On October 8, 34 state financial regulatory agencies reached a settlement with a cryptocurrency money transmitter and kiosk operator over violations of the Bank Secrecy Act (BSA) and anti-money laundering (AML) laws. In addition to the $2.5 million settlement, the kiosk operator must cease virtual currency kiosk operations by January 1, 2027, or face an additional $4 million penalty. The kiosk operator agreed to hire an independent consultant to review its BSA/AML program’s “comprehensiveness and effectiveness,” submit a report to the states within six months, and correct any deficiencies within 12 months.
The Ohio Casino Control Commission has expanded its enforcement campaign against sports prediction markets by ordering 10 operators to stop offering sports event contracts without a gambling license. The Commission issued cease-and-desist notices on October 2 requiring the prediction market operators to confirm compliance in writing by October 16. The action follows the Sixth Circuit’s September 25 ruling that the Commodity Exchange Act does not preempt Ohio’s sports-gambling laws. Ohio’s notices warn that offering sports gaming without an Ohio license can expose the targeted businesses to administrative, civil, nuisance, or criminal action.
On October 9, the CFTC issued a Notice of Proposed Rulemaking that would expressly expand the definition of “swap” to include event contracts, including those tied to sports, politics, cultural, and weather-related events. The proposal seeks to resolve ambiguity and states that event contracts are financial instruments commonly known in the trade as swaps. Comments are due within 30 days of its publication in the Federal Register. This rulemaking, issued the same day as the companion Interim Final Rule described below, signals the CFTC’s effort to ensure exclusive federal jurisdiction over event contracts even as state regulators push back on sports-related contracts.
Also on October 9, the CFTC issued an Interim Final Rule stating that casino-style gambling products are excluded from the definition of “swap.” Chairman Selig stated that casino-style gambling products are not derivatives, and that the rule provides clarity on the limits of the CFTC’s regulatory scope. The CFTC is requesting comments on the Interim Final Rule within 30 days of its Federal Register publication, though the rule takes effect immediately upon publication.