MoFo's Financial Markets & Innovation

House Members Introduce Insider-Trading Bill Limiting Stock and Prediction Market Activity

A group of House members introduced a bill that would bar federal candidates, elected officials, Supreme Court justices, federal judges, and other senior government officials from trading stocks and using prediction markets. Introduced by Rep. Kristen McDonald Rivet (D-Mich.), Rep. Kevin Kiley (I-Calif.), Rep. Greg Landsman (D-Ohio), and Rep. Eugene Vindman (D-Va.), the bill would also ban spouses and dependents from certain trading activities, and prevent candidates for federal office and certain federal political staff from participating in prediction market contracts regarding government and politics.

CFTC Issued a Proposed Rulemaking on Event Contract Data Reporting

On June 25, the CFTC proposed a rule on amendments to Parts 15, 16, and 17 of its regulations, which govern data reporting requirements for certain event contracts. The proposal establishes a reporting framework for fully collateralized event contracts, a product category that has been operating under staff no-action letters. Under the proposed rules, certain reporting markets, futures commission merchants, clearing members, and foreign brokers would report event contracts pursuant to Parts 15 through 18, rather than under portions of Parts 38, 39, 43, and 45. Chairman Michael S. Selig framed the rulemaking as a move away from “a patchwork of no-action letters” and toward a regulatory framework for the growing event contracts market. The proposal would specifically add a new Section 16.03, titled “Covered Event Contracts,” to Part 16 of the Commission’s regulations.

SEC Issued Request for Public Comment on Novel ETFs

On June 30, the SEC issued a request for public comment on exchange-traded funds (ETFs) looking to invest in innovative asset classes or pursue novel investment strategies. SEC Chairman Paul S. Atkins emphasized the need for a “consistent, transparent, and efficient regulatory framework” that can effectively serve markets. The Commission is seeking feedback on the status of certain novel ETFs as investment companies, their regulation, and how the registration process can continue to function effectively. The public comment period will remain open for 60 days after publication in the Federal Register.

Kalshi Prediction Markets Barred from Michigan by Judge

A Michigan Ingham County Circuit Court judge has issued a temporary restraining order blocking prediction market platform Kalshi from operating in Michigan, following Attorney General Dana Nessel’s March lawsuit against the company. The judge ruled that Michigan residents face “immediate and irreparable harm” from being “exploited by Kalshi’s sports betting operation masquerading as an investment opportunity.” The order bars Kalshi from offering wagers, accepting deposits, advertising, creating new accounts, or launching similar products in the state, and is effective until July 13, pending further proceedings. Kalshi said it will comply but disputes the characterization, arguing it is exclusively subject to federal trading laws and that its platform offers commodity trading instead of gambling. A federal judge had previously rejected Kalshi’s attempt to move the case to federal court, finding that Michigan’s gambling laws are not preempted by federal trading rules.

CLARITY Act Update

The CLARITY Act is facing an important two-week window as the Senate returns from its July 4 recess on July 13 with limited floor time before the August break. Key disputes remain unresolved, including whether to include restrictions addressing President Trump’s crypto holdings, law enforcement concerns over the Blockchain Regulatory Certainty Act, federal preemption of state law, conflict-of-interest rules for crypto exchanges, and affiliate trading restrictions. The bill needs at least 60 votes for passage, meaning at least seven Democrats must cross the aisle, with the assumption that Republicans will vote on party lines. The White House is reportedly engaging law enforcement organizations to discuss objections to the bill’s exemptions for developers from money transmitter requirements.

Separately, a community banking trade group launched a campaign opposing the CLARITY Act’s stablecoin provisions, warning that allowing crypto companies to pay rewards and incentives on stablecoin use could drain community bank deposits and small business loans. Crypto industry groups counter that the trade association is simply trying to shield an outdated model from competition and that the legislation introduces new avenues for pursuing bad actors while providing clear rules. Despite the opposition, daily in-person meetings are reportedly occurring between Senate negotiators, and the House Financial Services Committee scheduled a field hearing for July 17 to examine the CLARITY Act.