Key Highlights

• The $H token plummeted 80-90% following a security breach on June 8-9, erasing over $1 billion in market capitalization
• Malware on a developer’s computer compromised private keys, enabling hackers to steal 141M tokens and create 200M additional ones
• Immediate financial damage is calculated between $30M–$36M; $H dropped to $0.05–$0.13 before recovering to approximately $0.20
• Officials suspended bridge operations, announced a $1M USDT reward, and committed recovered assets to token repurchase initiatives
• Speculation about internal complicity has emerged among researchers, with an upcoming token release on June 25 intensifying concerns

Humanity Protocol’s $H token stood out as a top-performing cryptocurrency in early 2026, delivering returns between 300–800% and climbing to a record peak of $0.8439 on June 2. Yet within mere days, more than 80% of that value evaporated.

A cybersecurity incident on June 8–9 sparked the dramatic downturn. The digital asset plunged from approximately $0.67–$0.74 to depths of $0.05–$0.13. More than $1 billion in valuation disappeared within hours.

Following the crash, $H has mounted a 41% recovery and was changing hands near $0.20 as of June 10–11. The token still shows approximately 74% losses over the seven-day period.

Anatomy of the Security Breach

The vulnerability originated from an infected developer computer. Malicious software on this machine revealed private keys that controlled Humanity Protocol’s Gnosis Safe infrastructure on both Ethereum and BNB Chain.

This wasn’t a sophisticated smart contract vulnerability or an intricate DeFi protocol manipulation. It represented a fundamental operational security breakdown.

On the Ethereum network, three out of six Gnosis Safe keys were compromised. Attackers leveraged these credentials to extract approximately 141.2 million $H tokens through a single transfer.

On BNB Smart Chain, three out of five authorization keys fell into hostile hands. The perpetrators activated unrestricted minting capabilities and generated over 200 million new $H tokens through two separate operations.

Both the stolen and newly fabricated tokens flooded exchanges, destroying price stability and sparking widespread panic selling. The immediate monetary impact from extracted and manufactured tokens ranges from $30 million to $36 million.

Official Actions and Outstanding Concerns

Humanity Protocol responded swiftly following the compromise. Officials verified the incident stemmed from key exposure rather than code vulnerabilities, and immediately suspended all bridging functionality.

They deployed a public monitoring system displaying attacker addresses and transaction flows. A $1 million USDT reward was established for intelligence contributing to fund retrieval.

The organization also pledged that any reclaimed assets would support market purchases of $H tokens. No specific schedule for this buyback initiative has been revealed.

Blockchain investigator ZachXBT and fellow analysts have started reviewing transaction sequences surrounding the incident. Several researchers have floated theories regarding possible internal coordination.

The chronology has attracted attention. A planned token distribution was scheduled for June 25, approximately fourteen days following the security failure. Certain commentators have theorized the breach might represent a coordinated withdrawal ahead of that release.

Market Outlook and Community Focus

The rebound from $0.05–$0.13 to roughly $0.20–$0.21 indicates renewed purchasing interest. However, the asset remains 70–75% beneath pre-attack valuations, with transaction volumes notably subdued.

Limited market depth suggests the current uptick could reverse abruptly. The approaching June 25 distribution compounds existing uncertainty within an already shaken investor base.

Humanity Protocol manages sensitive biometric verification systems, making security lapses particularly destructive to credibility. Critical questions surrounding key custody protocols and potential insider participation await resolution.

The platform’s forthcoming actions — including potential asset recovery and the impact of the June 25 distribution — will likely determine whether this price recovery maintains momentum.

South Korea’s tax authorities are preparing to treat tokenized stocks as securities rather than virtual assets, a move that could bring the rapidly growing sector into the country’s existing taxation framework once financial regulators finalize their legal interpretation.

According to comments from South Korea’s Ministry of Economy and Finance shared with local outlet Bloomberg Bit, the government currently views tokenized stocks as securities in substance despite their blockchain-based structure. 

The ministry said that if the Financial Services Commission determines tokenized stocks qualify as securities, taxation could begin immediately under existing capital markets rules without requiring new legislation.

Officials told the publication that tokenized equities may take the form of digital assets, but their economic characteristics more closely resemble traditional securities. 

The ministry also pointed to previous guidance from financial regulators, which emphasized that assets meeting the characteristics of securities should be regulated as securities regardless of the technology used to issue them.

Interest in tokenized equities has grown rapidly over the past year as investors seek blockchain-based access to publicly traded companies. 

Data from RWA.xyz showed the tokenized stock market reached $1.47 billion as of June 8, up 115% since the start of the year.

Tokenized stock market value. Source: RWA.XYZ

Demand has been particularly strong among investors seeking exposure to U.S. companies such as Tesla and Nvidia through platforms that offer around-the-clock trading and faster settlement.

Financial regulators move toward legal clarification

Attention is now turning to the Financial Services Commission, which is expected to release revisions to its token securities guidelines and related regulations in July.

Earlier, during the second meeting of a public-private token securities task force in May, the commission said it would develop a detailed roadmap for the tokenization of conventional securities, including listed stocks. 

A formal interpretation classifying tokenized shares as securities could clear the way for tax collection during the second half of 2026.

South Korean regulators have already established a foundation for that approach. In its 2023 token securities guidelines, the commission stated that token securities issued in digital asset form fall under the scope of the Capital Markets Act. 

However, those guidelines focused largely on fractional ownership products tied to assets such as real estate, artworks, and intellectual property, leaving uncertainty around tokenized versions of ordinary shares.

Because of that uncertainty, many market participants had assumed tokenized stocks would be treated similarly to virtual assets and remain outside the tax net until South Korea’s virtual asset taxation regime takes effect next year.

Overseas trades could also fall under tax rules

The Ministry of Economy and Finance indicated that taxation would not necessarily be limited to domestically issued products.

Officials told Bloomberg Bit that securities taxation under existing law is based on the economic rights attached to an asset rather than where it is issued. 

As a result, tokenized stock transactions conducted through overseas platforms could still be subject to South Korean tax rules if the underlying rights are deemed equivalent to securities.

The ministry also noted that future classifications may depend on specific features attached to the tokens. Depending on whether voting rights are included, tokenized stocks could potentially be categorized as ordinary shares, derivative-linked securities, or investment contract securities.

At the same time, South Korea’s tax authorities and the National Tax Service are working to strengthen information-sharing arrangements with foreign tax agencies, including the U.S. Internal Revenue Service, to improve visibility into transactions conducted through overseas platforms.

The regulatory push comes as tokenized finance gains momentum globally. 

According to a Binance Research report, tokenized stocks had become the fastest-growing segment of the real-world asset sector, with market value rising 422% since early 2025. 

The research firm attributed much of the growth to platforms that provide blockchain-based access to traditional equities and exchange-traded funds.

Growing activity on platforms such as xStocks and Ondo Global Markets has further accelerated investor interest in blockchain-based securities, increasing pressure on regulators to clarify how existing financial and tax laws should apply to the sector.

Bitcoin and Ether options worth about $2.5 billion expire on June 12, putting the $60,000 to $62,000 Bitcoin range back in focus.

Around 35,000 Bitcoin options contracts expire today, with a notional value near $2.23 billion. The event is slightly larger than last week’s expiry, but still smaller than major monthly or quarterly expiries.

The current Bitcoin options batch has a put/call ratio near 0.66 to 0.68. Deribit data also placed Bitcoin’s max pain level around $66,000 to $67,000, above the current spot price near $63,000.

Max pain is the price where the largest number of options contracts expire worthless. When spot price sits far below that level, many bullish contracts lose value at expiry.

The event comes as crypto markets remain weak after a difficult week. Bitcoin has bounced slightly, but broader selling pressure remains visible across spot and derivatives markets.

Bitcoin $60K to $62K zone stays in focus

GreeksLive said Bitcoin options positioning has tightened around a narrow set of strike prices. The firm pointed to the $60,000 to $62,000 region as the main downside zone for traders.

“The largest short dealer exposure anchored is at $60K. Collectively, downside exposure is heavily concentrated within the $60K to $62K range,” GreeksLive said.

That range matters because it sits close to Bitcoin’s current support area. If BTC falls back into that band, dealer hedging and stop orders could increase short-term volatility.

Deribit also said positioning remains call-heavy despite recent market stress. That shows many traders still hold upside exposure, even as spot markets stay under pressure.

“Despite recent volatility, positioning remains skewed toward calls across both assets,” Deribit said.

Ether options add to expiry total

Ether options also expire today, adding about $293 million in notional value. Around 175,000 ETH contracts are set to expire, with max pain near $1,750.

ETH traded close to $1,650, staying below its max pain level. The token has struggled to recover after losing higher support zones during the latest crypto selloff.

The Ether options put/call ratio stood near 0.58 to 0.62, showing more call exposure than put exposure. Still, spot ETH has not shown a strong rebound yet.

The total crypto options expiry stands near $2.5 billion. That makes today’s event notable, but not large enough by itself to change the wider market trend.

Spot market remains weak

Bitcoin traded near $62,937, while Ethereum traded near $1,656, according to crypto.news market data. BTC held above the $60,000 area, while ETH stayed close to its lower support range.

Total crypto market value remains near multi-month lows after heavy selling earlier in June. The latest bounce has slowed the decline, but buyers have not yet shown strong control.

As previously reported by crypto.news, crypto spot volume fell to $679 billion in April as retail demand weakened. That report showed that the market is not only facing sellers, but also a shortage of active buyers.

SpaceX’s planned IPO has also raised questions about capital rotation from crypto into major technology listings, as previously reported. That pressure sits alongside geopolitical risk, inflation concerns, and weaker risk appetite.

For Bitcoin, the key level remains the $60,000 to $62,000 range. A clean hold above that zone could limit expiry-related pressure, while a break lower may bring the mid-$50,000 area back into discussion.

An international law enforcement operation among 11 countries has shut down AudiA6, a money laundering ring that processed over 336 million euros ($390 million) in illicit funds between 2022 and 2025.

On Wednesday, authorities arrested two administrators, Russian and Ukrainian nationals, in Georgia, seized 25 domains and more than 30 servers and 80 vehicles and froze roughly $900,000 in cryptocurrency, the European Union Agency for Criminal Justice Cooperation (Eurojust) said Thursday.

The AudiA6 “mixer-as-a-service” was used by cybercriminals involved in ransomware attacks to cash out stolen crypto and conceal the movement of illicit funds from authorities by offering to “clean” crypto within about an hour for a 3% to 10% commission.

Since 2021, AudiA6 wallets received approximately 10,333 BTC, valued at around $389 million at the time the transactions occurred, Chainalysis reported. 

The cybercrime syndicate behind the service is also reportedly running a separate marketplace forum known as “Dark2Web”, which is used to advertise illicit services and connect cybercriminals worldwide, according to Eurojust. 

The investigation involved agencies from the United States, Australia, France, Poland, Georgia, Iceland, Canada, Germany, Japan, Switzerland and the United Kingdom, coordinated through Eurojust and Europol. 

Fake KYC accounts used in scheme

The crypto laundering ring was facilitated by thousands of fraudulent accounts using stolen or purchased identities. 

More than 6,000 Know Your Customer (KYC) records linked to “money mule accounts” were identified during the investigation, Eurojust said. 

Many of those accounts were connected to Russian-speaking intermediaries recruited specifically to help move criminal proceeds through crypto exchanges, it added. 

Related: Ransomware attacks surge 50% in 2025, ransom payments decline

AudiA6 also reportedly laundered part of a ransom paid by an Australian business in 2024 following a ransomware extortion attack, according to the Australian Federal Police, which was part of the investigation. 

Both the regular and dark web versions of AudiA6 and Dark2Web domains have been replaced with seizure banners.

A multinational law enforcement effort led to the closure of the platforms. Source: Europol

Ransomware consolidates around a few operators  

Ransomware was recorded in 97 countries during the first quarter of 2026, but the distribution of attacks is becoming increasingly concentrated, with the US accounting for 64.7% of all recorded victims, according to Emsisoft. 

“The ransomware ecosystem is once again consolidating around fewer, more dominant operators,” with the top 10 ransomware groups accounting for 71% of all Q1 2026 victims, reported Check Point Research in May. 

Magazine: Does ‘Paper Bitcoin’ mean there’s an unlimited supply of BTC?

TLDR:

• Michael Selig solely runs the CFTC, gaining unmatched power over crypto markets.
• CFTC approved crypto perpetual futures, triggering CME Group’s stock decline and criticism.
• Lawmakers from both parties push Trump to nominate additional CFTC commissioners.
• Staff buyouts and unrest grow as CFTC’s crypto oversight role expands rapidly.

CFTC Chair Michael Selig is consolidating regulatory control over crypto and prediction markets, drawing both industry praise and rising concern in Washington.

As the agency’s sole commissioner, Selig now holds outsized influence over digital assets, derivatives, and platforms like Kalshi and Polymarket.

Solo Chair Reshapes CFTC Agenda

Selig has served less than six months as CFTC chair, yet his impact is already substantial. He operates as the only sitting member of what should be a five-person bipartisan commission.

This unusual arrangement gives him unilateral authority over crypto products, prediction markets, and oil futures.

His approach favors faster approvals and lighter enforcement than his predecessors. Selig recently approved crypto perpetual futures, a first for U.S. markets. These products let traders bet indefinitely on asset prices without expiration dates.

The approval rattled CME Group, whose stock dropped after the decision. Speaking on CNBC, CME CEO Terry Duffy warned that the move “could be a disaster waiting to happen.” Despite the pushback, the CFTC defended the decision as part of bringing offshore activity onshore.

Selig also backed the Winklevoss twins in their effort to vacate a Biden-era settlement. The CFTC released internal documents tied to the case, unsettling some staff members.

Commenting on the disclosures, attorney Jack Baughman, who represented Gemini, said “this sort of information should be made available in every case, in my view.”

Lawmakers from both parties are now urging Trump to nominate additional commissioners. Senate Agriculture Chair John Boozman and House Agriculture Chair GT Thompson back this push.

Sen. Elissa Slotkin voiced her own concern, stating bluntly, “We’ve got one guy who has clear leanings toward the industry. I’ve got a problem with that.”

Staff Unrest Grows Amid Crypto Bill Push

Internal tension at the CFTC has intensified alongside Selig’s expanding influence. A current official described the agency as lacking the operational capacity to oversee crypto.

CFTC spokesperson Brooke Nethercott rejected that characterization, calling it “a despicable description of our dedicated civil servants.”

A fresh round of buyout offers has hit the Division of Market Oversight particularly hard. This division traditionally handles derivatives exchange oversight and trading venue rules.

Reflecting on the broader pattern, one former official summarized the mood simply: “It’s death by a thousand cuts.”

Notably, a recent prediction market rule proposal bypassed this division entirely. Instead, the general counsel’s office led the drafting process this time.

Nethercott pushed back on suggestions of dysfunction, saying it would be false to “imply anything in the CFTC is done in a vacuum.”

Congress is weighing a digital assets bill that would formally expand CFTC authority. This legislation could make Selig a central regulator for the $2 trillion crypto market. Companies ranging from Coinbase to World Liberty Financial would fall under this oversight.

Former CFTC chair Timothy Massad criticized the agency’s current trajectory sharply, comparing it to a once-reliable engine now running off the rails. Still, industry voices like Chris Perkins remain enthusiastic, declaring of Selig’s approach, “He’s doing God’s work.”

Crypto traders, having seen bitcoin BTC$62,895.02, the largest cryptocurrency, bounce overnight to $64,000 from recent lows under $60,000, may be wondering whether the bottom has been hit and a fresh bull run has started.

There is a simple signal to get that confirmation. Right now, it is saying the rebound has not started.

That signal comes from the widely followed momentum gauge called the relative strength index, or RSI. The measure can range from 0 to 100. Readings above 70 indicate that an asset is running hot and potentially overbought, while readings below 30 suggest the opposite. Between those extremes, specific levels often emerge as dividing lines between bullish and bearish environments.

For the bitcoin price, the line is at 41.5, according to crypto data analytics platform Material Indicators. Above that level, BTC has historically had a stronger argument for being in a bullish macro trend. Below it, bearish pressure tends to dominate.

“Right now, Bitcoin is below it, and still trending down,” Keith Alan, an analyst at Material Indicators, said in an email. “That does not mean price has to collapse, but it does mean the burden of proof is still on the bulls.”

Federated Hermes has launched a new money market fund designed for stablecoin reserve management, introducing a product that can be used by payment stablecoin issuers operating under the GENIUS Act framework.

According to a July 10 announcement, the newly introduced Federated Hermes Money Market Management Digital Treasury Fund, trading under the ticker OFFXX, has been structured to meet the reserve asset requirements that payment stablecoin issuers must maintain under the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act.

The launch comes as the stablecoin industry moves deeper into the implementation phase of the GENIUS Act, which established a federal framework for payment stablecoins in July 2025 and requires issuers to maintain 1:1 backing with high quality liquid assets.

Under details released by Federated Hermes, the fund seeks to generate income while preserving principal stability through investments in U.S. dollar cash, U.S. Treasury securities with maturities of 93 days or less, and overnight repurchase agreements backed entirely by Treasury securities.

The company said the fund intends to operate in compliance with Rule 2a-7 of the Investment Company Act of 1940, the regulatory framework that governs money market funds.

While the Reserve Shares themselves do not use blockchain technology, Federated Hermes said the product has been created primarily for participants in the digital asset sector. The shares can be purchased and held by individuals, institutional investors, and payment stablecoin issuers either directly or through intermediaries.

In some cases, those intermediaries may use blockchain systems to maintain ownership records for customers. Federated Hermes also said it could explore using blockchain technology to record ownership of Reserve Shares or future share classes.

Growing regulatory requirements are creating demand for reserve-focused products. Proposed rules issued by FinCEN and OFAC under the GENIUS Act would subject permitted payment stablecoin issuers to anti-money laundering and sanctions compliance obligations similar to those applied to other financial institutions, which cover customer verification, transaction monitoring, sanctions screening, and suspicious activity reporting.

Federated Hermes expands digital asset offering

Drawing on more than five decades of experience in liquidity management, Federated Hermes appointed Susan Hill, head of the firm’s government liquidity group, and senior portfolio manager John Wyda to oversee the fund.

As of March 31, 2026, Federated Hermes managed $684.7 billion in money market assets and $907.1 billion in total assets under management, according to company figures.

“Liquidity management is a core business of Federated Hermes and we offer one of the largest menus of targeted solutions,” said Paul A. Uhlman, president and chief executive officer of the Federated Advisory Companies.

“Federated Hermes is proud to advance strategic initiatives that bring together the strength of money market investments and our management expertise.”

He said the firm continues to evaluate opportunities tied to blockchain technology as interest in digital assets and tokenized money market products grows.

Federal agencies are still finalizing several GENIUS Act rules, with implementation deadlines continuing through 2026. As issuers prepare for reserve, compliance, and reporting obligations under the law, products built specifically around eligible reserve assets are beginning to enter the market.

Ethereum remained under pressure on June 12 as geopolitical risk, ETF outflows, and weak technical structure kept ETH close to key support.

Ethereum traded at $1,652.70, down 0.4% over 24 hours, according to crypto.news market data. The token recorded $12.28 billion in daily trading volume, while its market cap stood near $199.23 billion.

ETH traded between $1,632.77 and $1,687.85 during the latest 24-hour period. The token was also down 4.91% over seven days, showing that short-term weakness remains in place.

The current move follows a sharp June drawdown across the crypto market. Ethereum recently touched the $1,500 area after losing support near $2,000, a level that had acted as a major marker for traders.

The daily chart still shows a clear downtrend. ETH has formed lower highs since its previous highs near the $4,500 to $5,000 region, and the latest price action shows consolidation near the lower part of the range.

Iran risk and Fed pressure weigh on Ethereum

Ethereum’s latest weakness came as U.S. military action against Iran pushed traders away from higher-risk assets. The conflict has lifted demand for the U.S. dollar and safe-haven positions, while crypto markets have faced liquidations.

Higher energy prices also add pressure because they can keep inflation elevated. That matters for Ethereum because sticky inflation reduces the chance of easier Federal Reserve policy.

A hawkish Federal Reserve usually weighs on crypto. Higher rates make speculative assets less attractive because investors can earn safer yields elsewhere.

As previously reported by crypto.news, the June crypto crash came from several pressures hitting the market at once. Those included a hawkish Fed, U.S.-Iran tensions, ETF outflows, and a leverage unwind.

For Ethereum, that mix has been hard to absorb. ETH often moves with higher beta than Bitcoin, meaning it can fall faster when traders reduce risk.

Ethereum ETF outflows add market pressure

Spot Ethereum ETFs recorded $15.89 million in net outflows on June 11, marking the third straight day of withdrawals, according to SoSoValue data. 

ETF outflows matter because these products can act as a source of spot demand. When flows turn negative, that demand weakens and can add sell pressure during unstable markets.

As previously reported, spot Ethereum ETFs saw $540 million in outflows in May, followed by another $168 million in early June. That removed a major source of support as ETH broke several key levels.

The outflow trend has also kept institutional demand in focus. Ethereum bulls need ETF flows to stabilize if ETH is to build a stronger recovery from the $1,500 to $1,650 range.

The latest ETF data does not mean all buyers have left. BlackRock’s ETHA still recorded inflows on June 11, but broader net flows remained negative across the full group.

Analysts split on accumulation and downside risk

Some analysts argue that Ethereum has entered a long-term accumulation zone. Ali Martinez pointed to Ethereum’s MVRV pricing band and said ETH is trading below the 0.8 MVRV band, which has often marked undervalued conditions.

“Ethereum below the 0.8 MVRV Pricing Band is a high-probability long-term accumulation zone,” said analyst Ali Charts.

Ali also noted that Ethereum’s Delta Price sits near $700. The metric compares investor cost basis with miner production cost and has historically appeared near deep cycle lows.

That view does not remove short-term risk. Daan Crypto Trades said ETH still needs to retake its range low before the structure becomes more constructive.

Advertisement

“Still watching for that range low retake before getting excited again,” said analyst Daan Crypto Trades.

He added that the current move still looks like another breakdown in a larger trend unless ETH reclaims the lost range. That view keeps attention on the $1,750 to $1,800 area.

Ethereum technical setup remains weak

Ethereum is trying to hold the $1,650 area. If sellers break that level, the next support zone sits near $1,550 to $1,500.

A deeper move below $1,500 could bring the $1,400 level into focus. Some analysts have warned that failure to hold that region may increase the risk of a move toward $1,000 to $1,100.

On the upside, ETH needs to reclaim $1,750 to $1,800 first. A stronger recovery would require a move back above $2,000, where the latest breakdown accelerated.

Advertisement

The BBP indicator remains negative near -149.38, showing that sellers still control the daily chart. However, the red bars have become smaller than the sharp bearish spike seen earlier in June, which suggests selling pressure has eased slightly.

The RSI stands near 30.50, while its signal line is near 25.10. That places ETH close to oversold territory, which can support a short-term relief bounce if buyers defend support.

A stronger signal would require RSI to move back above 40 and then toward 50. Until then, momentum remains weak.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

Advertisement

Former U.S. Commodity Futures Trading Commission Chair Gary Gensler has joined a growing list of groups challenging sports prediction markets, arguing in a new court filing that Congress never intended federal derivatives laws to cover sports betting contracts.

According to a filing submitted Thursday to the Sixth Circuit Court of Appeals, Gensler said sports-related event contracts offered by prediction market platforms such as Kalshi do not meet the definition of swaps under the Dodd-Frank Act because they are not designed to hedge economic risk.

The filing adds another voice to an intensifying legal battle over whether sports prediction markets should be regulated by the CFTC or treated as gambling products subject to state gaming laws. Tribal organizations, the Indian Gaming Association, the American Gaming Association, and Better Markets also filed amicus briefs supporting state authority in the case.

At the center of the dispute is a lawsuit Kalshi filed against Ohio after the state challenged the company’s sports-related contracts. A federal judge ruled against Kalshi in March, and the matter is now before the appellate court.

“Congress did not include sports betting contracts within the statutory Dodd-Frank definition of swap,” Gensler wrote in the filing. 

“Such contracts do not fit the CEA’s purpose or the statutory language defining swap, which focus on hedging economic risk. Sports bets are very rarely, if ever, about hedging.”

His filing argued that Congress designed swaps as tools for managing commercial and economic risks rather than for wagering on sporting outcomes.

The latest filing arrives as federal regulators continue shaping rules for prediction markets. Earlier this month, the CFTC proposed a framework that would review event contracts individually rather than banning entire categories of markets. 

As previously reported by crypto.news, the proposal could subject some sports contracts, including markets tied to player injuries and in-game events, to additional scrutiny.

Courts weigh federal authority against state gaming laws

Questions over who controls prediction markets have triggered lawsuits across the country.

Several states, including Ohio, Nevada, New Jersey, Maryland, Montana, and Illinois, have challenged prediction market operators, arguing that some sports contracts function as gambling products and should comply with state licensing, tax, and consumer protection requirements.

Meanwhile, prediction market firms have maintained that their products are permitted under the Commodity Exchange Act and fall under CFTC oversight.

Challenging the regulator’s recent position, Gensler argued that the agency’s interpretation stretches beyond what Congress intended when it expanded derivatives regulation through Dodd-Frank. 

“The CFTC now posits hedging theories for some sports bets that are at best only tenuously connected to reliable hedges of commercial risks,” the filing said. 

“That connection, however, is crucial, as Congress included only those event contracts that hedge risks in a manner similar to a swap and are sufficiently associated with a potential financial, economic, or commercial consequence.”

The agency itself has taken the opposite position. In an amicus brief filed last month, the CFTC argued that event contracts traded on designated contract markets under its supervision should be treated as swaps and remain within federal jurisdiction.

Court decisions have so far produced mixed results. The Third Circuit Court of Appeals ruled in April that New Jersey could not stop prediction markets from operating, while judges on the Ninth Circuit appeared more receptive to arguments from state regulators in a separate case.

Legal uncertainty has persisted even as the CFTC advances a federal rulemaking process. The agency received more than 1,500 public comments by early May and later reported receiving more than 3,000 submissions covering insider trading concerns, prohibited contracts, market safeguards, and questions about regulatory authority.

Industry participants including Kalshi, Polymarket, and venture capital firm Andreessen Horowitz have urged the CFTC to retain sole oversight of prediction markets. State gaming officials from Pennsylvania and Tennessee have argued that sports event contracts resemble sports betting and should not fall under the regulator’s authority.

Tribal groups and gaming industry challenge sports contracts

Separate filings submitted Thursday focused on the impact prediction markets could have on tribal gaming operations and state gambling systems.

According to a brief filed by the Indian Gaming Association and affiliated tribal organizations, sports prediction markets interfere with tribal rights established under the Indian Gaming Regulatory Act because gaming activity on tribal lands is required to benefit tribal communities rather than private companies.

The filing accused Kalshi of operating what it described as unregulated gaming activity across state and tribal jurisdictions while diverting revenue away from governments and tribal entities.

Another brief from the American Gaming Association argued that sports prediction markets and traditional sportsbooks are functionally similar. The group cited a trademark application filed by Kalshi that referenced services related to sports betting and gambling activities.

Better Markets also urged the court to reject the classification of sports prediction markets as swaps, pointing to previous statements in which Kalshi distinguished sports markets from political event contracts.

Emphasizing what he described as Congress’ original intent, Gensler argued that lawmakers never expected federal derivatives laws to replace state sports betting frameworks. 

“Senate Majority Leader Harry Reid of Nevada would never have consented to or passively accepted legislation displacing an activity so critical to his state’s economy and politics by permitting sports betting only under CFTC auspices,” the filing said.

The outcome of the case could have significant implications for the industry. If courts ultimately side with the CFTC, prediction market operators may continue offering event contracts under a federal framework. 

If states prevail, platforms could face separate licensing and compliance requirements in every jurisdiction where they operate, with some states potentially pursuing civil or criminal penalties against unregistered operators.

With federal appeals courts issuing conflicting decisions and both regulators and states defending competing interpretations of the law, the dispute appears increasingly likely to reach the U.S. Supreme Court.