The SEC is prepared to roll out major initiatives in the coming days as the CLARITY Act failed to progress before the August recess in Congress. The SEC called an open meeting for Friday, August 14 to consider proposing a new “tailored offering regime for certain investment contracts involving crypto assets.” The SEC’s forthcoming innovation exemption is also expected to permit firms to offer trading in tokenized versions of existing U.S. stocks. Details on the proposal are expected on August 14, but the final rules would not be effective until at least 2027.
On August 11, the CFTC used its emergency authority to prevent New York from obtaining a temporary restraining order against Kalshi. In the New York complaint, Attorney General James requested a temporary restraining order to prevent the prediction market from offering events contracts nationwide, which the CFTC found was in violation of the Commodity Exchange Act’s requirement of a uniform national market in derivatives. The CFTC ordered the exchange to continue to operate in accordance with the Commodity Exchange Act’s Core Principles. Chairman Michael S. Selig stated that “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws” and emphasized that these are interstate financial markets under federal jurisdiction.
Flight-tracking company FlightAware has filed a lawsuit against Kalshi for allegedly improperly using its proprietary data and brand to support bets on flight cancellations. Filed August 10 in the U.S. District Court for the Southern District of New York, the complaint alleges that Kalshi submitted a self-certification with the CFTC designating FlightAware as the Primary Source Agency for determining outcomes on flight cancellation contracts without FlightAware’s knowledge or consent. The lawsuit asserts claims of breach of contract, trademark infringement, and unfair competition, noting that FlightAware canceled Kalshi’s access to certain services and issued cease-and-desist notices after discovering the markets. FlightAware argues that these prediction markets could be abused to interfere with flights, which would pose a safety risk for travelers and airport employees.
On August 10, CFTC Chairman Michael S. Selig announced that the Innovation Advisory Committee will host its first meeting on August 20. The Committee was created to advise the CFTC on the intersection of technology, law, policy, and finance. The August 20 meeting will discuss “crypto assets, artificial intelligence, and prediction markets.”
On August 12, the CFTC Division of Market Oversight issued an advisory on certain self-certifications submitted under Regulations 40.5 and 40.6 by designated contract markets (DCMs). The advisory points to recent “procedural or substantive deficiencies” in certain incentive-program rule filings, specifically in event contracts. While not providing alternate or additional requirements for DCMs, the advisory outlines the CFTC staff’s expectations for submissions.