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Congress may have crafted a legislative workaround for President Trump’s crypto ‘ethics’ issues, but lawmen and prosecutors are proving a tougher sell.
- CLARITY ethics deal could exempt Trump’s sons
- Cops, prosecutors still not sold on CLARITY DeFi language
- Crypto PACs celebrate more primary wins
- Prediction markets can’t stop suing states and vice versa
- Americans agree that prediction markets are gambling
- World Cup bettors getting first crypto exposure via prediction markets
The U.S. Senate voted late Wednesday to start their July 4 holiday break a little early, as in immediately, and they won’t be back in town until July 13. After that, there will be four weeks (20 sitting days) until senators flee DC again on August 7 for their traditional month-long summer break. There will be a few more weeks of activity in September, but once October arrives, there will be no Senate floor activity until after the November midterm elections.
In other words, the window of opportunity to pass the digital asset market structure legislation (CLARITY Act) is rapidly closing, and some stakeholders are starting to sweat. There are multiple outstanding issues yet to be resolved before the Senate’s GOP leaders feel confident that they have a bill they can bring to the floor that will secure every single GOP ‘aye’ vote plus a minimum of seven Democrats to clear the required 60-vote hurdle.
The Senate’s skedaddle came after President Trump came to the Capitol for a meeting with GOP senators that, er, didn’t go well. Earlier in the day, Trump declared that he wouldn’t sign the Housing Act that the Senate passed Monday with bipartisan support (and included a ban on the Federal Reserve issuing a central bank digital currency that the GOP has been trying to pass for years).
While Trump and the Senate GOP appeared to have called a truce late Wednesday, and the Housing bill will get signed eventually—if for no other reason than Dems are already making ads accusing Trump of refusing to help Americans buy homes—the entire episode speaks to the chaos that reigns when Trump gets involved in the legislative process.
And make no mistake, Trump is deeply involved in how the Senate resolves CLARITY’s ‘ethics’ issue, aka adding language that would limit or outright ban elected officials—including the president—and their families from profiting off crypto ventures. The concern is that these officials can’t resist the urge to put their thumbs on the regulatory scales and eliminate guardrails that could make those ventures even more profitable.
On June 24, Semafor reporter Eleanor Mueller tweeted news of “a still-evolving bipartisan deal” on the ethics question that’s “expected not to cover the president’s adult children.” Mueller said Democrats were “focused on wins on phase-in and enforcement,” quoting a Democrat staffer involved in the ethics negotiations who said, “there’s no way to ban an adult child from conducting legal business.”
Punchbowl News’ Brendan Pedersen was quick to remind his followers that his outlet had quoted some senators involved in the ethics discussions saying much the same back in May.
Regardless, it would be a significant concession on the Dems’ part that wouldn’t negatively affect the Trump family’s crypto ventures, most of which are either run or represented by his sons, Don Jr., Eric, and Barron. In practical terms, the president’s role in these ventures is simply that of a figurehead, the capo di tutti capi who can make or break those who help or hinder them.
In other words, this concession would make the ethics rules largely symbolic, suggesting the Dems may be more interested in extricating themselves from a situation they don’t appear able to win. Also, continuing to block CLARITY’s passage could have serious negative electoral implications come November (see crypto PAC section below).
On June 24, Sen. Cynthia Lummis (R-WY), one of the driving forces behind the market structure push, told Fox Business that the Senate teams working on CLARITY will “put out a text over July 4th, and give people one last really thorough look of the bill, and then we’re moving in July.”
Politico’s Jasper Goodman quoted Lummis saying the revised bill would include “language that would allow a state attorney general to sue a digital asset exchange if they list, for example, a memecoin that was issued by an elected official subject to the ethics bill.”
For the record, Trump issued his $TRUMP memecoin on January 17, 2025, three days before he took the oath of office for the second time. Would that qualify for legal action, or would the fact that he was technically still a private citizen at the time of the token’s debut immunize him from prosecution?
On a related note, Sen. Richard Blumenthal (D-CT) went on CNN on Thursday to demand that execs from the Trump-linked World Liberty Financial (WLF) token-issuing project come to Capitol Hill “under oath, in a hearing” to explain why the $500 million sale of a 49% stake in WLF to UAE officials isn’t shady AF. Blumenthal was a signatory to this week’s letter to Senate leaders seeking an official probe into the sale and its potential impact on national security.
For the record, all three Trump sons are WLF’s co-founders, so this too would likely be off-limits under a ‘no relatives’ ethics policy.
Illicit finance concerns still a thing
Another bone of CLARITY contention is ‘illicit finance,’ aka the legal protections the bill currently offers developers of noncustodial decentralized finance (DeFi) platforms when nogoodniks use those platforms for illicit/illegal purposes.
This week witnessed the arrival of a new opponent of this immunity offer, a group of Catholic nuns who note the platforms’ use in facilitating financial transactions linked to human trafficking. But these sisters are far from alone in their quest to ensure justice can be done.
In April, a coalition of U.S. prosecutors and law enforcement agencies expressed their opposition to CLARITY’s DeFi language, saying it would complicate their capacities to bring crypto-friendly criminals to justice. In June, White House crypto advisor Patrick Witt convened a meeting with some of these cops/prosecutors in a (failed) bid to alleviate their concerns.
On June 23, Crypto in America’s Eleanor Terrett surfaced a new letter from many of these same cops/prosecutors in which they express gratitude for the face-to-face and insist they don’t have a bone to pick with “individuals who merely write or publish software code, nor with responsible technological innovation.”
But they do object to the “broad exemptions” in CLARITY’s Section 604, known in a previous life as the Blockchain Regulatory Certainty Act, which they believe “risks creating gaps in oversight and accountability that could impede” efforts to bring criminals to justice.
And 604 isn’t their only CLARITY tripwire. “Several provisions throughout the bill will reduce transparency, limit accountability, and create gaps in the anti-money laundering and countering the financing of terrorism (AML/CFT) framework that law enforcement relies upon to identify criminal activity, protect victims, and safeguard national security.”
The letter singles out the lack of “safeguards commonly applied to other financial intermediaries, including suspicious activity monitoring and reporting obligations.” Coin mixing platforms (like Tornado Cash) were mentioned for their role in “facilitating the movement or concealment of illicit funds.”
Spelling it out plainly, the letter says “no class of market participant should receive a blanket exemption from registration, know-your-customer (KYC), Bank Secrecy Act (BSA), or AML/CFT requirements.”
The lawmen insist they’re ready to work with stakeholders on this issue, but they also urge Congress to acknowledge “the breadth of this coalition” that has traditionally found common ground with the law-and-order GOP.
Fairshake: Spending millions, rolling sixes
Crypto-focused political action committees (PACs) had another good night on Tuesday as primary elections in Maryland, New York, and Utah saw crypto-supported candidates claim victories.
In Maryland, Adrian Boafo won a hotly contested race to replace the retiring Rep. Steny Hoyer as the Democratic candidate for the 5th District ballot come November. Boafo’s victory was aided by $5.3 million spent by Protect Progress, the Dem-focused offshoot of the dominant Fairshake PAC, plus individual contributions from three Coinbase (NASDAQ: COIN) execs.
Rep. April McClain Delaney easily defeated her Dem challengers for Maryland’s 6th District, thanks to $516,368 from Protect Progress. In Utah, Rep. Blake Moore fended off a challenge for his role as the Republican candidate for Utah’s 2nd District thanks to $400,000 from Fairshake’s GOP-focused offshoot Defend American Jobs.
In New York, Micah Lasher won the Democratic primary for House District 12, defeating rival Alex Bores, who attracted nearly $25 million in outside funding. Most of this funding came from AI-focused PACs, although some with the same funders as their crypto counterparts, both supporting ($16.8 million) and opposing Bores ($8.1 million).
Congressional crypto fan Rep. Ritchie Torres (D-NY) easily won his 15th District primary thanks to $1.4 million from Protect Progress and $300,000 from the Fellowship PAC, a new group backed by stablecoin issuer Tether. Torres also received a flood of individual contributions from crypto execs, including senior figures at all three of Fairshake’s major funders: Coinbase, Ripple Labs, and the Andreessen Horowitz (a16z) (NASDAQ: ZADIHX) venture capital group.
As Politico noted, Fairshake and its offshoots are now 38-2 in the congressional races they have spent money on this year. Many of these contests were foregone conclusions, meaning Fairshake’s impact was limited, but with the PAC having $135 million yet to spend in this current cycle, those are the kind of numbers that politicians facing re-election can’t ignore.
But Fairshake spent nothing in the primary race won by Rep. Brad Sherman (D-CA), a fierce crypto critic, in part because it knew Sherman was a lock, as Sherman told Politico, crypto PACs “like a good batting average. And if you want a good batting average, you limit the number of times that you go to bat against Major League pitching.”
Fearless prediction: lawyers will get rich
Shifting gears, the ongoing ‘states v prediction markets’ legal brawling continued unabated this week, as Kalshi sued Illinois Gov. J.B. Pritzker, Attorney General Kwame Raoul, and several other state officials on Tuesday.
Kalshi is seeking to block the July 1 implementation of a new law that requires prediction markets offering ‘contracts’ on sports events to obtain an Illinois gaming license, like all the other sportsbooks operating in the state. The law also establishes a Sports Wagering Fund that imposes a 15% tax on revenue derived from sports wagers, including those conducted via prediction markets.
Kalshi’s suit argues that the new law “expressly violates” the Commodity Exchange Act, which Kalshi claims grants the Commodity Futures Trading Commission (CFTC) ‘exclusive jurisdiction’ over “sports events contracts traded on federally regulated DCMs [designated contract markets].”
The CFTC sued Illinois in April, one of nine states the CFTC has (so far) targeted for daring to enforce their respective gambling rules. CFTC chair Michael Selig insists that prediction markets’ sports ‘contracts’ are actually swaps and thus are the sole regulatory responsibility of the CFTC. The CFTC amended its Illinois suit last week to note its outrage at the state’s new tax plans.
The legal standoff between the feds and states has produced several lower court victories for both sides, making a trip to the U.S. Supreme Court all but inevitable. The Supremes have a habit of doing what Trump wants, but not always, so it remains anyone’s guess which side will ultimately prevail in this jurisdictional turf war.
Getting back to CLARITY’s proposed ‘ethics’ solution, we remind our readers that Donald Trump Jr.’s 1789 Capital made a “double-digit millions” investment in Polymarket last year. Don Jr. has a seat on Polymarket’s advisory board and also serves as a Kalshi advisor.
Trump Media & Technology Group (TMTG) (NASDAQ: DJT) has been planning to launch its Truth Predict platform for some time, and the president himself claimed this spring that he wants to see American firms control this market.
American split on prediction market legality, wagering palette
A Politico poll released this week showed 29% of American voters held a negative view of prediction markets’ growing popularity, versus just 19% who held a positive view. The bulk of respondents either had no firm view (28%) or weren’t yet ready to pronounce judgment (24%).
Democrat voters were far more likely to hold a negative view (36%) than their GOP counterparts (27%), while the reverse was true for those holding positive views (GOP 25%, Dems 20%).
But just 6% of respondents said they’d actually placed a prediction wager, while another 17% said they’d consider it. (The number of those with actual wagering experience was 12% in both the 18-24 and 25-34 age demos.) But more than half of voters (53%) expressed zero interest in doing so, with the other 23% unsure.
As for whether the feds or individual states should regulate prediction markets, 28% chose the feds versus 15% who backed the states. However, this question was posed to respondents “who showed some understanding of the industry,” suggesting they’re also aware of state efforts to impose limits on these platforms’ operations.
As further evidence of the bias of this informed subgroup, 17% claimed that “prediction market companies should regulate themselves,” while another 8% said the platforms “should not be regulated” at all. (One suspects that if Politico had asked this group if Ayn Rand was both the world’s greatest writer and a total hottie, they’d have got 100% approval.)
Interestingly, 36% of respondents agreed that “prediction markets are gambling platforms no different than sportsbooks and casinos,” while 20% believe “prediction markets offer gambling products, but should be treated differently than sportsbooks and casinos.”
Recall that in America, states have the final say on what gambling products can and cannot be offered to their residents. So it’s hard to square this ‘yes, they’re sportsbooks’ with ‘no, the states should defer to the feds’ when it comes to regulating them.
Prediction markets’ World Cup wagers onboarding crypto users
In the meantime, the prediction platforms are making major bank off ‘contracts’ related to this year’s FIFA World Cup. Fortune crunched the numbers and found that Kalshi’s World Cup trading volume has hit $2.9 billion to date, while Polymarket isn’t far behind with $2.5 billion. Robinhood (NASDAQ: HOOD) said its prediction market joint venture with Susquehanna International Group has executed 400 million contracts since the tournament kicked off on June 11.
All three sites rely heavily on crypto payment rails, and the rush of new U.S. bettors finally paying attention to the World Cup is reportedly giving many of these customers their first direct exposure to crypto.
On Thursday, Bitget Wallet issued a report tracking 857,377 active Polymarket users, which found that 59.6% of users had no experience whatsoever with decentralized exchanges (DEX) before placing their first prediction wager.
The bulk (53%) of Polymarket users’ DEX activity involves stablecoin swaps, which makes sense given that Polymarket’s coin of the realm is pUSD, which is backed 1:1 with the USDC stablecoin issued by Circle (NASDAQ: CRCL). For U.S. users, Kalshi accepts/issues a variety of tokens through stablecoin intermediary Zero Hash, which converts to/from fiat on the customers’ behalf.
While prediction markets and their CFTC backers love to point out the platforms’ origins in agriculture-related hedges, Pew Research data from May showed sports made up 80% of total volume on Kalshi and 39% on Polymarket since July 2024. Conversely, political markets accounted for 32% of Polymarket volume but just 4% of Kalshi’s volume.
Those splits could be good news for Kalshi and bad news for Polymarket. That Politico poll asked what types of events Americans should be allowed to wager on, with sports (53% say ‘yes’), weather (46%), award shows (45%), and celebrity events (43%) all claiming larger slices than those who opposed their suitability.
On the flip side, Americans are largely opposed to betting on acts of terrorism (64% say ‘no’), the outcomes of wars (57%), election outcomes (44%), who receives presidential pardons (43%), and comments made by Trump and other newsmakers (40%). The largest negative score (65%) was on whether elected officials, candidates, and their staff should be allowed to bet on their own election results.
But hey, if your kids want to bet on your victory (or defeat), have at it.
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