the treatment of crypto assets and in line with congressional efforts to create a structured market framework, the SEC issues an interpretation explaining the staff’s current view of the application of federal securities laws to certain crypto assets, on-chain programs and services, and related transactions. The interpretation establishes categories of tokens, addresses how non-security crypto assets may be subject to an investment contract, and explains when crypto-related activities and transactions fall under the federal securities regime. The Commodity Futures Trading Commission (CFTC) specifically clarified that it would administer the Commodity Exchange Act (CEA) consistent with SEC’s Interpretation on Crypto Taxonomy. The CFTC added that “certain non-security crypto assets” could meet the definition of a commodity under the CEA.
On March 17, the CFTC’s Market Participants Division issued a no-action letter in response to a request from Phantom Technologies Inc., a developer of self-custodial crypto asset wallet software. Phantom asked whether it could continue promoting software that allows users to trade through registered platforms without registering as a broker. The CFTC stated that, subject to certain conditions, it would not recommend enforcement action against Phantom for these activities.
On March 17, Arizona filed criminal charges against prediction market platform Kalshi alleging the company was running an unlicensed gambling business and wagering on elections, which violate Arizona law. While Kalshi is facing more than 20 civil lawsuits over legal status, this recent legal action from Arizona is the first state to bring forth criminal charges. In response, CFTC Chair Selig expressed concern in a post on social media, saying that state issues with prediction markets are a “jurisdictional dispute and entirely inappropriate as a criminal prosecution.” Selig also stated that the CFTC is “watching this closely and evaluating its options.”
On March 17, Mastercard announced the acquisition of stablecoin infrastructure startup BVNK for up to $1.8 billion. Founded in 2021, BVNK works to enable on-ramps to blockchain networks, which would provide Mastercard with the infrastructure to expand stablecoin offerings. In a statement, Mastercard’s Chief Product Officer described its investment as supporting “speed and programmability for virtually every type of transaction.”
On March 11, FDIC Chairman Travis Hill announced that the FDIC is planning to propose that payment stablecoins subject to the GENIUS Act are not eligible for pass-through insurance. In a speech at the American Bankers Association, Hill stated that the FDIC is open to hearing different perspectives on this issue, and that the question of pass-through insurance applicability should be decided definitively by regulation. He also noted that as part of the same proposal, but apart from the GENIUS Act, the FDIC plans to provide clarification and seek comment on the applicability of deposit insurance rules to tokenized deposits.