Molly White's Citation Needed - Issue 109 – Reg Crypto

Episode Date: August 31, 2026

The SEC’s “Reg Crypto” aims to carve out exemptions, the CFTC wields emergency powers to shield prediction markets from state regulators, and a Trump family crypto firm gets a bank charter. Originally published on August 31, 2026.

I'm Molly White, and you're listening to the audio feed for the Citation Needed Newsletter. You can see the text version of the newsletter online at citation needed. News. Issue 109, reg crypto. The SEC's reg crypto aims to carve out exemptions. The CFTC wields emergency powers to shield prediction markets from state regulators, and a Trump family crypto firm gets a bank charter. This issue was originally published on August 31, 26. Bitcoin prices have recovered somewhat to around $79,000 after a sustained period below $70,000, and at times below $60,000.

The rebound was driven in part by the Treasury's decision to ramp up bond buybacks in hopes of lowering interest rates, and a short squeeze that liquidated over $4 billion in bets against the asset. As prices come up, guardrails are continuing to fall. Though the Senate has struck out for now on the Clarity Act, both the SEC and CFTC have pledged rulemaking if Congress can't force the bill through. To that end, the SEC just dropped Regulation Crypto, a 400-page proposed rule that carves out exemptions and safe harbors to reduce disclosures and reporting requirements on crypto issuers.

The CFTC has promised crypto rulemaking too and is busy battling with states over prediction markets, invoking emergency authority it hasn't used in decades to prevent the catastrophe that would surely occur if Michiganders and New Yorkers couldn't bet on things like will Trump say the word golf this week, or sports, mostly sports. In the White House Trump, flanked by crypto industry executives and campaign mega donors, posted that he had, quote, ended the war on crypto once and for all, and urged Congress to pass the Clarity Act, which he described as, quote, very, very powerful structured legislation, which will

keep us ahead of China, keep us ahead of everyone else. The executives who joined Trump represented firms that have collectively given nearly $60 million to his campaign. They were from companies including Coinbase, Andriesen Horowitz, Cracken, Gemini, the Intercontinental Exchange, ripple, blockchain.com, the NASDAQ, chain link, and Robinhood. Bizarrely, Trump also name-checked Hyperliquid, a niche cryptocurrency platform known for its perpetual futures offerings on crypto assets, traditional stocks, and commodities like oil. After noting that CFTC Chairman Mike Seelig had in May authorized, quote, the first ever true Bitcoin perpetual futures contract on a CFTC registered exchange, Trump added, quote,

I understand that Mike is also working to bring Hyperliquid into the United States in a fully compliant and legal fashion. Politico reported that the name drop came at the CFTC's request, in hopes that it would demonstrate the agency's eagerness to welcome crypto firms into the United States. Earlier this year, Hyperliquids set up its very own lobbying arm, the Hyper Liquid Policy Center, Quote, the U.S. faces a large challenge to rewrite the rules for the new chapter of DeFi, said its CEO, Jake Trevinsky, who of course is more than eager to help. Ice contracts. The two biggest blockchain intelligence firms are fighting over a $95 million ice contract, apparently the largest such contract ever offered by the United States government. The contract, which outlines the need for blockchain analysis. services to combat scams, ransomware, extortion, and sextortion, was awarded without an open

bidding process to TRM Labs. Its competitor, Chainalysis, was quick to file a lawsuit challenging the award, arguing they should have been allowed to compete for the contract. Trump Business Interests Recent analysis from Consumer Rights Watchdog Public Citizen estimates that investors in Trump's crypto endeavors have lost $4.7 billion. They attribute most of these losses, $3.2 billion, to holders of the Trump meme coin, where roughly 65% of holders have lost more money than they've made. Much of these losses are unrealized, meaning that people are still holding the tokens, even as prices continue to sink. Public Citizen rightly notes that not all investors were likely

looking for solely financial benefits, pointing to Justin Sun's subsequent regulatory relief, and planned Trump token purchases by entities like freight technologies, who in May 2025 announced a plan to purchase up to $20 million in Trump token because they thought it would be a, quote, effective way to advocate for fair, balanced, and free trade between Mexico and the U.S. Americans are broadly unhappy with Trump's profiteering at their expense, and a recent Reuters slash Ipsos poll found that 69% of all respondents, including nearly half of Republicans, believe that Trump's businesses influence his decisions in office. However, 56% of Republicans responded that they believe corruption has improved under Trump.

63% of respondents, including 92% of Democrats and 27% of Republicans, don't think it's appropriate for Trump and his family to earn money from crypto. World Liberty Financial The Trump family's World Liberty Financial cryptocurrency business has won a conditional bank charter from the Office of the Comptroller of the currency, which is led by Trump appointee Jonathan Gold. In its 13-page decision granting the approval, the OCC spends four-page. summarizing the comments it received pertaining to the application. Quote, two of the commenters discussed the OCC's authority to charter the bank, asserting, among other things, that the proposed activities do not align with OCC precedent with respect to fiduciary activities conducted by national trust banks.

One commenter discussed issuance of a stable coin by a national trust bank. Four commenters expressed concerns about potential conflicts of interest involving the bank, President Donald J. Trump and his family, Alexander and Zachary Whitkoff, and the United Arab Emirati investors in World Liberty Financial, Inc. Three commenters suggested that the bank could receive preferential treatment by the OCC because the comptroller is a presidential appointee. One commenter suggested that because the comptroller is a presidential appointee,

he could abstain from enforcing laws and regulations against the bank or over-enforce laws and regulations against rivals of the bank. One commenter suggested that certain purchases of WLFI tokens could potentially violate the Emoluments Clause of the U.S. Constitution and implicate national security concerns. One commenter suggested that the OCC should postpone review of the application until certain non-U.S. investors divest their interests in World Liberty Financial Inc. Several commenters argued that the OCC should not approve the application unless the Committee on Foreign Investment in the United States, CFIUS, reviews,

World Liberty Financial Inc's ownership structure and investments into that institution from United Arab Emirati investors. The OCC's rebuttals are brief. In effect, World Liberty's proposed activities are perfectly fine. The comptroller has been completely ethical. Emoluments concerns are out of scope for this application because WLFI tokens are issued by World Liberty Financial, not World Liberty Trust company, and investors in World Liberty Financial would not have any investment in or control over the bank. The OCC's dismissal of concerns over the UAE investments is particularly weird. They write that, quote, investors in World Liberty Financial Inc. would not have an investment in or control over the bank, yet elsewhere acknowledge an investment in the bank by String Z holdings.

String Z is backed by Sheikh Tanun bin Zayy and managed by Hamad Hohfenn al-Ali, Al-Matar al-Shamsi, a former director of Tannun's G-42. G42's CEO and General Counsel manage Arum Investment One, which invested $500 million into World Liberty Financial in January 2025. That's the investment that the OCC is suggesting is irrelevant. Shortly after the OCC's preliminary charter approval, the Wall Street Journal reported that the UAE in fact does own 49% of the holding entity established for the bank, even more than the Trump family's 38%. String Z and two other entities signed passivity commitments, agreements confirming they would not seek to control the bank. According to the journal, these agreements, relatively unusual in OCC decisions,

were requested by OCC leadership in hopes of avoiding more questions from members of Congress, who had already objected to World Liberty's application. Truth Social News Organization, The Intercept, and the Freedom of the Press Foundation have filed a lawsuit against President. Trump, the White House, and some White House personnel over the new service in which subscribers who pay up to $100,000 per month to the president's truth social platform, gain preferential access to posts from the president and others. The API was marketed by Trump Media and Technology Group CEO Kevin Hearn as a way to gain advance access to the, quote, most market-moving

posts, a category that includes the many official government announcements President Trump is fond of making on his own personal platform. The Intercept and the Freedom of the Press Foundation described the scheme as, quote, profoundly corrupt and unconstitutional, arguing that the First Amendment guarantees equal access to official presidential announcements. Quote, even content-neutral burdens on that access must be narrowly tailored to serve a significant government interest,

they write, arguing, quote, there is no legitimate interest, let alone a significant one, in permitting President Trump to profit from selling government information. When Truth Social announced its new data feed, they also announced that subscribers would gain access to an archive of historical posts, which would be made more challenging

for non-subscribers to access. The news organizations argue this will further impede their reporting. The Freedom of the Press Foundation in particular maintains a Trump anti-press social media tracker to archive the president's attacks on the media. They say their access to such posts will be slowed to favor paid subscribers and likely hampered by planned limitations on web scraping tools. In regulators, the SEC has unveiled its long-awaited proposed cryptocurrency regulatory regime,

regulation crypto assets, or reg crypto. The announcement was a bit of a surprise, particularly after an open meeting initially slated for mid-August, was deferred at the White House's request. According to Crypter Journalist Eleanor Tourette, the delay may have reflected worries about complicating Clarity Act negotiations or reports that SIFMA, a leading banking trade association, had signaled they would consider legal action if they felt the SEC overreached in its planned rulemaking. With the Clarity Act's prospects at an all-time low, the CFTC and the SEC have both pledged to rewrite the country's crypto rules, with or without Congress. At the CFTC, Chairman and sole commissioner Mike Seelig convened the first meeting of

of his Innovation Advisory Committee, where he promised crypto CEOs he would quote, heed President Trump's call to codify a future-proof digital asset market structure that cannot be undone by the crypto-haters. Of the 43 members of the Innovation Advisory Committee, 28 of them represent crypto firms. Another six represent prediction markets or gambling companies, and only 11 are primarily focused on traditional commodities. Whether because the SEC has given up, on clarity or has decided to take its chances with SIFMA in court, the agency suddenly released its 400-page proposed rule on August 18th. The draft proposal would create an exemption, allowing issuers to sell up to $5 million in tokens over an initial four-year period,

or a somewhat more demanding avenue in which companies could offer up to $75 million in tokens per year, subject to heightened disclosure and reporting responsibilities. It would also establish a safe harbor program through which crypto assets that meet specified criteria would cease to be treated as investment contracts, moving them outside the reach of the SEC. The proposal is now open for public comment. Now we'll see whether Wall Street thinks it goes too far and whether crypto thinks it goes far enough. In prediction markets. The New York Times recently outlined just how unusual it is for the CFTC to go on offense against the state's challenging prediction markets. In its 50-year history, the agency has never sued a state over a regulatory dispute.

This year, it sued nine and counting. Arizona, Connecticut, Illinois, Kentucky, New York, New Mexico, Minnesota, Rhode Island, and Wisconsin. All nine have Democratic governors, and eight of them also have Democratic attorneys general. Even in states the CFTC hasn't sued, they've exhibited startling overreach. In Michigan, after a state judge ordered Calci to cancel bets, the CFTC invoked its emergency authority to order Calci to disregard the court's order. The agency argued that forcing bet cancellations, quote, constitutes an emergency because it is a, quote, major market disturbance which prevents the market from accurately reflecting the forces of supply and demand. They warned that letting the order stand,

quote, would risk shattering public confidence in prediction markets. This was a the CFTC's first use of its emergency powers since 1980, when it suspended trading in grain futures amid market disruption following President Carter's order to ban U.S. grain sales to the Soviet Union. Quote, how is being unable to gamble on sports online a market emergency, said former CFTC enforcement director I10 Goldman, describing the order as, quote, unprecedented and frankly outrageous. In New York, the CFTC again invoked its emergency powers, directing Calci to keep operating after the state sought a temporary restraining order to halt the platform. Chairman Seleck warned that New York intended to make prediction markets,

quote, waste away under its iron curtain of state gaming laws. The CFTC's blitz comes amid political pressure from the president and his family to shield prediction markets from state gambling regulators, pressure that overlaps with their financial interests in the sector. In early March, the Times reports Donald Trump Jr. addressed Republican state AGs in a closed-door meeting, delivering a message the paper says, quote, dovetailed with a message his father's administration has sent to state leaders. Back off. Trump Jr. is a paid advisor to Kalshi and both an investor in and advisor to Polly Market. The president's truth social business has a marketing agreement with cryptocurrency.

to promote its prediction markets, and recently introduced its $100,000 per month API promising advance access to the platform's quote, most market-moving posts. Trump's truth's social posts routinely move traditional markets and resolve the outcomes of bets on prediction markets, where traders gamble on everything from his posting frequency to specific words he might mention, to various government actions he often announces on the platform. Insider Trading The popularity of prediction markets has brought with it a surge in suspected insider trading, as the sudden ability to bet on anything has tempted those with inside information about anything.

A recent report from the Anti-Corruption Data Collective flagged 556 wallets on polymarket that exhibit characteristics of insider trading, frequently winning long-shot bets on a small subset of markets and topics. Many of them made their bets shortly after registering on the platform, which researchers say is a, quote, possible sign they joined specifically to trade on privileged information. And a parade of bots and so-called whales, or high-volume high activity but likely non-bought traders, often follow these likely insider wallets into trades, suggesting a burgeoning sector of automated and human traders who are learning to look out for insider trading, so they can then copy it.

Of these 556 likely insider wallets, the researchers also noted that 152 of them were making their long-shot bets on military and defense markets. Separately, CNN reported that Polly Market had referred to the Justice Department, quote, dozens of accounts that exhibited signs of insider trading on military-related contracts. Unsurprisingly, one of the people who agrees with most state attorneys general that prediction markets are definitely gambling, not financial activity, is, Michel Spaniolo, a Google engineer arrested in May for allegedly using his insider access to Google's search data to profit from bets on the most searched terms of the year. Quote, interpreting bets on polymarket.com around Google's trending searches to be swaps would produce absurd results, his lawyers wrote, an emotion to dismiss the indictment. Quote, taken to his logical end, the CEA's definition of a

swap would reach virtually every kind of wager that could possibly exist, no matter how, how attenuated the economic consequence, including wagers on the outcome of a neighborhood ping-pong match, wages between friends about the outcome of a reality television show, or even charity raffles. That the person accused of federal felonies would argue that his activities were mere gambling is hardly surprising, given it would undercut the entire case against him. Gabriel Perez, Trump's former teleprompter operator who was using his advance access to Trump's speeches to place profitable bets, has agreed to disgorge just over $100,000 in profits and pay a $65,000

penalty. In elections and political influence, in Florida's District 24, Democrat Oliver Gilbert won his primary despite $2 million in opposition spending from the Fair Shake Pro-Crypto SuperPack network. In ads that ironically urged voters to, quote, follow the money, the super PAC attacked Gilbert for accepting campaign support from a contractor that worked on a controversial proposed ICE detention facility in South Florida. Quote, then Gilbert allowed Miami-Dade to continue working with ICE. A keen viewer might notice that the dates showed on these so-called headlines, more on that in a moment, in the ad don't match the narrative. The campaign support cites a story from July 26, and Gilbert's supposed subsequent allowance of ice dates back a year prior.

The Miami Herald was also quick to note that the ad completely fabricated headlines it had attributed to the Herald, and misrepresented the stories the ad seemed to be referring to. The article about Gilbert's supposedly, quote, dodging a vote to oppose ICE, the herald clarifies, quote, mentions Gilbert in one sentence, which notes that he asked to indefinitely defer a vote to modify the county's agreement with ICE after a procedural move by the commission made the vote unnecessary. One of the articles, which the ad references with a fabricated headline reading, quote, Oliver Gilbert approves $15 million for MAGA donor's company, does not even mention Gilbert. Fairshake's attempt to defeat Democratic opponents by linking them to ICE mirrors their similarly unsuccessful strategy against Illinois Senate candidate Juliana Stratton earlier this year. Of course, the ads talk about ICE because these packs know that running ads about crypto would only alienate the voters their chasing. They don't care about ICE whatsoever. Fairshake's Republican arm has dumped more than

$7 million behind Kentucky's Republican Senate candidate Andy Barr, who's been running ads in which he proclaims, I love ice. Cheers to ICE. In the courts, Zhang Sangho, the CEO of the South Korean Delio cryptocurrency exchange that collapsed in mid-20203, has been sentenced to 15 years in prison after he was found guilty of defrauding its customers. Victims lost approximately 70 billion won or almost $50 million. The Web 3 is going just great recap. There were nine entries between August 11 and 31st. $47.46 million were added to the grift counter. More markets was exploited for $9.3 million. The crypto.com affiliated Kronos blockchain was halted after a tectonic theft. An exploit on the rain crypto payments infrastructure provider caused losses for so-called self-custodial neobanks.

Moonwell lost $8.7 million to their fourth exploit in less than a year. Term finance lost $8.5 million to a governance attack. Keychain, tack, and other cosmos-based blockchains were exploited after, quote, negligent vulnerability disclosures. Bounce Bit was exploited for $3 million, then announced their shutdown and migration. $1.76 million was stolen from Maya chain in an attack that exploited six bugs. Ravencoin rolled back their blockchain after an exploit, and the Harmony token plunged 40% after an unauthorized mint. Worth a read.

The project on government oversight has done a great long-form dive into the Trump family's Alt-5 Sigma WLFI Treasury Company. The firm's history is full of red flags, and there are multitudes of reasons, both pre- and post-dating its metamorphosis into a crypto treasury firm that the SEC might be interested in looking more closely. However, there is one very president-shaped reason it might not, and a FOIA request by POGO that produced no investigation records related to Alt-5 Sigma suggests no investigation has been opened. That report is titled No SEC Probe of Trump Crypto Deal despite alleged illegality. In the News

Frequent New York Times opinion writer Thomas B. Edsel wrote, I asked a wide range of crypto experts about the Trump family's involvement in the industry, and more than half pointed me to independent analyst Molly White. So that was pretty cool. He extensively quotes me in the op-ed about President Trump's many crypto-related conflicts of interest, along with Cornell economist Eswar Prasad, and Duke Financial Regulation Scholar Lee Reiner's. That op-ed is titled A Blatent and Gargantuan Conflict of Interest. I went on the podcast for the American Institute for Boys and Men to talk about prediction markets,

cryptocurrency, and why so many young people, men in particular, are drawn to these products. We also spoke about their recent policy publication, which was titled prediction markets, regulation, risks, and areas of research. The podcast episode is titled When Investing Starts to Look Like Gambling. I joined media justice for a panel on tech money and politics, which is part of their broader series called Brobots versus the People. Along with AI Now Institute's senior fellow AIA Ibrahim and Tech Oversight Project Deputy Executive Director Kyle Morse,

I spoke about the crypto and AI industry's spending and strategies this midterm cycle. That's titled Clocking the Robots Playbook. Finally, I rejoined the Trash Future Gang, not to talk about crypto for a change, but about Grockapedia, the supposed Wikipedia killer, which has not published any updates

since April. That episode is titled RIP Grogapedia 2025 to 26, featuring Molly White. That's all for now, folks. Until next time, this has been Molly White. Thanks for listening to this issue of the citation needed newsletter. If you would like to support my work with a free or pay what you want subscription to the citation needed newsletter, or if you would like to receive these issues in your email, go to citation needed.news. slash sign up. If you enjoyed the podcast version of this episode, please consider leaving a rating or review in your podcast player of choice.