Prediction market platform Kalshi announced action against US House of Representatives candidate Laurie Buckhout and ousted Republican lawmaker George Santos over using insider information for trading on event contracts, in one of the first lifetime bans the company has imposed since its launch in 2021. 

In separate notices of settlement of disciplinary action announced on Friday, Kalshi’s compliance department said it had permanently suspended Santos from trading on the prediction markets platform and imposed a $71,356 penalty. Buckhout received a three-year suspension and a $2,590 penalty.

Both restrictions by Kalshi were made in response to investigations into Santos and Buckhout trading using event contracts that could be manipulated by their own actions. According to the platform, Buckhout, running in North Carolina’s 1st congressional district, “announced her candidacy for public office and was added as a market option for a contract on a North Carolina Congressional election,” while Santos “engaged in trading activity in certain markets related to his attendance at the State of the Union address” in February 2026.

“If a Trader is a decision maker, either directly or indirectly, or has any influence, directly or indirectly, no matter the scale and importance of the influence, on the outcome of the Underlying event of any Contract, that Trader is prohibited from attempting to enter into any trade, either directly or indirectly, on the market in such Contracts,” state Kalshi’s rules.

The actions by the company represented a significant crackdown at a time when prediction market platforms are under scrutiny by state and federal lawmakers over claims that many of the event contracts are susceptible to manipulation. President Donald Trump’s teleprompter operator, Gabriel Perez, was fined $172,000 by federal regulators after trading event contracts on Kalshi related to Trump’s speeches. 

While Kalshi’s compliance department reported that Buckhout “cooperated with the inquiry” and agreed to the three-year trading ban and penalty, the platform made no such statement in Santos’ case suggesting that the former US lawmaker had cooperated with its investigation.

Related: Trump teleprompter operator made $100K betting on Kalshi markets tied to speeches: ABC

Buckhout remains the Republican candidate for North Carolina’s 1st congressional district in the 2026 midterm elections, while Santos, formerly a representative for New York’s 3rd congressional district, was expelled from Congress in December 2023 amid fraud allegations.

In response to the settlement, Santos said in a Monday X post that Kalshi was an “unserious company.” Buckhout reportedly called her actions betting on her own congressional race a “dumb mistake.”

As of Tuesday, Kalshi still listed event contracts related to the outcome of Buckhout’s North Carolina race, giving Democratic incumbent Don Davis a 63% chance over the Republican’s 41%.

Event contract for Laurie Buckhout in North Carolina House race. Source: Kalshi

CFTC taps emergency authority in fed-state prediction markets legal battle

Kalshi and other prediction market platforms like Polymarket face several lawsuits filed by individual US state gaming authorities over allegations the companies are facilitating illegal bets on sporting events. At the same time, the sole commissioner and chair of the US Commodity Futures Trading Commission (CFTC), Michael Selig, claims that the agency has “exclusive jurisdiction” over prediction markets and vowed to take legal action against any state authority challenging this position.

Last month, the CFTC, in a rare move, invoked emergency authority opposing the state of New York attempting to bar Kalshi from offering contracts tied to sports, elections and other events.

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The US Securities and Exchange Commission (SEC) has proposed overhauling decades-old rules governing transfer agents as blockchain-based recordkeeping and tokenized securities become more prominent in US markets.

The proposal would update requirements covering registration, recordkeeping, safeguarding and securities transfers, while introducing new rules aimed at risks emerging from increasingly digital and automated market infrastructure.

“Market participants are actively seeking to bring blockchain-native, or ‘onchain’ transfer agents into the U.S. market,” the SEC said, pointing to models for blockchain-based recordkeeping, tokenized fund administration and cross-chain interoperability.

The agency said its existing framework does not adequately address those developments, particularly risks involving cybersecurity, operational resilience and the safeguarding of securities and investor records.

Under the proposal, transfer agents would face expanded reporting requirements and new compliance standards, including rules governing restrictive legends on securities and the use of third-party service providers.

SEC’s proposed Transfer Agent Rules. Source: SEC

The SEC said its transfer agent rules have not been substantively updated since the late 1970s and early 1980s, when the industry still relied heavily on paper certificates and manual recordkeeping.

The regulatory agency is seeking public comment on the proposed changes, with comments due 60 days after the proposal is published in the Federal Register.

Related: CFTC chair says agency will move forward on crypto regulation if CLARITY fails

SEC pursues broader securities rule changes

The SEC is “on a mission to simplify its rules,” according to analysis from law firm Cahill Gordon & Reindel sent to clients on Tuesday.

In May, the SEC proposed three major changes to public-company rules. The proposals would allow companies to opt for semiannual reporting, simplify the existing filer classification system and expand access to streamlined registered securities offerings.

Last week, the SEC sent a proposed overhaul of custody rules for investment advisers and investment companies to the White House for review, with potential changes covering how firms hold crypto assets for clients. The changes could provide clearer standards for how investment advisers and funds custody digital assets while complying with federal securities rules.

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RedStone has said Tectonic’s estimated $75 million exploit resulted from weak collateral controls rather than an inaccurate oracle after TONIC’s reported price rose about 100-fold in 20 minutes.

RedStone co-founder Marcin Kazmierczak told crypto.news that the oracle accurately reported TONIC’s price in the pool it monitored, but Tectonic allegedly accepted the reading without checking whether the token could be sold at that valuation in meaningful size.

Cronos validators halted block production on Aug. 30 after Tectonic disclosed an incident involving the decentralized lending protocol. Independent researcher Weilin Li estimated that approximately $75 million was affected, although neither Tectonic nor Cronos has confirmed the final loss.

According to Li’s initial analysis, the attacker pushed TONIC’s price about 100 times higher within roughly 20 minutes. The inflated tokens were then supplied to Tectonic as collateral, allowing the attacker to borrow assets with more established liquidity.

TONIC reportedly had a collateral factor of 20%, meaning the protocol allowed users to borrow assets worth up to one-fifth of the collateral’s reported value. Li identified about 364.6 trillion TONIC in the position, which would have needed a reported value of around $375 million to support approximately $75 million in borrowing.

Tectonic oracle reported a manipulated market price

Kazmierczak rejected the idea that the oracle itself necessarily produced incorrect data, drawing a distinction between observing the available market price and deciding whether that price is safe for a lending protocol.

“The oracle wasn’t wrong. It accurately reported the price of TONIC on the pool it was reading from at that moment,” he said.

A thinly traded token can register a high spot price after a limited number of trades, even when the market lacks enough buyers to support large sales at the same level. According to Kazmierczak, Tectonic’s alleged failure was accepting the manipulated price as collateral without testing how much TONIC could actually be sold before its value collapsed.

“Reporting a price and validating that a price is safe to lend against are two different jobs, and Tectonic’s design conflated them.”

The initial Tectonic incident left most of the identified assets on Cronos when validators stopped the chain. Li estimated that about $6 million had reached Ethereum, while roughly $60 million remained at one Cronos address. A second address holding close to $8 million raised his combined estimate to about $75 million.

Funds remaining at identified addresses should not be treated as recovered unless the network, protocol or affected users regain control of them. Cronos and Tectonic had not confirmed Li’s address attribution or asset estimates when the preliminary analysis was published.

Borrow caps could have limited the Tectonic loss

Among the safeguards available to lending protocols, Kazmierczak said borrow caps linked to executable liquidity would have provided the strongest protection. Such a cap limits the total amount users can borrow against an asset based on how much of the collateral could realistically be sold without causing a steep price decline.

“Even if TONIC’s reported price moves 100x, a borrow cap sized to what could realistically be exited without collapsing the market limits the damage regardless of what the price feed says,” he said.

Dynamic collateral factors, price-impact limits and minimum market-depth requirements could also have reduced Tectonic’s exposure, according to Kazmierczak. However, he argued that a properly set borrow cap can contain losses even when another risk parameter fails.

Tectonic apparently lacked those protections, he said, allowing a token with limited liquidity to support borrowing on the basis of a temporarily inflated valuation. Neither Tectonic nor Cronos has released a technical postmortem confirming which controls were active when the incident occurred.

Kazmierczak also cautioned against treating a longer time-weighted average price window as a complete solution. A TWAP calculates an average price across a set period, making brief market moves less influential than they would be under a spot-price feed.

Although longer windows can filter out short-lived price changes, Kazmierczak said protocols must set them according to each asset’s liquidity and trading history. In his assessment, a 100-fold increase in 20 minutes should have raised questions about TONIC’s eligibility as collateral rather than prompting a debate over the ideal averaging period.

“A move like TONIC’s, 100x in 20 minutes, isn’t a volatility event a wider TWAP window would smooth over. It’s a signal the asset shouldn’t have been usable as collateral at any meaningful size in the first place.”

Thin collateral has caused similar DeFi attacks

Tectonic’s reported attack followed an $8.7 million Moonwell exploit on Base on Aug. 27. Security firms said the Moonwell attacker manipulated the collateral value of the relatively illiquid MAMO token before borrowing cbBTC from the protocol’s mBTC market.

Following the incident, Moonwell lowered borrow caps across its Base Core Markets to 1 wei, effectively preventing new loans. It also reduced the supply caps for MAMO and WELL to 1 wei while investigating the transactions.

Kazmierczak compared Tectonic with Mango Markets and Moola Market, two protocols targeted through variations of inflated collateral pricing in October 2022. Mango Markets lost more than $100 million after Avraham Eisenberg increased the value of positions linked to the thinly traded MNGO token and borrowed other assets against them.

The Mango case also provides a U.S. legal example of how difficult it can be to apply existing fraud and commodities laws to automated lending systems. A Manhattan jury convicted Eisenberg in 2024 of commodities fraud, commodities manipulation and wire fraud, but a federal judge vacated the convictions in May 2025 over venue problems and insufficient evidence supporting the wire fraud count.

According to Kazmierczak, protocols repeatedly expose themselves to such attacks because listing a native governance token as collateral can increase its use and help attract deposits. The cost of weak settings may remain hidden until someone tests how the lending market responds to a manipulated token price.

He placed primary responsibility on risk curators and other service providers tasked with setting and maintaining collateral parameters, working alongside protocol developers and oracle providers. Governance participants may approve an asset listing, Kazmierczak said, but many voters lack the market-structure knowledge needed to judge liquidity and price-impact risks.

Cronos restored the chain to its pre-exploit state

Cronos has since restarted network operations after validators restored the blockchain to a point before the Tectonic incident. The network described the halt as an emergency action agreed through validator consensus to protect users.

Restoring the earlier chain state removed transactions recorded after the chosen rollback point from the restarted version of Cronos. Crypto.com CEO Kris Marszalek said the company’s centralized app and exchange continued to operate during the halt and that funds held through those services were unaffected.

Tectonic had asked users not to interact with the lending protocol while its team investigated the incident. Cronos has not published the technical process validators used to select and approve the restored state, while the promised postmortem is expected to address the attack, the emergency halt, and the subsequent restart.

A consortium of 21 major financial institutions says it plans to form a new company dedicated to developing and issuing stablecoins, signaling a renewed effort from traditional banks to build digital-dollar rails that fit emerging regulations. The group announced Tuesday that it aims to launch a US dollar-denominated stablecoin in the first half of 2027, once the company is formed and other conditions are met.

Beyond a first US dollar product, the consortium says it intends to expand to stablecoins denominated in other G7 currencies, with a euro offering identified as its next priority. The planned tokens are intended to serve wholesale, institutional, and retail users, including applications such as cross-border payments and digital asset settlement.

Key takeaways

• 21 large financial institutions plan to create a company to develop and issue stablecoins.
• The initial product is expected to be a US dollar-denominated stablecoin in the first half of 2027.
• Officials say the stablecoin framework will aim to comply with the US GENIUS Act and, where applicable, the EU’s MiCA.
• After the dollar launch, the consortium’s stated next step is a euro-denominated stablecoin.
• The consortium more than doubled compared with an earlier October effort involving 10 banks exploring reserve-backed stablecoins.

From bank pilots to a coordinated stablecoin company

The Tuesday announcement frames the initiative as a step toward a more formal, multi-institution approach to stablecoins. The consortium names Bank of America, Goldman Sachs, Citi, Deutsche Bank, UBS, Santander, MUFG, and Fidelity Investments, among others.

While stablecoins have already gained traction across parts of the financial ecosystem, this move stands out for its scale and for the breadth of the participating institutions across regions including North America, Europe, East Asia, and parts of the Middle East and Africa. The group’s expansion from the earlier, smaller effort suggests momentum is building toward shared infrastructure rather than isolated, institution-by-institution experiments.

In October 2025, Reuters reported that an initial group of 10 banks was exploring a 1:1 reserve-backed model of digital money available on public blockchains. The new consortium effectively builds on that earlier exploration, with the stated plan now moving closer to an eventual issuance roadmap, albeit still contingent on forming the company and meeting other unspecified conditions.

Regulatory alignment is central to the plan

Stablecoin projects increasingly rise or fall on regulatory fit, and the consortium is explicitly tying its design goals to compliance pathways. According to the announcement, the planned stablecoin will aim to comply with the US GENIUS Act and the EU’s Markets in Crypto-Assets Regulation (MiCA), where applicable.

This matters for more than public messaging. Stablecoin issuers and distributors typically need legal clarity around reserve management, redemption, consumer protections, and supervisory oversight. By explicitly referencing both US and EU frameworks, the consortium is signaling that it wants the token to operate not just as a blockchain-native instrument, but as an asset that can be integrated into regulated distribution channels.

That regulatory emphasis also aligns with broader shifts in the sector. Stablecoins have seen growing adoption in recent years, and the passage of GENIUS and MiCA has helped clarify routes that were previously more uncertain for mainstream institutions.

Where the consortium says it wants to use the token

The announcement says the stablecoin is designed for wholesale and institutional use as well as retail access. Use cases highlighted include cross-border payments and digital asset settlement—applications where speed, programmability, and transfer finality are often treated as advantages compared with traditional correspondent banking flows.

For investors and market participants, the inclusion of multiple target segments suggests the consortium wants the stablecoin to function across different integration levels: internal settlement for financial firms, cross-border transfer for payment corridors, and easier access for retail users through downstream partners.

The planned multi-currency expansion further indicates the project is not intended to be a one-off US dollar product. The consortium’s stated next priority is a euro-denominated stablecoin, which could matter for liquidity planning and for cross-border use cases within Europe and between regions.

Broader industry momentum: Asia policy, bank issuance, and institutional surveys

This consortium’s announcement comes amid other signs of institutional progress. In Singapore, for example, the country’s authorities are said to be considering allowing jointly issued cross-border stablecoins into its regulatory regime. The Tuesday announcement reportedly revisits an earlier position that limited the framework to domestic issuance.

Separately, institutional interest has been building through both surveys and product launches. Earlier in 2025, a Fireblocks survey of 295 executives found that 90% of respondents were using or planning to use stablecoins, underscoring that demand is not limited to crypto-native companies.

There have also been concrete issuance steps by major firms. According to coverage referenced by the article, Societe Generale’s crypto subsidiary has issued euro- and dollar-denominated stablecoins, and Fidelity has launched a US dollar-pegged FIDD stablecoin. The article also notes Standard Chartered’s backing of a Hong Kong dollar stablecoin venture.

Taken together, these developments suggest a shift from isolated experiments toward products that can be distributed, regulated, and operationalized at institutional scale. The consortium’s planned US-dollar launch in 2027 can be read as part of that same arc—moving from “can it work?” to “how does it fit within the rules and distribution networks?”

For market watchers, the key question is whether the consortium’s approach—reserve-backed stablecoins with compliance targets aimed at GENIUS and MiCA—will translate into a deployable issuance plan that other institutions can readily integrate with. Investors should watch for updates on the company’s formation, the exact token structure and reserve arrangements, and how the group coordinates cross-border deployment as regulators continue to clarify stablecoin treatment.