Tag: Regulation & Policy

Gensler Argues Dodd-Frank Did Not Authorize Nationwide Sports Wagering

Gary Gensler, former chair of both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), filed an amicus brief late Thursday with the Sixth Circuit Court of Appeals, asserting that Congress did not grant the CFTC authority over nationwide sports wagering when it enacted the Dodd-Frank Act in 2010. Gensler contends that state gaming laws remain in effect.

Tribal Nations and Gaming Associations Support Ohio

Thirty Native American tribes and 11 tribal associations have submitted an amicus curiae brief in support of Ohio in the Sixth Circuit’s appeal concerning prediction markets. This filing comes after federal district judge Sarah Morrison denied Kalshi’s request for a preliminary injunction in its challenge to state cease-and-desist orders. Gaming attorney and prediction market expert Daniel Wallach noted the significance of this broad support for Ohio’s position.

Diverse Coalition Backs State Authority

Gensler’s filing joins a notable group of amici curiae supporting the State of Ohio, including the Indian Gaming Association, the American Gaming Association, and Better Markets. Notably, the Utah Attorney General, representing a state where sports betting is entirely outlawed, was among the co-signers alongside Nevada.

Gensler’s Shift from Crypto Enforcement to State Gaming Support

As SEC chair, Gensler spearheaded an aggressive campaign against the cryptocurrency industry, initiating approximately 100 enforcement actions and characterizing the sector as one “built up around noncompliance.” He is now aligning himself with states in opposition to a market that has received CFTC endorsement.

Dodd-Frank’s Original Intent

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010 following the 2008 financial crisis to regulate swaps and curb risky derivatives, is central to the current legal dispute. Gensler, who chaired the CFTC from 2009 to 2014 and was involved in its negotiation, stated that the law was designed to address the financial crash, not to authorize sports wagering.

“Millions of people were out of work. Millions of people had lost their homes,” Gensler said in a CNBC interview, referring to legislation focused on credit-default and interest-rate swaps. He recalled his extensive testimony before Congress, emphasizing that no lawmakers suggested granting his agency authority over sports betting.

The brief further argues that no drafters of Dodd-Frank “was attempting to put a curve ball by the Senate Majority Leader to legalize a national sports-betting regime.” The filing invokes the court’s principle that Congress does not “hide elephants in mouseholes,” suggesting that preempting a $165-billion-a-year industry would not be concealed within “a subpart of a definition.”

Opposition to CFTC’s Proposed Rule

Gensler has also voiced opposition to the CFTC’s extensive 267-page proposal, which would permit betting on sports outcomes but prohibit contracts related to war, assassination, and certain injury- or referee-related wagers. When asked if the proposal represented progress, Gensler responded negatively, asserting that the agency is attempting to reverse a rule the CFTC unanimously adopted around 2011 that prohibited contracts on “assassination, war, terrorism, gaming or unlawful acts.”

Citing the CFTC’s reduced workforce and concerns about youth gambling and addiction, Gensler argued that these issues are best managed at the state level, stating, “Let the states do it.”

Federal vs. State Jurisdiction Battle Intensifies

Sixteen states are currently engaged in legal proceedings with prediction market platforms. Minnesota has banned them outright, making it a felony to operate or advertise such services. The CFTC has taken the unusual step of suing six states to defend what it asserts is its exclusive jurisdiction.

President Donald Trump has publicly supported the federal government’s stance, deeming the issue “critically important” and urging regulators to maintain control as states increasingly treat the sector as gambling. The administration has reinforced this position in court, with the CFTC and the Department of Justice jointly suing Minnesota shortly after Governor Tim Walz signed the state’s prediction market ban into law.

Daniel Wallach highlighted that the tribal amici brief underscores the breadth of Kalshi’s legal argument. The company bases its claim of exclusive federal jurisdiction not only on Dodd-Frank but also on the Commodity Futures Modernization Act of 2000 and the CFTC Act of 1974. Wallach noted that these earlier statutes are sufficiently old to qualify as “long-extant statutes” under the major-questions doctrine, which typically requires explicit congressional authorization for significant expansions of agency authority.

Decrypt has reached out to the CFTC and Kalshi for comment.

Banking Groups Urge Clarity on Stablecoin Oversight

U.S. banking trade groups are urging federal regulators to clarify which entities are responsible for overseeing stablecoin transactions after their initial issuance. This push marks a new front in a policy debate that has seen cryptocurrency firms warn that stringent anti-money laundering (AML) rules could drive regulated dollar-backed tokens out of the decentralized finance (DeFi) sector.

In two joint comment letters released Wednesday, the Bank Policy Institute (BPI) and The Clearing House argued that current regulations do not impose sufficient obligations on DeFi firms, certain digital asset custodians, and exchanges. The groups contend that most illicit activity occurs in the secondary market, making oversight of this stage critical as regulators develop stablecoin AML rules.

Calls for a Flexible AML Regime

The banking organizations emphasized the need for a “flexibility first” approach in their letters. They suggested that regulators should allow banks to concentrate resources on the most pressing threats, moving away from a “check-the-box compliance” mentality and addressing the existing gaps in stablecoin secondary markets.

The BPI and The Clearing House specifically noted in their stablecoin letter that the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) “correctly recognize” that the “majority of illicit finance involving payment stablecoins occurs on the secondary market.” They also pointed out that permitted payment stablecoin issuers “may have less information on secondary market transactions than on primary market transactions.”

Stablecoins are digital tokens designed to maintain a stable value, typically pegged to a fiat currency like the U.S. dollar. Issuers are responsible for creating and redeeming these tokens and managing the reserves that back them. Under legislation like the GENIUS Act, certain issuers can qualify as “permitted payment stablecoin issuers,” authorizing them to operate in the U.S.

Industry Divided on Oversight Responsibilities

Earlier this week, crypto investment firm Paradigm and the Hyperliquid Policy Center issued a warning that broad AML rules could displace regulated dollar tokens from DeFi. They argued that stablecoin issuers should not be held liable for activities they cannot monitor or control once tokens enter secondary markets.

The differing perspectives from the banking and crypto industries highlight a growing tension over how to regulate stablecoin activity post-issuance without making issuers directly responsible for transactions beyond their control.

Charles d’Haussy, CEO of the dYdX Foundation, commented that both industry letters overlook existing compliance tools embedded within major stablecoins and utilized by DeFi platforms.

“What is missing from both submissions is a basic technical fact: AML monitoring in stablecoins does not stop at issuance,” d’Haussy told Decrypt. He explained that every transfer of USDC or USDT passes through the issuer’s master smart contract, where freeze and blacklist controls operate in real-time. Furthermore, he noted that most leading DeFi platforms conduct on-chain trade screening, suggesting the regulatory gap is “narrower than either letter acknowledges.”

D’Haussy believes the primary enforcement challenge lies with “offshore exchanges and unhosted wallets operating outside FATF’s Travel Rule framework, not the compliant DeFi infrastructure that is already doing the work.”

Beyond the technical aspects of monitoring, broader oversight could facilitate the scaling of stablecoin markets by “narrowing the gap” between crypto and traditional finance, according to Dominick John, an analyst at Zeus Research. For DeFi firms, custodians, and exchanges, this could translate to enhanced Know Your Customer (KYC) checks and transaction controls, potentially leading to “clearer rules, stronger trust, [and] bigger institutional flows.”

Crypto Adoption Thrives in Nepal Despite Official Ban, IMF Warns

KATHMANDU, Nepal – Despite a nationwide ban on cryptocurrency transactions, adoption of digital assets is growing in Nepal, prompting the International Monetary Fund (IMF) to urge authorities to enhance monitoring of the sector to safeguard financial stability and prevent illicit financial flows.

In a report released Tuesday, the IMF noted a “marked growth” in stablecoin and unbacked crypto asset flows between 2019 and 2024. While acknowledging that adoption remains modest compared to regional peers, the Fund emphasized that the trend “warrants close monitoring” given the legal prohibition on crypto activities.

This finding was part of the IMF’s 2026 Article IV Consultation, published as its Executive Board concluded its seventh and final review of Nepal’s Extended Credit Facility on June 5. Nepal officially banned all cryptocurrency transactions in 2021, with the central bank declaring trading, mining, and related activities illegal.

IMF staff calculations indicate that crypto inflows, which were negligible in 2020, surged to over $2.6 billion in 2021, briefly representing more than 13% of Nepal’s Gross Domestic Product (GDP). By 2023, these volumes had decreased to approximately 4% of GDP, before climbing back to around 8% in 2024, with stablecoins constituting the larger and expanding portion of these flows.

Regarding cross-border flows, the IMF estimated Nepal’s crypto engagement at around 5% of GDP in early 2025. This places Nepal ahead of countries like Bangladesh and Myanmar but significantly behind Vietnam, which stands at approximately 26%.

The IMF advocates for a regulatory framework that aligns with international standards. Such a framework, the Fund stated, “would help safeguard financial stability and integrity and consumer protection, while limiting circumvention of capital controls or large-scale deposit outflows.” Additionally, the IMF pressed Nepal to finalize its action plan with the Financial Action Task Force (FATF) and be removed from the FATF’s grey list.

Musheer Ahmed, founder and managing director of Finstep Asia, suggested that the debate between banning and regulating crypto stems from a fundamental misunderstanding. “The technology is not regulated. The use cases may be regulated,” Ahmed explained, noting that countries with strict crypto bans are still exploring tokenization for real-world assets and traditional finance. He argued that the persistent use cases, such as trading and remittances, are precisely those that merit regulation.

“On the trading front, it does make sense to bring in regulations” for consumer and investor protection, Ahmed said. He also highlighted the need for regulators to balance oversight of cross-border payment systems with existing concerns about monetary risks and capital controls.

The IMF has consistently urged governments to regulate the cryptocurrency sector. A notable instance involved El Salvador, which scaled back its Bitcoin experiment in December 2024 to secure a $1.4 billion fund facility. The IMF maintains that El Salvador ceased its Bitcoin purchases, with a spokesperson previously stating that “the total amount of government-owned Bitcoin has not increased and that the increase in the Bitcoin Reserve Fund corresponds to movements across government wallets.”

However, El Salvador’s President Nayib Bukele has offered a different account, asserting that the nation continues to purchase one Bitcoin daily and tweeting, “No, it’s not stopping…..it won’t stop now, and it won’t stop in the future.” Blockchain data indicates a daily growth of approximately 1 BTC in El Salvador’s wallets, though analysts caution that public records cannot definitively confirm whether these are new acquisitions or older coins being moved through exchanges.

Ahmed believes the El Salvador experiment has had limited impact. While it brought the country attention in the virtual asset space and attracted crypto capital, its limited adoption suggests Bitcoin is primarily used as an asset rather than a currency. He pointed to payment rails, particularly stablecoin transactions, as the area demonstrating significant traction.

The IMF’s warning on crypto comes as Nepal is still recovering from widespread protests in September, which led to the ousting of the Oli government and the installation of an interim administration. The unrest was triggered by the government’s ban on 26 social media platforms, prompting large-scale demonstrations by young Nepalis. The social media ban, in turn, saw a surge in the use of decentralized messaging apps like Bitchat, which operates without internet connectivity. China later ordered the app removed from its App Store due to concerns about its potential for “social mobilization.”

The IMF plans to continue its engagement with Nepal through post-financing assessments and annual Article IV consultations, with cryptocurrency oversight now a key agenda item.

Governments Must Act on AI Safety, Anthropic CEO Urges

Dario Amodei, CEO of AI firm Anthropic, asserted on Wednesday that governments can no longer afford to merely study the issue of artificial intelligence regulation. He called for the United States to implement binding safety requirements for its most powerful AI models.

In an essay titled “Policy on the AI Exponential,” Amodei argued that current transparency mandates are insufficient and advocated for mandatory regulation of “frontier AI” systems.

“AI is advancing at a lightning pace—in only four years, AI models have gone from barely being able to write a coherent line of code to writing most of the code at major AI companies,” Amodei wrote.

Amodei’s essay coincides with Anthropic’s expansion of access to Claude Mythos, its restricted frontier AI model designed for cybersecurity organizations and government partners. The company launched Mythos 5 on Tuesday. Researchers, including those at the UK’s AI Security Institute, have reportedly found that the model can autonomously execute complex cyber attacks.

Amodei stated that his regulatory proposal draws inspiration from the framework used by the Federal Aviation Administration.

“Frontier AI models, like airplanes, should be required to go through technical testing and auditing, and their release should be blocked or reversed as a threat to public safety if they do not meet high standards of safety,” he wrote. “I am grateful to see the Trump administration’s Executive Order move incrementally towards a greater role for government in AI, though Anthropic’s proposal recommends even further action.”

A Proposed Regulatory Framework

Under Amodei’s proposed framework, advanced AI models would undergo mandatory third-party testing. The government would be empowered to halt unsafe deployments and require companies to secure model weights, conduct safety assessments, and report significant incidents. He also urged governments to prepare for AI-driven job displacement and advancements in drug development, to limit the use of surveillance and autonomous weapons in domestic law enforcement, and to enhance cooperation among democratic nations on critical AI technologies.

“First, enduring job displacement is undesirable and dangerous, and we should do everything we can to minimize or prevent it, not to bring it about,” Amodei wrote, referencing past warnings he has issued regarding job displacement. “Second, any response to AI-driven job displacement needs to address both the need to provide for everyone economically, and the need for people to find meaning, purpose, and agency.”

Public Release and Industry Scrutiny

The essay was released in the same week Anthropic launched Claude Fable 5, a public-facing version of Claude Mythos 5. This version redirects certain requests related to cybersecurity, biology, chemistry, and AI development to the less capable Claude Opus 4.8 as a safeguard against misuse. However, the launch has drawn criticism from developers and researchers. Concerns have been raised about Fable’s higher token usage, mandatory 30-day data retention policies, and safeguards that can diminish the model’s capabilities without user notification.

Amodei’s call for policy changes in AI development comes as Anthropic prepares for a potential public offering. Earlier this month, the company filed paperwork with the U.S. Securities and Exchange Commission for an initial public offering, following a reported $65 billion Series H funding round that valued the company at a reported $965 billion.

Debate Over AI Risks and Regulation

While Amodei has framed the issue as a race between technological progress and public policy, critics have questioned whether calls for stricter AI regulation truly serve the public interest. In April, OpenAI CEO Sam Altman accused Anthropic of employing “fear-based marketing” to promote Claude Mythos. Altman suggested that concerns about advanced AI could be used to justify concentrating control of the technology within a small group of companies.

“You can justify that in a lot of different ways, and some of it’s real, like there are going to be legitimate safety concerns,” Altman stated. “But if what you want is like ‘we need control of AI, just us, because we’re the trustworthy people’, I think fear-based marketing is probably the most effective way to justify that.”

Amodei rejected the notion that concerns about advanced AI are primarily a public relations issue. He contended that fears surrounding the technology stem from legitimate concerns that require addressing.

“People are worried about AI because they correctly perceive that its risks are real, not because AI CEOs have been insufficiently Panglossian,” he said, referencing the character from Voltaire’s “Candide” known for his unshakeable optimism.

“I believe it is my duty as an AI leader to continue to be transparent about these risks, and public concern in response to this transparency constitutes democratic accountability working as it should,” Amodei concluded.