1. CFTC Expands Its Prediction-Market Jurisdiction Fight and Recalibrates Its Enforcement Posture
The CFTC moved aggressively to assert federal primacy over prediction markets. On May 28, a week after Rhode Island’s attorney general demanded that prediction markets “stand down” and “disgorge their profits,” the agency intervened in the U.S. District Court for the District of Rhode Island to block the state’s effort to apply its gambling laws against CFTC-registered contract markets.
Prediction-market operators have pushed back as well. On May 27, KalshiEX LLC filed a complaint for permanent injunction and declaratory relief against Minnesota’s attorney general, governor, and gambling-enforcement director, alleging that Minnesota’s SF 3432 “impermissibly usurps the CFTC’s exclusive jurisdiction by banning certain event contracts, including those traded on federally designated contract markets,” in violation of the Supremacy Clause.
The CFTC's recalibration extends to enforcement and industry partnerships. The agency originally sued Gemini Trust Company LLC in the U.S. District Court for the Southern District of New York in June 2022, and the parties entered into a consent order in January 2025 under which Gemini paid a $5 million civil penalty. On May 27, the CFTC joined Gemini in a motion for relief from that judgment, stating that after a comprehensive review of the investigation, the evidence, the charging decision, and the litigation—and in light of changes in federal digital-asset policy—it had concluded that “the complaint should not have been filed—and would not have been under current enforcement standards.” The parties jointly moved to vacate the consent order's prospective provisions, including injunctive relief, though they agreed that the $5 million penalty already paid “will not be returned to Gemini.” On the integrity side, the CFTC has moved to formalize relationships with professional sports leagues. In March, the agency signed its first-ever memorandum of understanding with a professional sports league when it partnered with Major League Baseball to share information and coordinate on market integrity for baseball-related event contracts. On May 21, the NHL became the second league to sign an MOU with the CFTC, establishing a parallel framework to protect the integrity of professional hockey and related event contracts offered on prediction markets exchanges. The CFTC Rhode Island intervention press release is available here; the CFTC–NHL MOU press release is available here; the CFTC cooperation advisory press release is available here; the CFTC–Gemini motion for relief press release is available here; and the Kalshi complaint is available here.
2. States and Foreign Governments Move to Regulate Prediction Markets
State ethics restrictions on prediction-market participation continue to spread. On May 27, North Carolina Gov. Josh Stein signed Executive Order No. 37, barring executive-branch employees from using nonpublic information to participate in prediction markets, from trading on markets substantially related to their official duties, and from using state resources to trade. Tennessee has gone further: HB 2079/SB 1992, enacted as Public Chapter 1109 and effective July 1, creates a Class E felony for anyone who “engages in conduct intended to influence the outcome of an event” while holding a prediction-market contract that would benefit from that outcome.
On June 1, Illinois took a different tack: taxation. As part of its FY2027 budget, the state enacted Senate Bill 3019, which adds “exchange wagers” (contracts tied to sporting events traded on prediction markets) to the Sports Wagering Act. The bill imposes a 1.75% transaction tax on each exchange wager, rising to 3.5% after a licensee exceeds five million wagers in a fiscal year; it also cuts the initial master sports wagering license fee for online operators from $20 million to $15 million.
On the federal front, on May 27, the House Armed Services Committee’s Subcommittee on Military Personnel marked up Section 521 of the FY2027 National Defense Authorization Act. The provision would direct the Secretary of Defense to issue regulations within 180 days barring members of the Armed Forces and civilian employees of the Department of Defense from entering into transactions on prediction markets when the individual possesses material nonpublic information relevant to the transaction or may reasonably obtain such information in the course of official duties. The regulations would specify a range of punishments for violations, which could include administrative, disciplinary, or other corrective measures.
Internationally, regulators have moved to block prediction-market platforms outright. On May 25, Spain’s Directorate General for Gambling Regulation (DGOJ) opened a sanctioning proceeding against Polymarket and Kalshi and ordered their websites blocked, finding that they operated without required authorization and that prediction markets qualify as games of chance under Spanish law. On May 22, Indonesia’s Ministry of Communication and Digital Affairs (Komdigi) blocked Polymarket, with Director General Alexander Sabar stating that platforms facilitating money-based wagers on uncertain outcomes remain categorized as online gambling “even when packaged as a prediction market,” including those using blockchain or crypto assets. The North Carolina Executive Order No. 37 is available here; the Tennessee HB 2079/SB 1992 (Public Chapter 1109) is available here; the Illinois SB 3019 is available here; the House Armed Services Committee NDAA is available here; the Spain DGOJ sanctioning-proceeding press release is available here; and the Indonesia Komdigi press release is available here.
3. Federal Banking Regulators Advance a CAMELS Overhaul and Face Pressure Over a Fintech Bank Acquisition
On May 19, the Federal Financial Institutions Examination Council invited public comment on proposed revisions to the Uniform Financial Institutions Rating System–based on the capital adequacy, asset quality, management, earnings, liquidity, and sensitivity (CAMELS) framework–to “focus ratings on material financial risk and improve the transparency of ratings.” Federal Deposit Insurance Corporation (FDIC) Chairman Travis Hill noted that the CAMELS system “has not been modified since 1996” and that the proposal would shift emphasis “away from a bank’s process for managing risks and towards factors and risks that materially impact a bank’s financial condition,” including by “reducing the influence of the Management component rating on the overall composite rating” and limiting specialty-exam considerations to those that pose material financial risk. Office of the Comptroller of the Currency (OCC) Comptroller Jonathan V. Gould said the revisions “shift supervision away from process-heavy oversight toward a stronger focus on material financial risk.” The proposed revisions would apply to all FDIC-supervised institutions and to all national banks and federal savings associations.
Against this regulatory backdrop, investor appetite for fintech banking platforms has remained strong. On March 25, 2025, Mercury announced a $300 million Series C–“a mix of primary and secondary funding”–at a $3.5 billion valuation, led by Sequoia Capital, with the company reporting more than 200,000 business customers, $500 million in 2024 annual revenue, and $156 billion in annual transaction volume.
That growth has also drawn congressional scrutiny. On May 21, Senator Elizabeth Warren and Senator Chris Van Hollen released a letter dated May 20 to Gould and Federal Reserve Chair Kevin Warsh urging them to deny Enova International’s application to become a national bank holding company. The senators noted that “in December 2025, Enova announced its agreement to acquire a bank subsidiary, Grasshopper Bank N.A.,” and argued that converting “a nonbank, high-cost lender into a national bank holding company” would let Enova “expand its predatory lending operations to every state in the country without regard to state licensing and anti-evasion laws by seeking to become a national bank that enjoys the benefits of federal preemption.” They pointed to annual percentage rates “upwards of 100% to 300%” and urged the agencies to deny the application. OCC Bulletin 2026-22 is available here; OCC News Release 2026-39 is available here; FDIC Chairman Hill statement on the CAMELS proposal is available here; FDIC Financial Institution Letter on the CAMELS revisions is available here; Senate Banking Committee minority letter is available here.
4. Tennessee Enacts Tax on International Money Transmissions
On May 27, Tennessee enacted HB 2502 as Public Chapter 1035 after Gov. Bill Lee signed the bill, which makes the service of “transmitting money from a location originating in this state to a location outside of the United States or its territories” a taxable service when performed by an entity licensed under the Money Transmission Modernization Act. As rewritten by House Amendment No. 1, the tax is levied “at the rate of (i) $10 per transaction[,] and (ii) 2% of any money transmitted in excess of $500”; is not subject to the local option tax; and exempts transmissions by financial institutions other than Money Transmission Modernization Act licensees. A sender may apply to the Department of Revenue for a refund between June 1 and June 30 by supplying a Social Security number or a taxpayer identification number and proof of taxes paid. A money transmitter may rely on customer-provided information about the recipient’s physical address in determining whether a transfer is taxable. The act carries an effective date of May 21, and the tax itself is effective January 1, 2027. The Tennessee General Assembly bill information and summary for HB 2502 is available here.
5. Federal Reserve Installs a New Chairman, Proposes a ‘Payment Account’
On May 22, Kevin Warsh took the oath of office as chairman and a member of the Board of Governors of the Federal Reserve System, and the Federal Open Market Committee unanimously selected him as its chairman after President Donald Trump nominated Warsh on March 4. Two days before he took the oath, on May 20, the board requested public comment on a proposal to establish a “payment account” that legally eligible financial institutions could use “for the specific purpose of clearing and settling their payments.” The board explained that “financial institutions with an increasingly wide range of business models have sought direct access to the Federal Reserve’s payment services to reduce costs and increase payment speed,” and that “[m]any of these requests for access come from institutions that are not federally insured.” The proposed account is a special-purpose account, separate and distinct from a full-service master account, and would hold only limited overnight balances to fund next-day payment activity; account holders “would not have access to intraday credit or the discount window, would not earn interest on balances held at a [Federal] Reserve Bank, and would only have access to payment services with automated controls to prevent overdrafts.” The proposal “would not expand or otherwise change legal eligibility for access to accounts or payments services,” and the board affirmed that Federal Reserve Banks would expect account holders to mitigate illicit-finance risks; requests would generally receive a streamlined review, with Federal Reserve Banks expected to act within 90 days. The board also encouraged Federal Reserve Banks to temporarily pause decisions on access requests from institutions falling within Tier 3 of its Account Access Guidelines until it completes the payment-account policy process. The Federal Reserve press release on Warsh is available here, and the Federal Reserve 2026 press-release index (payment account proposal) is available here.
