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 April 13, staff in the SEC’s Division of Trading and Markets issued a statement providing conditional, five-year no-action relief from broker-dealer registration under Section 15 of the Securities Exchange Act of 1934 for certain Covered User Interface Providers offering crypto asset services. The relief applies to certain crypto trading interfaces, such as non-custodial wallets or front ends to blockchain-enabled software applications, provided they do not take custody of customer assets, execute trades on a user’s behalf, or provide investment advice.
On April 9, Senator Blumenthal sent a letter to the CEO of Polymarket regarding potential insider trading on their prediction markets. The letter alleges that new users placed large and specific bets prior to significant action in Venezuela and Iran earlier this year, which Blumenthal believes may indicate some users are trading on national security secrets. Since the actions in Venezuela and Iran, Polymarket has announced additional rules to combat the use of confidential information in trading. The Senator requests additional information on death wagers, national security information, and insider trading by April 24, 2026.
Following the CFTC-DOJ joint filing against Arizona, Connecticut, and Illinois last week, discussed in last week’s Financial Markets & Innovation Weekly Update from Morrison Foerster, the CFTC filed a motion on April 9 requesting the halt of Arizona’s application of state laws to CFTC-registered prediction markets. The U.S. District Court of Arizona granted their request for a temporary restraining order on April 10. In the same vein, Kalshi filed suit against Montana officials on April 13 for their application of state gambling laws to the CFTC-registered prediction market. This recent suit against Montana comes after multiple cease-and-desist letters and an agreement between Kalshi attorneys and Montana regulators.
On April 10, the CFTC announced members of its Innovation Task Force, which include attorneys from large law firms, consultants, and CFTC staff members. The Innovation Task Force will focus on regulatory clarity for digital assets, AI, and prediction markets, and will be led by Michael K. Passalacqua.