MoFo's Financial Markets & Innovation

States and CFTC File for Jurisdiction in Courts Nationwide

In the last week, the flurry of activity surrounding prediction market jurisdiction has continued, with both the states and the U.S. Commodity Futures Trading Commission (CFTC) claiming rights to enforce. Specifically, the CFTC sued New York and Wisconsin late last week for filing suit against prominent prediction markets and allegedly violating the CFTC’s exclusive jurisdiction over the platforms, adding to other lawsuits in Arizona, Connecticut, and Illinois. Additionally, the CFTC filed an amicus brief with the Massachusetts Supreme Court in Massachusetts v. KalshiEx, arguing again that the Commodity Exchange Act gives the CFTC exclusive authority to regulate the “swaps” that Kalshi offers. On the other side, a coalition of 38 attorneys general filed an amicus brief in support of Massachusetts, saying that the Dodd-Frank Act wasn’t intended to legalize sports gambling nationwide and that the products should not be considered swaps.

Regulators Talk Crypto at the Bitcoin 2026 Conference

Over the weekend, representatives from the SEC, CFTC, and DOJ, and digital asset industry members met in Las Vegas to discuss tokenization, cryptocurrency market structure, and innovation. In his fireside chat, SEC Chair Paul Atkins discussed an upcoming “innovation exemption” for crypto projects to test out innovative products without breaking securities laws. Both Atkins and CFTC Chair Mike Selig emphasized the need for Congress to pass a crypto asset market structure bill and for continued cooperation between their agencies.

In a separate remote discussion, Acting Attorney General Todd Blanche and FBI Director Kash Patel spoke on U.S. government criminal enforcement of digital assets.  Specifically, Blanche discussed an enforcement shift to look at crimes committed by third-party users instead of the actions of software developers when building the platform. While echoing a similar outlook, Patel stated that the FBI will be focusing on fraud, scam centers, and foreign adversaries using crypto to commit crimes against Americans.

DOJ and CFTC Charge Army Soldier for Prediction Markets Insider Trading

Last week, the United States Attorney’s Office for the Southern District of New York (SDNY) brought what appears to be the first criminal prosecution related to prediction markets insider trading. SDNY indicted an active-duty U.S. Army Special Forces master sergeant who allegedly profited by more than $400,000 in connection with his alleged use of material nonpublic information regarding a U.S. military operation to capture Nicolás Maduro and his wife to trade event contracts tied to that outcome. The CFTC filed a parallel civil action the same day. To learn more about this action, read our recent client alert.

Coalition Bails Out Crypto Protocol After Separate Security Incident

After last week’s security hack at crypto protocol KelpDAO and the deposit of funds into DeFi lending platform Aave, Aave experienced a significant liquidity run, which caused liquidity and deposit issues on the platform. These issues were felt particularly by positions using “looping strategies,” a method for users to increase returns by borrowing and redepositing. In response to the run, a coalition named DeFi United, comprised of the platform and cryptocurrency allies, has committed $240 million in a token meant to represent Ether to ensure affected users can be made whole. Though Aave did not experience a security breach, the highly connected crypto industry caused the incident to extend further than the breached party.

Senators Send Letter to SEC Chair Atkins on Crypto Market Treatment

On April 27, Senators Elizabeth Warren (D-Mass.) and Chris Van Hollen (D-MD) sent a letter to Paul Atkins discussing concerns raised by recent SEC interpretive guidance on crypto assets. The Senators wrote on the so-called loopholes for crypto offerings to avoid securities laws by using the sweeping exemptions set forth in the guidance. The letter also raised questions on the legality of the interpretive guidance published outside a notice-and-comment period, financial stability considerations, and cybersecurity risks. They requested copies of various communications and records related to the guidance, specifically communications with the White House.