Launchy Regulatory Roundup #82 - CFTC Sues States Over Prediction Markets

📢 Sponsor | 💡 Telegram | 📰 Past Editions

Good Morning.

Welcome to our 82nd edition of the regulatory roundup. If you know anybody who would benefit from this content, please help us spread the word!

In Today's Edition:

• Headline: CFTC Sues States Over Prediction Markets 👀 

• Global Legal Roundup

• Case Study: California, Congress Target Prediction Market Insiders 🔎 

You read and share. We listen and improve. Send us feedback at [email protected].

HEADLINE

CFTC Sues States Over Prediction Markets

State of play: The CFTC is suing Illinois, Arizona, and Connecticut to assert exclusive federal jurisdiction over prediction markets, marking the first time the agency has taken direct legal action against states over the issue.

• Illinois sent cease-and-desist letters to Kalshi, Crypto.com, and Polymarket, prompting the CFTC's federal suit.

• CFTC Chair Selig warned that fragmented state regulation weakens consumer protection and raises fraud risk.

• The agency is seeking a permanent injunction to block Illinois from enforcing state gaming laws against federally regulated platforms.

What’s Next: Other states testing prediction market restrictions should expect similar federal pushback, and courts will ultimately decide whether the Commodity Exchange Act's "exclusive jurisdiction" clause overrides state gaming law.

Why it Matters: The outcome will set a precedent for who controls the fastest-growing segment of crypto-adjacent derivatives, with billions in trading volume and platforms like Polymarket operating in a legal gray zone.

Our Take: The CFTC is making the right call procedurally, but the optics are messy: suing three states while the same platforms face credible insider trading allegations lets regulators claim jurisdiction without addressing the conduct that made states act in the first place.

GLOBAL LEGAL ROUNDUP

America:

• 🇺🇲 Treasury issues GENIUS Act rule proposal.

• 🇺🇲 Sen. Warren targets Bitmain-Trump family ties.

• 🇺🇲 Crypto super PAC names Tether exec chairman.

• 🇺🇲 Coinbase CLO says Clarity Act 'very close' to reaching deal.

• 🇺🇲 California bars officials from prediction market insider betting.

• 🇺🇲 US Labor Department proposes opening 401(k) plans to crypto.

• 🇺🇲 Alabama gov signs bill creating legality for DAO-like nonprofit entities.

• 🇺🇲 US indicts 10 foreign nationals for alleged crypto wash trading scheme.

• 🇺🇲 Coinbase receives conditional approval for national trust charter from OCC.

• 🇨🇦 Canada proposes ban on crypto political donations in election integrity bill

Europe:

• 🇷🇺 Russia moves to narrow crypto trading to regulated intermediaries.

Middle-East & Africa:

• 🇦🇪 VARA imposes margin, governance, and disclosure rules on crypto trading.

APAC:

• 🇭🇰 Hong Kong misses March target for first stablecoin licenses.

• 🇦🇺 Australia passes bill requiring financial licenses for crypto platforms.

• 🇯🇵 Japan’s financial watchdog flags KuCoin for OTC derivatives transactions.

CASE STUDY

California, Congress Target Prediction Market Insiders

State of play: California and federal lawmakers are moving to close insider trading loopholes in prediction markets, as suspiciously timed bets tied to military strikes and policy decisions draw scrutiny from both state and federal officials.

• California's Newsom signed an executive order barring state appointees from using non-public information to bet on prediction markets.

• The bipartisan PREDICT Act would ban federal officials and their families from trading event contracts tied to political outcomes, with profits forfeited and a 10% fine imposed on violators.

• Suspected insiders netted millions betting ahead of US military strikes in Venezuela and Iran, prompting Kalshi and Polymarket to tighten trading restrictions.

• Both platforms rolled out new restrictions and expanded surveillance measures this week targeting participants with direct influence over outcomes.

• Kalshi and Polymarket surpassed $20B in combined monthly trading volume for the first time, marking a seventh consecutive record high.

Our Take: Regulation here is overdue, but the sequencing is backwards: platforms crossed $20B in monthly volume and suspected insiders already cashed out millions before lawmakers moved.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our comprehensive database of crypto regulations around the world👇

If you enjoy reading this issue, please consider subscribing. It takes 1 minute of your time but it would mean the world to us 🙇

Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.