Please see below for this week’s Financial Markets & Innovation Weekly Update from Morrison Foerster, tracking how emerging technologies are reshaping financial markets and how U.S. and global regulators are responding. Covering developments across digital assets, prediction markets, artificial intelligence, and next-generation trading infrastructure, this update highlights key regulatory actions, enforcement activity, policy signals, and related market structure implications.
On March 30, Reports indicated that federal prosecutors are examining whether certain bets placed on prediction markets may have the violated laws. According to a spokesperson for the U.S. Attorney’s Office for the Southern District of New York, authorities are considering the application of insider trading, anti-money laundering, market manipulation, and anti-fraud statutes, and have met with participants from a major prediction market platform.
On March 30, Senator Warren (D-Mass.) sent a letter to SEC Chairman Paul Atkins regarding Judge Margaret Ryan’s recent resignation from her position as Director of the Division of Enforcement. According to reports, the resignation came in the wake of a disagreement on her ability to bring actions against President Trump’s allies, including in matters against digital asset related individuals that have recently been dropped. Warren details instances in which the Republican nominees acted in favor of individuals close to the administration without discussion with the Division of Enforcement. Additionally, Warren pointed out that the SEC has not released enforcement data from fiscal year 2025, reiterating previous letters and statements.
On March 31, Federal Reserve Governor Michael Barr issued remarks on stablecoins at a GENIUS Act implementation event. In his remarks at the Federalist Society, Barr stated that his main areas of concern for stablecoins include their use in money laundering, issues with financial stability, and their liquidity. Barr believes regulatory implementation on both the federal and state levels will be a determining factor in preventing stablecoin runs.
In a white paper released on March 31, Google researchers warned that quantum computers would be able to breach protections on cryptocurrency faster than previously anticipated. Prior estimates had determined that the materials needed to build quantum computers capable of breaking cryptocurrency security would ensure these attacks would not occur until well into the future. To prevent these attacks, the researchers advise transitioning to post-quantum cryptography before the 2029 timeline.
On April 1, the Treasury Department issued a notice of proposed rulemaking regarding state-level regulatory regimes under the GENIUS Act. Under the GENIUS Act, payment stablecoin issuers with issuances under $10 billion may choose to be regulated under a state regulatory regime comparable to the federal framework. To be substantially similar to the federal framework, state regulatory regimes would be required to remain consistent with federal standards “in all substantive respects” and have standards that “lead[] to regulatory outcomes that are at least as stringent and protective as the [f]ederal regulatory framework.” The state regulatory regimes would also need to include provisions for a transition from the state to federal regulatory regimes consistent with the GENIUS Act. Comments will be due 60 days after publication in the Federal Register.
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