Summer of crypto (regs): State of Crypto

Last Tuesday’s House Ways and Means Committee hearing on digital asset tax bills was pretty straightforward. The members of the committee asked largely substantive questions, seemingly aimed at better understanding both how crypto taxes might work as well as what holes exist in current tax policy. There was no sniping at each other, no real pot shots at President Donald Trump and his family and no major arguments. At most, we had a few lawmakers question whether crypto is really an urgent issue amid current economic conditions.

In agency news, the CFTC published a proposal for better regulating prediction markets, giving the general public some time to weigh in, even as the various legal cases continue.

Why it matters

Crypto taxes are the next big issue after the market structure bill happens (if it happens, anyway). And while the hearing wasn’t exactly spicy, it did suggest that there is a lot of work to be done before crypto tax legislation can proceed through a markup and to the House floor.

The CFTC’s proposal to more closely regulate prediction markets is a first step in this process, and the public comments will be revealing.

Breaking it down

Tuesday’s hearing from the Ways and Means Committee saw lawmakers ask questions about the various discussion draft bills presented for the hearing, addressing the different aspects of the crypto tax debate. It was a remarkably conciliatory hearing, when contrasted with some of the other hearings the crypto industry has watched.

Now we wait and see how these bills advance, and whether there is a bipartisan agreement on some of the sticking points.

The CFTC is also getting busy. The regulator published a proposal last week for how it can oversee prediction markets. Part of this proposal includes how the agency would define gaming for the purposes of establishing what prediction market contracts fall under its purview, and what potential contracts wouldn’t meet the bar for being a federally regulated swap product.

And Gary Gensler, the former SEC and CFTC chair who had a major role in the creation and implementation of Dodd-Frank, filed an amicus brief alongside a number of other entities and states arguing that the term “swaps” was never meant to include anything that could look like sports betting.

Nevertheless, the CFTC filed another lawsuit against New Mexico on Friday, arguing that sports-related prediction markets are still swaps and should not be governed by a state gaming regulator.

On the SEC front, we’re watching for its innovation exemption to come out. The proposal’s public release has already been delayed, and legal experts have concerns about how it seems to be structured so far.

Oh and Sam Bankman-Fried lost his appeal of his 2023 conviction on fraud and conspiracy charges. A Second Circuit Court of Appeals panel found that District Judge Lewis Kaplan did not overreach his role or make mistakes in how he oversaw Bankman-Fried’s criminal trial.

This week

• There aren’t any congressional hearings or agency events that we’re tracking this week.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Bluesky @nikhileshde.bsky.social.

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See ya’ll next week!