On June 10, the CFTC issued a proposed rule that would create a framework to determine whether events contracts include certain unlawful or prohibited conduct, including terrorism, war, and gaming. The framework would determine whether an events contract is “contrary to public interest,” which the CFTC would determine after a 90-day review that commences within 10 days of the events contract’s listing. The proposal addresses only a small part of the Advanced Notice of Proposed Rulemaking published in March, and the CFTC states that the March publication may lead to further rulemaking.
On June 9, the New York State Department of Financial Services proposed regulations to align its stablecoin framework with the GENIUS Act’s requirements for state certification. The proposed regulation incorporates NY DFS’s existing requirements for U.S. dollar-backed stablecoins, including backing, redeemability, reserves, and independent audits, while adding new federal provisions including requirements for comprehensive risk management programs. Critically, the existing guidance remains in effect. Comments are due within the 10-day preproposal comment period, followed by a 60-day comment period, with the final regulation set to take effect simultaneously with the GENIUS Act, followed by a one-year transition period for existing New York-licensed issuers.
In a June 8 letter to CFTC Chairman Michael Selig, Senator Elizabeth Warren (D-Mass.) expressed concerns about the agency’s regulation of prediction markets and cryptocurrencies, citing a recent news report detailing executive branch and industry involvement in agency decision-making. The Senator noted that the CFTC reduced its workforce by approximately 25%, halted enforcement actions, and limited regulatory actions against allies of the executive branch. She is primarily concerned with potential quid pro quo corruption in light of the president’s investments in the cryptocurrency and prediction market industries. Warren requested information from Chairman Selig by June 18, including records of communications with prediction market firms and a list of staff placed on leave.
More than 200 digital asset companies and trade groups penned letters to Senate leaders urging consideration of the CLARITY Act as soon as possible. The bill is waiting for full consideration by the Senate after the Senate Banking Committee’s bipartisan passage, and time before the midterm elections is scarce. The letter points to American leadership in financial innovation, the bipartisanship of the bill, and the need for transparent oversight as reasons to support its passage.
Prediction market platform Kalshi has reportedly announced that traders will be required to disclose their employment status when trading in certain markets. The changes will be implemented in the next few weeks following recommendations from an audit panel after recent insider-trading incidents. Kalshi will focus on national security and company performance markets because of the potential for material nonpublic information to influence trading activity. For the markets flagged by Kalshi, participants will be required to verify their employment through an online form, and Kalshi will not independently audit the information unless suspicious activity occurs.