Decentralized Prediction Market Polymarket is Under CFTC Investigation: Report

Decentralized Prediction Market Polymarket is Under CFTC Investigation: Report

New York-based decentralized prediction market Polymarket is under the scrutiny of a top Wall Street regulator.

The Commodity Futures Trading Commission (CFTC) is investigating whether Polymarket is letting customers improperly trade binary options or trade swaps and if it should be registered with the agency, according to a Bloomberg report citing people familiar with the matter.

The firm, however, is not accused of any wrongdoing, and CFTC investigations do not always lead to enforcement cases.

“Polymarket is firmly committed to complying with applicable laws and regulations and to providing information to regulators that will assist them with any inquiry,” a spokesman for the firm said in response.

The company also has law firm Sullivan & Cromwell partner James McDonald handling the probe, who was head of the CFTC’s enforcement division until last year, Bloomberg said, citing sources.

Since launching last year, Polymarket has facilitated about 4 billion shares. Trades on the prediction market are made using the stablecoin USDC.

Amidst this, the company is in talks with investors on a new round of funding that would value it at about $1 billion. Last year, Polymarket raised $4 million in venture capital.

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Author: AnTy

Tether Puts the Past Behind Them by Paying $41M to CFTC for Not Having All of Its Reserves in Cash

Tether Puts the Past Behind Them by Paying $41M to CFTC for Not Having All of Its Reserves in Cash

The US Commodity Futures Trading Commission (CFTC) announced that it has settled charges against Tether for “making untrue or misleading statements and omissions of material fact in connection with the U.S. dollar tether token (USDT) stablecoin.”

Tether will pay a $41 million penalty for what the company says is “putting the past behind us so we can move forward and focus on the future.”

CFTC said, while Tether claimed USDT is fully backed by fiat assets, it found that the company failed to disclose that the reserves backing also included unsecured receivables and non-fiat assets in its reserves between June 1, 2016, to February 25, 2019.

“There is no finding that tether tokens were not fully backed at all times — simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times,” said Tether in a statement, noting that not only it always maintained adequate reserves but it also has never failed to satisfy a redemption request.

The agency also settled charges against the cryptocurrency exchange Bitfinex for being engaged in illegal retail commodity transactions in crypto assets with US persons and operating as a futures commission merchant (FCM) without registering as required.

Bitfinex will be paying $1.5 million in penalty and is required by the agency to implement and maintain additional systems reasonably designed to prevent unlawful retail commodity transactions.

Tether said the CFTC’s Order makes no finding of a violation after December 2018.

Acting Director of Enforcement Vincent McGonagle said in a statement that the CFTC will continue to use its anti-fraud enforcement authority over digital assets, when necessary. Additionally, it will act to ensure that margined and leveraged digital asset trading offered to retail US customers must occur on properly registered and regulated exchanges, he added.

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Author: AnTy

BlockFi’s First Independent Director, Former CFTC Chair Chris Giancarlo, Quits Board After Just 4 Months

BlockFi’s First Independent Director, Former CFTC Chair Chris Giancarlo, Quits Board After Just 4 Months

Former chief US commodities regulator Christopher Giancarlo has made an exit from the board of directors of crypto lending firm BlockFi after four months, the company said on Wednesday.

“We appreciate the wisdom that Chris has imparted in his formal capacity as a Board member,” said Zac Prince, CEO, and Founder of BlockFi.

Giancarlo has been replaced by Ellen-Blair Chube, a managing director at William Blair, but he will continue to provide strategic counsel to the firm in an advisory role.

“BlockFi is an institution that is critical to the broader crypto ecosystem. I’m looking forward to continuing to advise this impressive group of leaders as they work to bridge the worlds of traditional finance and blockchain technology,” said Giancarlo in a statement.

The reason why Giancarlo has resigned from his position in BlockFi wasn’t shared by the company. He was the first independent director of BlockFi’s board.

During his tenure as chairman of the U.S. Commodity Futures Trading Commission (CFTC), Giancarlo was known as ‘Crypto Dad’ for his crypto-friendly views. He has also co-founded the Digital Dollar project.

Great Turmoil

BlockFi has been going through a turbulent past few months as it faced an onslaught of legal issues. As we reported, multiple US states issued a warning against the company’s flagship BlockFi Interest Accounts (BIA), alleging they were unregistered securities.

The company stopped onboarded new accounts in the states and warned that it could be forced to do so “worldwide” if its New Jersey case isn’t resolved, whose thrice-delayed cease-and-desist order takes effect at the end of the month.

The firm is also planning to go public as soon as 2022 after a potential $500 million Series E funding round at a roughly $5 billion valuation. Reportedly, lead investor Third Point LLC has pulled out following its ongoing fight with regulators.

Amidst this, yet again, BlockFi slashed the rates on crypto holdings for the fourth time this year. Starting Sept. 1st, rates and tiers are changed for Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Chainlink (LINK), PAX Gold (PAXG), Basic Attention Token (BAT), Uniswap (UNI), and Stablecoins (BUSD, DAI, GUSD, PAX, USDC, and USDT) holdings in the BlockFi Interest Account (BIA).

“Tier 1 rates for all cryptocurrencies are increasing. By our estimates, close to 75% of clients will see an increase in their APY,” noted the company, which said the rates are set based on “market dynamics for lending and borrowing.”

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Author: AnTy

Digital Assets “Not Regulated by the CFTC,” Even if They Are A Commodity: CFTC Commissioner

Digital Assets “Not Regulated by the CFTC,” Even if They Are A Commodity: CFTC Commissioner

One of the Commissioners of Commodity Futures Trading Commission (CFTC), Dawn D. Stump, released a statement on Monday detailing the agency’s regulatory authority over digital assets. She said,

“The CFTC’s regulatory oversight authority, as well as the application of our enforcement authority, must be well understood by the public. Only then can proper regulatory compliance be demanded.”

With the growth in cryptos’ popularity raising the question of how this new financial asset class is regulated in the US, Stump said, “there has often been a grossly inaccurate oversimplification,” regarding either categorizing them as securities regulated by the SEC or commodities regulated by the CFTC.

This misunderstanding about “US regulatory delineations has grown to a point” that Stump believes it now requires correction. In response, she has laid out ten points as to how and what the CFTC regulates.

These basics by Stump covers that commodity’s definition under CFTC is “extremely broad” and does not regulate cash commodities. So, “Even if a digital asset is a commodity, it is not regulated by the CFTC,” however, the CFTC does regulate derivatives on digital assets, it said.

She further states that when it comes to CFTC’s regulatory authority concerning crypto-assets, instead of considering whether a cryptocurrency is a commodity or security, the focus should be on whether a futures contract or other derivatives product is involved.

“The CFTC does not regulate commodities (regardless of whether or not they are securities); rather, it regulates derivatives—and this is true for digital assets just as for any other asset class.”

CFTC Chair Brian Quintez, a notable crypto advocate meanwhile, is preparing to spend August 31st as his last day in the office. In his statement upon departure, he said,

“During my term, the CFTC has overseen the listing of Bitcoin futures contracts; the custody of digital assets within the traditional clearing infrastructure; the proliferation of blockchain technology; the creation of cryptographic, tokenized commodities; and the rapid expansion of decentralized finance (DeFi), which purports to realize the ultimate transparency-competition-innovation-reward dynamic of a true free market.”

US president Joe Biden is reportedly planning to nominate acting CFTC Chair Rostim Behnem to serve as the full chairman.

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Author: AnTy

CFTC Wants A Piece of Crypto Too, But More Concerned About DeFi

CFTC is reminding the SEC that it is them who has authority over crypto-assets, while Senator Elizabeth Warren is urging for more crypto oversight to avoid possible systemic risks before it gets even bigger.

Senator Elizabeth Warren is urging US regulators and Congress to respond to the growth of cryptocurrencies.

“Right now, we don’t have any cops on the beat to speak of,” said Warren, a Massachusetts Democrat, in an interview with Bloomberg.

“So long as it’s an unregulated system, you may be pulling more people in so that they can get cheated, and that’s not what we want.”

While the senator does see positives for the technology behind crypto assets in potentially providing a solution for “unbanked” who are required to pay high fees to cash their checks, Warren also said regulations need to be stepped up to avoid any possible systemic risks.

“The bigger it gets and the more it stays outside the financial system — something goes wrong, there’s a run on crypto, or elsewhere in the economy, I don’t want the U.S. taxpayer to be the one that gets called on to back this up.”

Warren further pointed to pump and dump schemes that are illegal but often not punished due to unclear oversight on the industry.

Her comments follow US Securities and Exchange Commissioner (SEC) Chair Gary Gensler talking about bringing more crypto enforcement actions on the market, which he said is rife with manipulation and fraud.

He called for Congress to give the SEC the power to oversee crypto exchanges, which are not within the SEC’s authority, along with crypto lending, decentralized finance.

Gensler also said that many tokens, not just crypto assets but also stablecoins and derivatives, may fit the definition of securities that fall under existing US laws.

However, it’s not just the Fed, IRS, and SEC after crypto, but other agencies like CFTC wants a piece of the pie as well.

“Just so we’re all clear here, the SEC has no authority over pure commodities or their trading venues, whether those commodities are wheat, gold, oil….or crypto assets,” tweeted CFTC Commissioner Brian Quintenz on Wednesday.

Quintenz also retweeted several tweets regarding crypto, including one from the House Committee On Agriculture that said, “crypto is bigger than the SEC. Congress needs to write the rules of the road to protect investors AND innovation in the digital economy.”

Quintenz seems to be more interested in and concerned about DeFi.

Last week, in response to Warren talking about the need to regulate crypto before many small investors get entirely wiped out, Quintenz said that CFTC has already extensively used its authority over outright crypto token fraud. It’s the decentralized systems with full transparency of open source code that “significant(ly) reduce information asymmetries.” He said at the time,

“The competition-innovation cycle occurring in defi, powered by almost zero barriers to entry and total transparency (both unprecedented in the traditional financial system), is incredible to watch. But CFTC must stay vigilant at prosecuting outright fraud.”

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Author: AnTy

FTX.US Hires Former CFTC Attorney, Who Served as SEC Chair Gary Gensler’s General Counsel

FTX.US Hires Former CFTC Attorney, Who Served as SEC Chair Gary Gensler’s General Counsel

This new addition is to help the growing crypto exchange expand in the US, where it aims to become the “market-leading” platform by volume “over the next two years.”

Amidst the ongoing growing regulatory scrutiny over the cryptocurrency market, crypto exchange FTX.US has hired Ryne Miller as its General Counsel.

“I am really excited to join the FTX.US team. We will be working alongside U.S. regulators to bring regulated digital asset markets to U.S. customers,” said Miller, who joins FTX.US from Sullivan & Cromwell LLP, where he was the co-head of its Commodities, Futures & Derivatives practice.

The former attorney at the Commodity Futures Trading Commission (CFTC), where he served as legal counsel to current SEC Chairman Gary Gensler, Miller has extensive experience in securities and derivatives.

“We’re excited to have Ryne join the team and guide us through the evolving regulatory landscape of cryptocurrencies and derivatives. His industry expertise and leadership will be critical as we forge cooperative working relationships with US regulators amid the expansion of our businesses,” said Brett Harrison, President of FTX.US.

In its official announcement, FTX.US describes itself as a regulated crypto exchange that aims to “become the market-leading US cryptocurrency exchange by volume over the next two years.”

Crypto market participants actually characterizes FTX’s legal and regulatory competence as “an enormously under-appreciated moat.” It is especially of importance in the current environment when the industry is growing fast, institutions are coming in a herd, and regulators don’t want to have it remain an unregulated “Wild West.”

Besides leading the regulatory landscape, FTX is also among the very few, if not the only company to have amped up its marketing efforts substantially.

In its attest efforts, FTX has signed a partnership with League Championship Series (LCS) to become its official crypto exchange.

“Our seven-year partnership with FTX represents the largest sponsorship agreement Riot has ever signed for an esports league,” reads the official statement.

Starting this weekend, FTX branding will appear on the LCS broadcast around the most valuable currency in League of Legends: Gold. The exchange will also directly sponsor the LCS Most Improved Player Award.

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Author: AnTy

Former CFTC Chair Says A Bitcoin ETF Would Be Good For Regulators; SkyBridge BTC ETF Delayed

Timothy Massad, former chairman of the US Commodity Futures Trading Commission (CFTC), has urged the U.S Securities and Exchange Commission (SEC) to approve a Bitcoin exchange-traded fund (ETF).

Massad made his points known in a Bloomberg opinion piece. He said the SEC should look into approving an ETF in a way that would enhance transparency and integrity in the industry.

Bitcoin ETF Would Be Good For Retail Investors

Massad said a Bitcoin ETF would help retail investors invest in digital assets without purchasing them and dealing with the complexities of custody.

He said that while it would be best to have crypto regulations in place before approving a Bitcoin ETF, this may not happen soon. This is why Massad thinks a conditional approval would be best to increase the industry’s transparency, integrity, and investor protection, not just its mass appeal. Massad said,

“Although it would be best to see such ETFs approved only after Congress has strengthened crypto regulation generally, the likelihood of that happening in the near future is low.”

While cryptocurrency exchanges are largely unregulated in the U.S, the former CFTC chair said the SEC could use the ETF listing process to improve the integrity of cryptocurrency exchanges in the absence of comprehensive regulations.

He added that the ETF approval could be granted on the condition that the ETF prices are based on an index of exchanges meeting certain prescribed standards.

Massad’s comments follow similar comments attributed to SEC Commissioner Hester Peirce, who argued that a Bitcoin ETF should have been approved a long time ago.

In an interview with CNBC, Peirce said that she sees the SEC using double standards in approving crypto products. According to her, the SEC applies a heightened standard in filings associated with cryptocurrencies, unlike the standards it uses for traditional, equity-based products.

SEC’s Continuous Delay In Approving ETFs

Over the years, there have been several applications for a Bitcoin ETF, but the SEC is yet to approve any of the applications.

The regulator had previously cited concerns like fraud, market manipulation, and volatility as the reasons behind the rejections or delays.

The latest application facing delay by the SEC is Anthony Scarammuci’s SkyBridge Capital’s application for a Bitcoin ETF. A filing by the regulator shows that the application submitted on May 6 has been extended for 45 days ending in August.

The SEC is currently reviewing many applications and has invited public comment on the Bitcoin ETF filed by asset manager VanEck. The review process has also been extended until August 2021.

Other firms currently witnessing delays from the regulator in approving ETFs include WisdomTree, Kryptoin, and Fidelity Investments.

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Author: Jimmy Aki

Gearing Up For An IPO: BlockFi Adds Former CFTC Chairman ‘Crypto Dad’ to Board

Gearing Up For An IPO: BlockFi Adds Former CFTC Chairman ‘Crypto Dad’ to Board

Former Commodity Futures Trading Commission (CFTC) chairman J. Christopher Giancarlo has joined the board of directors of crypto neobank BlockFi.

“Just another step towards BlockFi’s mission of bringing financial products to crypto investors around the world,” tweeted Anthony Pompliano, founder and partner at Morgan Creek Digital.

Giancarlo headed CFTC in 2017 when Bitcoin futures made its debut on CME Group and Chicago Board Options Exchange (CBOE). He left office in 2019.

In early 2018, during his congressional testimony in which he advocated for a “do no harm” regulatory stance towards crypto assets, it earned him the title “Crypto Dad.”

Giancarlo is the first independent, non-equity holding director on BlockFi’s five-person board.

“As the adoption of digital assets accelerates, it is critical for the financial industry to consider how to adapt and integrate these innovations in a way that best serves investors and the broader economy,” Giancarlo said in a statement on Tuesday.

Crypto lender, BlockFi allows users to earn interest on their crypto assets and also offers Bitcoin Trust and is looking for Giancarlo’s guidance on regulatory developments and other initiatives.

The crypto unicorn managed over $15 billion in assets and reported just shy of $100 million revenue in 2020. Running toward generating $500 million in revenue this year, the company has grown its client base from 10k to 250k since 2019-end.

Founded in 2017 by Zac Prince and Flori Marquez, BlockFi is rumored to be planning for an initial public offering (IPO) in the second half of 2021, which was valued at $3 billion in its latest private funding round. Coinbase, the largest crypto exchange in the US, made its debut on Nasdaq at a valuation that briefly went to $100 billion.

“There are plenty of reasons a company like BlockFi might want a former high-ranking gov’t official like Chris Giancarlo on its board, & I’d guess one of them is preparation for an IPO. Great move,” tweeted Jake Chervinsky, General Counsel at Compound Finance.

Besides a move suggesting BlockFi gearing up for going public, this addition also underscores the ongoing demand for regulatory experiences in the crypto industry. Just yesterday, Binance.US tapped former acting OCC chief Brian Brooks as its new CEO.

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Author: AnTy

Former CFTC Chairman, Giancarlo & Billionaire Lasry Invest in Crypto Asset Manager, BlockTower

Former CFTC Chairman, Giancarlo & Billionaire Lasry Invest in Crypto Asset Manager, BlockTower

  • Milwaukee Bucks billionaire co-owner, Marc Lasry, and former CFTC Chairman, Christopher Giancarlo, invest in BlockTower, a crypto investments firm.

Bitcoin-enthusiast and billionaire, Gary Lasry and Christopher Giancarlo, the former Commodities and Futures Trading Commission (CFTC) chairman, are reportedly making an undisclosed investment in cryptocurrency and blockchain investment firm, BlockTower.

According to a report from Bloomberg, Lasry, the CEO of Avenue Capital Group, made an independent into the crypto firm, persons familiar with the matter reported. The Milwaukee Bucks co-owner declined to comment on the reports.

Known as ‘crypto dad’ across crypto circles, Giancarlo made huge progress in regulating the U.S. crypto field during his time as the chairman of the CFTC. The former CFTC boss has been vocal on developing the Bitcoin and crypto ecosystem – recently calling for the launch of a digital dollar.

Giancarlo confirmed the investment but declined to comment further or disclose the amount invested in Block Tower.

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Author: Lujan Odera

Bitcoin-Friendly Ex-CFTC Chief Gary Gensler to Advise Biden on Wall Street

Former Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler will be joining Joe Biden’s presidential transition to examine financial regulators.

Gensler, a former Goldman Sachs partner, is known for implementing a new regulatory regime for swaps and has gained a reputation for standing up to Wall Street.

He is also known for his bitcoin-friendly views, which he called a “catalyst for change.” Gensler actually taught a course at MIT called “Blockchain and Money” on how Bitcoin and the technology underpinning it could be used in finance.

It has been under Donald Trump’s presidential term that the IRS added the infamousdo you own crypto” question, and the President told the Treasury to “go after Bitcoin.” Not to mention he himself isn’t a fan of Bitcoin and cryptocurrencies either.

Meanwhile, Gensler has said although many currencies face regulatory scrutiny, Bitcoin “should remain exempt” from that.

Crypto market participants feel positive about Joe Biden and that he could be good for the industry. Even cryptocurrency derivatives exchange FTX CEO Sam Bankman-Fried made the second biggest contribution to Biden.

The real winner of this election has clearly been Bitcoin as not only the price of the digital currency reached some important levels to climb to a 24-month high, but crypto-friendly faces could be seen in the government too.

Quant trader and entrepreneur Qiao Wang also noted that Trump and Treasury Secretary Steven Mnuchin have been “openly hostile towards BTC.”

Not only “a likely Republican senate to counter Dems’ aggressive regulation tendencies,” but Wang also believes, “Democrats are more likely to create inflation which is good for BTC.”

Recently we also saw Wyoming electing Bitcoiner Cynthia Lummis to the US Senate.

KeyBank NA executive Don Graves has also been tapped for the role, a longtime Biden adviser involved in reviewing bank regulators.

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Author: AnTy