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 July 14, the Commodity Futures Trading Commission (CFTC) blocked an emergency rule change that directed Kalshi to cancel trades involving Michigan residents. The Commission simultaneously required Kalshi to honor and fulfill all open trades through its normal settlement processes. Chairman Michael S. Selig stated that federal law prevents a Designated Contract Market from treating residents of any one state differently than others. The agency emphasized that unwinding already executed derivatives trades is unprecedented and could trigger disruptions across the broader market by undermining contractual certainty.
The House Agriculture Committee’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development has scheduled a hearing for July 21 focused on sports-related prediction markets. Lawmakers are expected to explore the application of consumer protections and market integrity when participants wager on sporting outcomes through CFTC-regulated platforms.
On social media, President Trump urged the Senate to advance the CLARITY Act as a tribute to Senator Lindsey Graham (R-SC), who had passed away over the weekend. Though Senator Graham was not a member of the Senate Banking Committee or a sponsor of the CLARITY Act, President Trump stated that Graham was “a big supporter.” President Trump also said China and other foreign countries are attempting to compete in digital assets and AI, and the CLARITY Act would help defend U.S. hegemony. In response to the President’s post, Senator Cynthia Lummis (R-Wy.) stated that “Senator Graham … was passionate about ensuring that American leadership stayed at the forefront of everything – including digital assets” and reiterated her support of the CLARITY Act’s passage.
On July 13, a coalition of 78 banking organizations sent a joint letter to Senate leadership requesting specific revisions to Section 404 of the CLARITY Act, which discusses stablecoin yield. The coalition’s central concern is that ambiguities in the current draft would allow stablecoin issuers to structure rewards and incentive programs that could function as interest payments, which would turn payment stablecoins into substitutes for bank deposits. The groups proposed specific textual changes, including the replacement of the “economically or functionally equivalent” standard with a stricter “substantially similar” test and the deletion of a provision that permits payments calculated in reference to a holder’s balance or tenure. The banking groups acknowledged the value of responsible digital asset innovation but emphasized the effects of community bank deposits on local economies and communities.
Senator Cynthia Lummis (R-WY) announced on July 14 that formal bill text for the CLARITY Act would be introduced within days. In a social media post and news interview, Lummis described the legislation’s goals as combating illicit finance, establishing consumer protections, and maintaining U.S. crypto market leadership. The announcement comes as the Senate returns from recess with a roughly four-week window to secure the 60-vote threshold needed for floor passage before the August recess deadline.