MoFo's Financial Markets & Innovation

CFTC Staffs Innovation Advisory Committee

On February 12, the CFTC announced the members of the Innovation Advisory Committee, which was created to help the Commission stay up to date on how innovations such as AI and blockchain influence derivatives and commodity markets. The 35 newly appointed members of the Committee are mainly CEOs of digital asset related companies.

CA DFPI Announces Additional Restitution in DFAL Enforcement Action

On February 17, the California Department of Financial Protection and Innovation (DFPI) announced additional restitution requirements for violations of the California Digital Financial Law (DFAL) by a crypto kiosk company. DFPI originally issued an enforcement action to the company on July 25, 2025, for violations of DFAL’s transaction limit and disclosure requirements. The enforcement action also included a requirement for the crypto kiosk operator to provide written reports periodically to DFPI. Finally, DFPI emphasized its focus on crypto kiosk operator compliance with DFAL.

SEC Chair Atkins Appears before House and Senate for Oversight Hearing

On February 11 and 12, SEC Chairman Paul Atkins testified in the House and Senate, respectively. In both hearings, Atkins emphasized the SEC’s focus on digital asset regulatory clarity, the joint CFTC-SEC Project Crypto, and the need for the CLARITY Act to “future-proof” digital asset treatment. Through questions from Senator Mark Rounds (R-S.D.), Atkins also discussed the potential for an “innovation exemption” for companies to test AI tools, which echoes the White House AI Action Plan and a bill sponsored by Senator Rounds titled “Unleashing AI Innovation in Financial Services Act.”

SEC Director of Corporation Finance Sets Upcoming Agenda, Including Crypto Assets

On February 13, the SEC’s Division of Corporation Finance Director James Moloney released a statement on “coming attractions” in his division. Throughout the remarks, Moloney focuses on the SEC’s efforts to limit burdensome regulations and expand the release of guidance to ensure companies can comply. Moloney also discusses two recommendations focused on crypto assets that will be sent to the broader SEC in the form of interpretive guidance. The first recommendation will provide a framework for determining whether crypto assets are investment contracts. The second will set a regulatory framework for the offer and sale of crypto assets subject to an investment contract.

Virginia Legislature Looks to Regulate Crypto Kiosks

In early February, the Virginia state House and Senate passed a bill that would establish a regulatory framework for cryptocurrency kiosks. Kiosks would be required to obtain a license with the State Corporation Commission, file quarterly and annual reports, and reasonably attempt to prevent fraud and money laundering. Fraud and money laundering protections include a 48-hour hold for new users and ID checks for all transactions. The bill also limits transactions above a certain daily and monthly limit, and operators would be limited to a transaction charge of 18% of the transaction. 

CFTC Chair Pens Op-Ed on Prediction Markets

On February 16, CFTC Chair Michael Selig published an opinion in The Wall Street Journal announcing the Commission’s amicus brief supporting Crypto.com in the Ninth Circuit Court of Appeals. Crypto.com is faced with legal action from the Nevada Gaming Control Board for allegedly operating an unlicensed gambling site through its offering of sports event contracts. Selig writes that the Crypto.com case, along with roughly 50 other active cases, is an example of “overzealous state governments undermin[ing]” CFTC exclusive authority over CFTC registered exchanges in prediction markets. Selig writes that, under the Commodity Exchange Act, the event contracts offered by CFTC registered companies are swaps and are under CFTC jurisdiction.

SEC Division of Trading and Markets FAQs on Crypto Asset Activities and Distributed Ledger Technology

On February 19, the SEC Division of Trading and Markets added additional crypto asset and distributed ledger FAQs regarding payment stablecoin treatment under the broker-dealer net capital rule. The FAQs state that the Division “will not object” if a broker-dealer applied a 2% haircut on payment stablecoin proprietary positions in calculating net capital. In a statement on the FAQs, Commission Hester Peirce stated that she wants the SEC to “consider how Rule 15c3-1 could be amended to account for payment stablecoins” and that she embraces feedback from market participants on any rules that could be amended for SEC-registered entities to use payment stablecoins.