tl;dr
The SEC cracks on with its pro-crypto stance. The CFTC proves its pro-crypto credentials.
Market Snap
Market Wrap
With CPI out today and PPI out tomorrow, there is the potential for some heightened market volatility. Last month’s figures surprised to the downside, as did nonfarm payrolls. A repeat this month would be a boost to risk markets.
Curious Cryptos’ Commentary – SEC and “Project Crypto”
“Project Crypto” is the SEC’s plan to develop wide-ranging regulation for the crypto industry. It has started with the issuance of a formal notice of an Open Meeting this Friday at 10am ET with this objective:
“The Commission will consider whether to issue a release proposing new rules to create a tailored offering regime for certain investment contracts involving crypto assets.”
Source: https://www.sec.gov/newsroom/meetings-events/sunshine-act-notice-open-081426
SEC Chairman Paul Atkins has been publicly vocal in his support of the crypto industry, so he is clearly a very wise man. His preference is for legislative action to provide a durable framework, but with Senate consideration for the CLARITY Act now delayed to September at the earliest, Paul is taking unilateral action to provide an increased degree of regulatory certainty around cryptos.
TD Cowen analyst, Jaret Seiberg, explains:
“We view this as the first of several rulemakings the SEC will undertake to provide regulatory certainty for crypto assets after the Senate failed before the August recess to advance the Clarity Act on crypto market structure.”
This current initiative aims to provide a “regimented path for legal issuance of digital assets”. This will clarify the situations in which crypto projects can raise capital without risking the ire of the SEC, and perhaps also provide details of how a project can move to become a commodity through decentralisation, taking it out of the orbit of the SEC entirely, and into the hands of the CFTC.
Curious Cryptos’ Commentary – CFTC and Kalshi
Kalshi is one of several newly created prediction markets, operating onchain requiring only a crypto wallet for access, though there are other login options. There have been concerns raised about the potential for insider trading. Indeed, a soldier was recently charged for allegedly using inside information to profit from the capture of Venezuelan President Nicolás Maduro. Putting aside the illegality of using insider information to enrich oneself, I think we can all agree such betting is distasteful at best, whatever one’s personal opinions of Maduro’s kleptocratic administration.
However, it is a legal activity that undoubtedly should be regulated.
New York has long been actively anti-crypto. New York Attorney General Letitia James sued Kalshi, claiming it as an illegal gambling business, and seeking $36bn of restitution, disgorgement of profits, and civil penalties:
There is a certain mindset of some politicians across the entire political spectrum who believe that banning stuff is generally the way to go, rather than it being a tool that should rarely be used. Those politicians have a serious lack of understanding, deliberate or otherwise, of the true nature of decentralisation.
The CFTC has ridden to the rescue, making an order that allows Kalshi to continue operating in New York state. In a statement, the CFTC makes its position plain:
“The Commodity Futures Trading Commission today exercised its emergency authority in response to KalshiEX, LLC’s notification of a market emergency and ordered the exchange to continue to operate in accordance with the Commodity Exchange Act’s Core Principles.”
CFTC Chairman, Michael S. Selig, spoke more plainly still:
“New York has no business regulating these interstate financial markets. The Commission is required by law to ensure order in these markets, and that is what we have done today.”
Source: https://www.cftc.gov/PressRoom/PressReleases/9281-26
The CFTC’s pro-crypto credentials are no longer in any doubt, another win in the fight for freedom, liberty, and privacy.