Lowenstein Crypto advises leading digital asset and cryptocurrency projects, exchanges, and trading firms. Our practice covers regulatory advice, transactions and structuring advice, investigations, and adversarial matters including commercial disputes, bankruptcy, and related litigation. As these markets continue their rapid growth and market participants continue to evolve and mature their businesses, we are providing this weekly digest as a resource that highlights and summarizes a selection of key recent legal regulatory developments.

SEC and CFTC Hold Joint Event on U.S. Financial Leadership Harmonization

On Jan. 29, Securities and Exchange Commission (SEC) Chairman Paul S. Atkins and Commodity Futures Trading Commission (CFTC) Chairman Michael S. Selig held a joint event discussing harmonization between the two agencies and their efforts to deliver on President Donald Trump’s promise to make the United States the crypto capital of the world. During the event, Atkins and Selig announced that “Project Crypto” will now be a joint initiative between their two agencies, aimed at harmonizing crypto regulation by establishing a clear asset taxonomy, reducing duplicative compliance requirements, clarifying jurisdictional boundaries, and enabling innovations including tokenized collateral, perpetual futures, and prediction markets to operate onshore under American law.

Both chairmen emphasized that while they are using their existing regulatory authorities to modernize rules and provide clarity, they view congressional market structure legislation as crucial to “future-proof” these reforms and prevent future administrations from reversing this progress. On prediction markets, Selig announced he has directed staff to withdraw the 2024 proposal and 2025 advisory restricting political and sports-related event contracts, reassess the CFTC’s participation in pending litigation to defend its exclusive jurisdiction, and draft new rulemaking with clearer standards for event contracts.  The full video recording of the event is available here, and the press release is available here.

SEC Releases Statement Regarding Tokenized Securities

On Jan. 28, the SEC’s Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets Staff released a statement (Statement) to provide greater clarity on the application of federal securities laws and the tokenization of securities. Staff highlighted the methods of tokenizing securities, the types of tokenized securities, and regulatory considerations when assessing the application of securities laws. In releasing the Statement, staff recognized issuer-sponsored tokenized securities and third party-sponsored tokenized securities while cautioning issuers of the latter to consider whether the crypto assets are security-based swaps. The Statement can be viewed here. For additional information, please refer to Lowenstein Sandler’s client alert here.

White House to Host Crypto and Banking Summit

On Jan. 28, the White House reportedly invited executives and trade groups from the crypto and banking industries to discuss a path toward crypto market structure legislation. The summit, scheduled for Feb. 2, is expected to focus on how legislation will address rewards and interest earned on customer crypto holdings. The meeting comes after several failed attempts to introduce bipartisan legislation, delays in market structure draft bills, and pushback from industry participants. Reporting on the event is available here.

SEC Drops Gemini Enforcement Action

On Jan. 22, the SEC filed a joint stipulation to dismiss a civil enforcement action against Genesis Global Capital, LLC, and Gemini Trust Company, LLC. Prior to the dismissal, Gemini returned 100 percent of the crypto assets that customers had loaned to Genesis through the Gemini Earn Program. Gemini froze Earn Program customer withdrawals in 2022 following the collapse of crypto exchange FTX. Pursuant to the stipulation, the United States District Court for the Southern District of New York previously dismissed the SEC’s complaint with prejudice and without costs or fees to either party. The SEC originally filed the enforcement action on January 12, 2023. The Joint Stipulation to Dismiss and Release can be read here.

Crypto Exchange Advertisements Banned in United Kingdom

On Jan. 28, the United Kingdom’s Advertising Standards Authority (ASA) banned several advertisements created by crypto exchange CB Payments Ltd. (Coinbase), claiming that the advertisements suggested investing in crypto could help viewers escape financial problems without clearly disclosing the inherent risks involved in investing in crypto assets. The advertisements carried the phrase “If everything’s fine, don’t change anything,” specifically targeting the UK’s “widely reported” cost of living and home ownership crisis. In its ruling, the ASA determined that the phrase “had the effect of positioning Coinbase as an alternative to traditional financial systems and implying that Coinbase could be part of the solution to the financial problems stated in the ads.”  The ASA ruling is available here.

South Korea Prepares to Introduce Stablecoin Regulations

On Jan. 28, the South Korean Democratic Party’s Digital Asset Task Force met at the National Assembly to lock in key details regarding capital requirements for stablecoin issuers and categories of regulated crypto entities. Rep. Ahn Do-geol, task force secretary, said in a press briefing, “We agreed to set the legal capital requirement for stablecoin issuers [to be] at least 5 billion won,” equating to approximately US$3.5 million.  The legislation's official name was also confirmed as the “Digital Asset Basic Act,” with the text proposing that digital asset businesses be subdivided into approximately eight categories by function. Two to three high-risk categories are expected to require “authorization” from financial authorities, while the remaining categories will only need to “register” to operate. Reporting on the press briefing is available here.

Iowa Introduces Bill to Regulate Prediction Market Exchanges

On Jan. 22, Iowa lawmakers referred legislation to the state’s Ways and Means Committee that would bring federally regulated prediction market platforms under the state’s oversight. The legislation encompasses event contracts that provide binary payouts related to sporting activities, elections, legislative actions, and economic indicators. The legislation would require CFTC-registered prediction market exchanges to obtain a $10 million permit from the state and to pay a 20 percent tax on adjusted revenues. The proposed legislation is available here.

Prediction Market Exchange Becomes First Authorized Prediction Market with Major League Soccer

On Jan. 26, the largest prediction markets exchange globally, Polymarket, entered into a multiyear partnership with Major League Soccer (MLS). As part of the arrangement, Polymarket has been granted Authorized Gaming Operator status. This status allows the platform to offer markets tied to MLS competitions under a framework similar to those used by traditional regulated sports betting operators. The partnership follows similar agreements with the National Hockey League and the Ultimate Fighting Championship. The press release is available here.