The U.S. Commodity Futures Trading Commission is soliciting public input on a March-proposed rule aimed at tightening and clarifying the agency’s authority over prediction-market event contracts. More than 1,500 comments were filed as the comment window closed, reflecting a broad mix of support for clearer federal oversight and concerns that new rules could curb access or push activity into less regulated spaces.

Key takeaways

• The CFTC drew more than 1,500 public responses to its proposed rule, which would empower the regulator to amend or issue new regulations for event contracts on prediction markets.
• Kalshi and Polymarket endorsed the CFTC’s stance on exclusive federal jurisdiction, with Kalshi’s Luana Lopes Lara urging guidance to keep event contracts listed and overseen by the Commission; Polymarket’s Justin Hertzberg likewise backed strong CFTC authority.
• Industry voices such as Andreessen Horowitz supported the move, arguing that state actions to regulate or ban prediction markets threaten impartial access and the viability of CFTC-regulated platforms.
• State gambling regulators and some lawmakers pushed back, warning that prediction markets could masquerade as unregulated sportsbooks or raise questions about jurisdiction over sports and geopolitical markets.
• The debate appears amid ongoing legal tensions between federal regulators and several states, who have pursued or threatened litigation over prediction-market operations.

Federal rulemaking and the broad jurisdictional question

The public comment period centered on a CFTC proposal designed to formalize the agency’s ability to adjust or introduce regulations governing event-based contracts offered on prediction markets. The agency’s aim is to clarify oversight for products that people bet on outcomes ranging from elections to geopolitical events, by carving out a defined federal jurisdiction that some market participants say is overdue, while others worry about potential overreach into areas traditionally governed by state gambling regulators.

In the view of Kalshi, a leading prediction-market platform, the proposal could usefully supplement existing rules. Kalshi co-founder and chief operating officer Luana Lopes Lara told the commission that its current framework is “well-designed and effective,” and urged the agency to provide guidance that would ensure the universe of event contracts can continue to be listed, traded, and overseen by the Commission. Her stance reflects a desire for regulatory clarity that maintains a federal standard without stifling innovation.

A separate industry voice, Polymarket, echoed similar sentiment. Polymarket US CEO Justin Hertzberg commended CFTC Chair Mike Selig for reaffirming the Commission’s exclusive jurisdiction over prediction markets, while stressing that the regulator should continue to exercise that authority. The call for certainty here mirrors a broader industry preference for predictable rules that reduce the risk of a patchwork state-by-state regime.

Supportive voices: investors and builders weigh in

Beyond Kalshi and Polymarket, venture capital firm Andreessen Horowitz joined the chorus advocating for federal clarity. In a letter, the firm argued that actions by individual states to regulate or ban prediction markets can impede impartial access and raise barriers for participants who rely on predictable, federally supervised systems.

From the industry’s perspective, a stable federal framework could unlock participation from institutions and developers who have looked for consistent regulatory ground to justify scaling operations that depend on prediction-market economics. Yet supporters also recognize that clear rules must address real-world risks, including consumer protection, market manipulation, and the potential for insider knowledge to influence outcomes.

Regulators and lawmakers push back: concerns about overreach and misuse

Not everyone in the regulatory ecosystem welcomed the CFTC’s stance. Several state gambling regulators pressed back, arguing that the federal approach could obscure the line between sports betting and prediction markets, and potentially allow platforms to circumvent state oversight. Pennsylvania’s Kevin O’Toole, executive director of the Gaming Control Board, asserted that the CFTC’s position could allow prediction markets to masquerade as unregulated sportsbooks. Similarly, Mary Beth Thomas, executive director of the Tennessee Sports Wagering Council, contended that sports event contracts offered on prediction markets may fall outside the CFTC’s jurisdiction altogether and should remain under state control.

Missouri’s perspective was notably pointed. Michael Leara, executive director of the Missouri Gaming Commission, urged Congress to preserve state jurisdiction over sports-event contracts, arguing that lawmakers did not intend futures markets to embody gambling activities. Such framing highlights the friction between a federally focused approach to prediction markets and states that view these activities as intrinsically tied to traditional gambling regulation.

The debate also touched on broader policy concerns. Some lawmakers worry about the potential for prediction markets to monetize geopolitical events or to be influenced by insiders with privileged information. In a joint letter, Dennis Kelleher, CEO and co-founder of Better Markets, along with 12 consumer groups, urged the CFTC to prohibit event contracts tied to elections or geopolitical events, arguing such contracts could influence public policy or governmental action.

The intensity of state-level pushback has intersected with ongoing legal action in the federal arena. The CFTC has argued that it should hold authority over prediction markets and has pursued litigation against several states that challenged this position, signaling a deliberate effort to secure a clear federal role in this space. The tension between state sovereignty and federal oversight remains a central throughline of the current discourse.

Market implications: what readers should watch next

Looking ahead, the CFTC’s next steps will be crucial for market participants navigating prediction markets and related crypto ventures. While the proposed rule is designed to formalize federal oversight, the precise contours of the final rule—and how it will be interpreted by states and courts—remain to be seen. For traders and platform operators, the outcome could impact licensing trajectories, listing standards, and the balance between consumer protections and open access.

The broader environment also includes notable developments around insider trading restrictions and platform governance. Kalshi and Polymarket indicated in recent weeks that they have tightened insider-trading controls and restricted certain users, such as politicians, from participating in their markets. These steps may reflect a growing sensitivity to insider risks and could inform how stricter federal guidance might shape platform policies going forward. Separately, the Senate’s decision to ban its members and staff from using prediction markets has added a political dimension to the regulatory conversation, signaling that policymakers are watching how these tools are used in practice.

As the CFTC weighs public input, observers will be watching for signs of timing and substance in forthcoming guidance or a final rule. If the agency provides clearer standards on listing, trading, and oversight of event contracts, it could spur greater participation from compliant players while also clarifying the boundaries for state regulators. Conversely, if the final rule narrows federal reach or imposes onerous requirements, it could slow adoption and push certain activities toward gray areas or state-level solutions.

Readers should monitor next statements from the CFTC, any coordinated actions among states, and the evolution of platform policies around eligibility, insider trading, and dispute resolution. The outcome will help define not only the regulatory risk landscape for prediction markets but also the broader trajectory of how crypto-related derivatives and event-based instruments integrate into the U.S. financial-regulatory framework.

Stablecoins may need a new public identity as their role expands beyond crypto trading, according to Robert Hackett, head of special projects at a16z crypto. 

In a May 1 report, Hackett said the word came from crypto’s early years, when builders needed tokens that could hold steady value during sharp market swings.

He said the name once made sense because it explained the main problem these assets solved. However, Hackett argued that the technology has moved past that early use case. He wrote, “Stability is now table stakes. It’s a prerequisite, and not the point.”

Stablecoins move beyond price stability

Stablecoins are cryptocurrencies designed to track assets such as the U.S. dollar, gold, or other reference values. They now support payments, transfers, settlement, savings products, and financial apps built on public blockchains.

Hackett said the term still points to the original problem of crypto volatility, not to the wider platform stablecoins have become. He added that the real question is no longer whether these assets can hold value, but what builders can create with them.

The market has also grown. DefiLlama data showed the total stablecoin market cap near $320.84 billion, with USDT holding about 59.06% dominance. That size has made the sector one of crypto’s main bridges to payments and dollar-based activity.

Rebrand debate grows among builders

John Palmer, a developer and brand adviser, made a similar case last week. He said it “feels like a bug” to call them stablecoins because the category may expand crypto’s use far beyond its current reach.

Palmer also said these assets deserve a self-defined name, rather than one built as a response to volatility. His comments matched Hackett’s view that the word stablecoin frames the technology as a fix, not as a base layer for digital money.

Moreover, Hackett said other terms, such as “digital cash” or “programmable money,” may describe the technology better. Still, he noted that such names can feel too awkward for common use.

He also said early names often remain even after technology changes. As an example, he compared stablecoins with terms such as horsepower and email. In his view, people may later speak more often about digital dollars, digital euros, and other onchain assets.

Elsewhere, the a16z comments came as the firm stays active in wider crypto policy debates. Crypto.news reported that a16z also backed the CFTC in a dispute over state-level restrictions on prediction markets, showing its wider role in digital asset regulation discussions.

Payward has completed its acquisition of Bitnomial, giving Kraken a regulated pathway to launch crypto derivatives in the U.S.

According to a company statement released Friday, the deal hands Payward control of a full set of Commodity Futures Trading Commission licenses, including a Futures Commission Merchant, a Designated Contract Market, and a Derivatives Clearing Organization, allowing it to operate trading, clearing, and brokerage services under one framework.

Arjun Sethi, co-CEO of Payward and Kraken, said the rollout will begin with spot margin trading on Kraken, with perpetual contracts and options scheduled to follow, adding that “that stack is what makes the next set of products possible.”

Bitnomial, based in Chicago, spent more than a decade securing the three CFTC approvals required to run a complete derivatives operation, a combination no other crypto-native U.S. firm holds at the same time, according to Payward’s earlier disclosure in April.

With the transaction closed, Bitnomial will operate within Payward while keeping its regulatory structure and third-party services intact, the company said, alongside plans to expand the exchange’s team as development continues.

Payward said the integration will connect Bitnomial’s infrastructure across Kraken, NinjaTrader, and its business-to-business platform, allowing banks, brokerages, and payment firms to access regulated U.S. crypto derivatives through a single API.

When the acquisition was first announced, Payward said the deal could reach up to $550 million in cash and stock, valuing the company at $20 billion, although final terms were not disclosed upon closing.

Company data released in April showed Payward generated $2.2 billion in revenue in 2025, processed about $2 trillion in transaction volume, and held more than $48 billion in customer assets at year-end.

Outside the U.S., Payward said it already runs regulated derivatives businesses in the UK following a 2019 acquisition and introduced EU-regulated offerings in 2025, building out its international presence ahead of entering the U.S. market with a fully licensed structure.

The acquisition follows a separate $200 million investment from Deutsche Börse Group earlier this month, while Payward confirmed it had confidentially filed a draft S-1 with the U.S. Securities and Exchange Commission in November as it continues to consider a public listing.

The 11 U.S.-listed spot bitcoin BTC$79,854.07 exchange-traded funds (ETFs) have now recorded two consecutive months of net inflows in a sign of renewed institutional appetite for the leading cryptocurrency.

But zoom out, and the recovery looks more modest than the monthly headlines suggest.

ETFs have pulled in a total of $3.29 billion in investor funds over the past two months, according to data source SoSoValue. May began on a positive note, with ETFs registering a net inflow of $629 million on Friday.

That has lifted the cumulative net inflows since the launch in January 2024 to $58.72 billion, which is still shy of the record high of $61.19 billion in October. It’s also the month when bitcoin’s spot price hit its lifetime peak of over $126,000.

The gap shows that, though demand has recovered, it has yet to compensate for the outflows between November 2025 and February 2026. The four-month stretch saw investors yank $6.38 billion alongside a sharp slide in bitcoin to nearly $60,000 from over $100,000.

It’s not necessarily a reason for alarm, but a useful reality check on where things stand compared to the peak of October’s bullish sentiment. It tells us that the recovery in ETF flows is real but incomplete. Whether it gains enough momentum remains to be seen in the days ahead.

TLDR

• Fundstrat co-founder Tom Lee believes cryptocurrency markets and approximately 50% of equities have completed an unnoticed bear cycle
• Short interest has climbed to depths normally observed at bear market bottoms rather than at cyclical tops
• Real Vision’s Raoul Pal characterizes recent price action as a mid-cycle pullback rather than a terminal phase
• The Crypto Fear and Greed Index dropped to 8, marking its most extended period under 10 in its history
• Cryptocurrency investment products experienced $445 million in redemptions over the past week, with Ethereum absorbing the largest share at $222 million

Tom Lee, who co-founded the investment research company Fundstrat, believes the cryptocurrency sector has already navigated through the majority of its bearish territory. He shared these insights during a conversation on Fundstrat’s research platform.

Lee explained that approximately half of equity markets alongside the entire cryptocurrency space have already completed what he described as an obscured bear market phase. He referenced significant selloffs in software equities and noted that digital assets mirrored these downward movements due to identical liquidity constraints.

He further observed that bearish positioning has swelled to magnitudes typically associated with mid-bear-market conditions rather than standard cyclical peaks. According to Lee, this distinction carries weight because it indicates the bulk of downside pressure has likely already materialized.

Lee noted that investor sentiment deteriorated more rapidly than negative news flow. Market participants adopted defensive postures even as forward-looking economic indicators were finding stability. He interprets this divergence as evidence of a possible inflection point instead of the beginning of deeper losses.

He distinguished between routine cyclical credit tension and systemic financial risk. The recent turbulence in private credit markets, according to Lee, appears more consistent with standard credit cycle dynamics rather than a crisis comparable to 2008. He suggested major banking institutions could actually gain from this transition.

Macroeconomic Indicators Signal Mid-Cycle Position, Not Peak

Raoul Pal, who founded Real Vision, expressed a comparable assessment. He cited global M2 money supply reaching record levels, dollar weakness, and strengthening Institute for Supply Management data.

“The current move does not look like the end of the cycle but a mid-cycle correction,” Pal said in an interview.

Pal also drew attention to the Crypto Fear and Greed Index. The indicator plummeted to 8 and has remained beneath 10 for an unprecedented duration compared to even the 2022 bear market.

He interpreted this extreme fear reading as a potential bottom signal rather than a harbinger of additional declines. The sustained nature of this fearful sentiment, he contended, actually increases the probability of a market bounce.

Investment Fund Flows Paint a Cautious Picture for Now

Despite these optimistic perspectives, actual capital movements remain negative. Cryptocurrency investment vehicles recorded $445 million in redemptions during the previous week.

Ethereum experienced the steepest single outflow totaling $222 million. This represents tangible evidence of continued investor caution.

Lee introduced a forward-looking argument centered on artificial intelligence. He suggested that stablecoin payment systems and blockchain-based settlement infrastructure could emerge as the foundational layer that AI agents utilize at meaningful scale.

This convergence, he maintained, could channel capital back toward Bitcoin and Ethereum once macroeconomic headwinds subside.

Whether a genuine recovery takes hold hinges on the pace of liquidity expansion. It also depends on whether market sentiment continues to trail the actual economic fundamentals.

The latest concrete indicators remain the $445 million in weekly redemptions and the Fear and Greed Index resting at 8 — representing its most extreme and prolonged fear reading in recorded history.

Bitcoin price surged to a four-month high of $80,529 on Monday shortly after United States President Donald Trump revealed “Project Freedom” to help stranded cargo ships affected by the closure of the Strait of Hormuz.

According to data from crypto.news, Bitcoin (BTC) price rose nearly 3% breaking past the $80,000 a level that had been serving as stiff resistance. The bellwether has rallied over 20% in the past month.

Bitcoin price jumped today after Trump announced Project Freedom via a Truth Social post on Sunday, an initiative to free stranded cargo ships that were trapped as innocent bystanders in the U.S.-Iran conflict. Notably, the U.S. would guide foreign vessels safely through the restricted waterways so that they could freely get on with their business. The initiative reportedly went into effect today.

Despite the humanitarian framing by the U.S., Iranian officials have warned that any U.S. interference to navigate in the strait would be considered a violation of the fragile ceasefire and could lead to a forceful response.

Besides the project, Trump also said that his representatives were engaged in “very positive” discussions with Iran that could help ease tensions in the Middle East.

“I am fully aware that my Representatives are having very positive discussions with the Country of Iran, and that these discussions could lead to something very positive for all,” said Trump in his May 3 Truth Social post.

As Bitcoin price rallied on the news, it triggered a short squeeze as short traders were caught offguard. Data from CoinGlass shows that over $160 million in Bitcoin short liquidations occurred, which caused over $300 million in short liquidations across the crypto market.

West Texas Intermediate was up 0.6% at $102 per barrel while Brent Crude oil traded at $108, up 0.4%, showing stability as markets await the mission’s outcome.

Safe-haven assets like gold and silver fell slightly lower on the day, while major Asian tech stocks such as the Nikkei 225 and Hang Seng closed higher as investor confidence returned.

Meanwhile, spot Bitcoin exchange-traded funds in the U.S. entered their fifth straight week of net inflows with $153 million added last week. Such institutional inflows often improve retail investors’ perception of the asset’s legitimacy and hence drive further upward momentum.

Looking ahead, one of the next major catalysts for Bitcoin and broader markets is the May 7 initial jobless claims report, which will provide insight into the strength of the labor market and could influence expectations around the Federal Reserve’s interest rate policy.

A U.S. court order has placed Arbitrum DAO’s planned use of frozen hack funds under legal restraint.

According to filings authorized by the U.S. District Court for the Southern District of New York, plaintiffs served a restraining notice on May 1 through Arbitrum’s governance forum, blocking any movement of 30,766 ETH, valued at nearly $71.1 million, that had been frozen by the Arbitrum Security Council after the Kelp DAO exploit.

Lawyers representing the plaintiffs, identified as victims holding unpaid terrorism-related judgments against North Korea, have argued that the seized ether constitutes property in which the DPRK holds an interest. Their claim rests on allegations that the funds were stolen by the Lazarus Group on behalf of Pyongyang, a link previously attributed by LayerZero in its investigation of the breach.

Arbitrum’s intervention traces back to April 20, when its Security Council moved the assets into a controlled wallet after identifying attacker-linked addresses. In an April 21 update, the network said the freeze followed input from law enforcement regarding the exploiter’s identity, adding that the action did not disrupt user activity or applications.

Gerstein Harrow LLP filed the action on behalf of Han Kim and Yong Seok Kim, whose case stems from the killing of Reverend Kim Dong-shik by North Korean agents. A U.S. court awarded roughly $330 million in damages in that case, and the latest filing combines that judgment with two others, Kaplan v. DPRK and Calderon-Cardona v. DPRK, bringing total claims to more than $877 million before interest.

Legal arguments presented by the plaintiffs cite the Foreign Sovereign Immunities Act and the Terrorism Risk Insurance Act, which permit creditors to attach assets tied to state sponsors of terrorism. The filing names both Lazarus Group and APT-38 as instrumentalities of the DPRK.

Governance vote collides with legal claim

Arbitrum DAO had opened a Snapshot vote on April 30 to decide whether the frozen ETH should be transferred to a recovery initiative formed after the exploit. The proposal, authored by Aave Labs with contributions from Kelp DAO, LayerZero, EtherFi, and Compound, seeks to route the funds into a multi-signature wallet managed by ecosystem participants and security firm Certora.

Voting data shows more than 99% support for the plan as of publication time, with a May 7 deadline set for the temperature check. The design limits the wallet’s function to receiving recovered assets and using them to restore backing for rsETH.

Aave Labs has included an indemnification clause in the proposal, offering to cover the Arbitrum Foundation, Offchain Labs, and Security Council members against claims tied to the freeze or release of funds. The extent to which such protections would apply under an active court-ordered restraint remains unresolved.

The dispute unfolds against the backdrop of a $292 million exploit that drained 116,500 rsETH from Kelp DAO’s LayerZero-based bridge on April 18. LayerZero’s analysis pointed to a compromise of RPC nodes and a 1-of-1 verifier setup that allowed a forged cross-chain message to pass validation, while Kelp DAO has maintained that the configuration followed default deployment parameters.

On-chain tracking cited in subsequent reports showed the attacker moving funds through Arbitrum and converting assets into Tron-based USDT, a pattern analysts said was intended to fragment the transaction trail. Estimates cited by Yahoo Finance placed North Korean-linked crypto thefts near $600 million in the first quarter, with the Kelp DAO incident accounting for a significant share.

Arbitrum’s freeze had initially been framed as a step toward recovery, but the court-backed claim has now introduced competing demands over the same pool of assets, leaving the DAO’s next move subject to legal constraint.