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What are liquid staking tokens? stETH and the depeg risk, explained

Published

4 weeks ago

8 July 2026

What are liquid staking tokens? stETH and the depeg risk, explained

Staking locks your crypto and earns yield. Liquid staking hands you a tradeable receipt for that locked position, so the same capital can earn twice. It is one of DeFi’s largest markets, and it comes with a specific danger most guides skip: the receipt can trade below what it represents. Here is how liquid staking tokens work, and where the risk actually lives.

Summary

Liquid staking tokens let users keep earning staking rewards while using a tradeable token across DeFi without unlocking the original assets.
The biggest risk comes when liquid staking tokens trade below the value of the assets backing them, especially during periods of market stress and heavy withdrawals.
Higher yields from liquid staking strategies often involve leverage, increasing the risk of liquidations if the token temporarily loses its peg.

Staking a proof-of-stake asset like Ether involves a trade-off that used to be absolute: lock your tokens to help secure the network and earn rewards, and accept that the locked tokens are frozen and useless for anything else. Liquid staking removes the second half of that bargain. You deposit your tokens with a protocol, the protocol stakes them for you, and in return you receive a new token, a liquid staking token, that represents your staked position and can be freely traded, sold, or put to work elsewhere in decentralized finance. The original capital keeps earning staking rewards; the receipt token lets that same capital do a second job.

That double-duty is why liquid staking became one of the largest categories in all of DeFi, with tens of billions of dollars flowing into it. It is also why it carries a risk that plain staking does not. The receipt token is only useful if the market treats it as equal in value to the asset it represents, and there are moments, usually the worst possible moments, when the market does not. A liquid staking token can trade below the value of the staked asset behind it, an event called a depeg, and understanding when and why that happens is the difference between using this tool safely and being surprised by it.

This guide explains what liquid staking tokens are, the two designs they come in, how the peg is supposed to hold and how it breaks, the concentration risk hiding behind the biggest provider, the way these tokens get stacked into leverage across DeFi, and the practical questions to ask before holding one. The star example throughout is stETH, the largest liquid staking token, but the mechanics apply across the category, from Rocket Pool’s rETH on Ethereum to the staked-asset tokens on other proof-of-stake networks. The goal is to leave you able to hold one of these tokens understanding exactly what it is, what backs it, and under what conditions its price can part ways with the asset it represents.

The problem liquid staking solves

To see why liquid staking exists, start with the friction of ordinary staking. On Ethereum, running your own validator requires locking thirty-two ether, operating node software with constant uptime, and accepting that your stake is subject to exit queues when you want out. For most holders this is impractical: they lack thirty-two ether, do not want to run infrastructure, and dislike freezing capital they might need, especially as Ethereum reworks its staking and consensus layers in ways that will reshape validator economics for years.

Staking pools solved the first problems by letting many users combine smaller amounts under professional validators, but the funds were still locked. Liquid staking solves the last problem, the lock itself. When you deposit into a liquid staking protocol, it pools your tokens with everyone else’s, stakes them across a set of validators, and mints you a token representing your share of the staked pool plus its accruing rewards. You no longer need thirty-two ether, you never touch validator software, and, crucially, your position is now liquid: the receipt token sits in your wallet and can move freely while the underlying stake keeps earning.

A coat-check analogy captures it. You hand over your coat and receive a claim ticket. The coat stays safely in the cloakroom earning nothing, but the ticket is now in your hands, and while you cannot wear the ticket, you can hold it, hand it to a friend, or even sell it. Liquid staking works the same way: the staked asset stays locked and productive, while the token proving your claim to it circulates freely. Whoever holds the ticket holds the claim, so selling the token means selling the staked position along with it.

The result is capital efficiency that plain staking cannot match. A holder can stake, receive the token, and then lend it, use it as collateral, or provide it as liquidity, earning a second layer of return on top of the base staking reward, all without unstaking. That stacking is the appeal and, as later sections show, the source of the systemic worry.

Two designs: rebasing and value-accruing

Liquid staking tokens come in two flavors, and the difference matters for how rewards show up in your wallet and how the token behaves in DeFi.

A rebasing token keeps its price pegged to the underlying asset one to one and delivers rewards by increasing the number of tokens you hold. Lido’s stETH is the classic example: hold it, and your stETH balance grows a little each day, with each stETH meant to remain worth roughly one ether. The appeal is transparency, since your balance visibly climbs, but the growing balance complicates integrations, because many DeFi protocols were not built to handle a token quantity that changes on its own.

A value-accruing token keeps the token count fixed and delivers rewards by rising in value against the underlying asset. Rocket Pool’s rETH works this way, as does the wrapped version of stETH, wstETH. You hold the same number of tokens over time, but each one is redeemable for progressively more ether as rewards accumulate; stake when one token equals one ether and, a year later, that token might redeem for meaningfully more. This design integrates more smoothly across DeFi because the balance is stable, which is why wrapped, value-accruing versions dominate in lending and liquidity protocols and increasingly appear in the institutional DeFi rails being built on other ledgers too.

The distinction is easy to miss and important in practice. A rebasing token used as collateral can behave strangely because its balance shifts; a value-accruing token trades at a price that is intentionally above one-to-one and rising, so seeing rETH or wstETH quoted above the price of ether is normal and correct, not a premium to fear. Knowing which design you hold prevents misreading its price and misusing it in a protocol.

How the peg holds, and how it breaks

The entire usefulness of a liquid staking token rests on the market valuing it close to the staked asset it represents. That relationship is a soft peg, maintained by arbitrage and redemption instead of any hard guarantee, and understanding the mechanism explains exactly when it can slip.

In normal conditions the peg holds tightly because of a redemption path. A stETH is a claim on staked ether, and once the protocol’s withdrawal queue is functioning, that claim can be redeemed for actual ether. If stETH ever trades meaningfully below one ether on the open market, arbitrageurs buy the discounted stETH, redeem it for a full ether through the queue, and pocket the difference, and that buying pressure pushes the price back toward parity. Deep secondary-market liquidity reinforces this: research on stETH has found that most deviations beyond a small threshold correct within hours, because the arbitrage is reliable and the market is deep.

The peg breaks when the redemption path is slow and the market panics faster than arbitrage can act. Redeeming a liquid staking token for the underlying asset is not instant; it runs through the network’s validator exit queue, which can take days when many people withdraw at once. In a stressed market, holders who want out immediately cannot wait for the queue, so they sell on the open market instead, and a wave of forced selling can push the token below the value of the asset behind it. This is a depeg: not a loss of the underlying stake, but a temporary discount on the receipt.

The defining real-world case came in 2022, when stETH traded as low as roughly a nickel under parity during a broad market crisis. Large holders facing liquidation needed liquidity immediately, the withdrawal path at the time did not allow direct redemption, and the resulting sell pressure drove stETH to a visible discount to ether. Critically, the underlying staked ether was never lost or impaired; the discount reflected the mismatch between an instant desire to exit and a redemption process that could not move instantly. Once redemption became possible and panic subsided, the peg restored. The episode is the template: a liquid staking token depeg is almost always a liquidity-and-timing event, not a solvency event, but that distinction is cold comfort to someone forced to sell at the discount.

How the yield actually stacks

A concrete walk-through of the returns shows both why liquid staking is popular and where the layers of risk enter, because each layer of yield is also a layer of exposure.

Start with the base. Staking ether on Ethereum earns a network reward, a modest annual percentage that comes from new issuance and transaction fees paid to validators for securing the chain. A holder who simply stakes and holds a liquid staking token captures this base reward with almost none of the friction of solo staking: no thirty-two-ether minimum, no node to run, no direct exit-queue management. For many holders, that is the entire appeal, and it is a reasonable, relatively conservative use of the tool.

The second layer comes from putting the token to work. Because the liquid staking token is freely tradeable, a holder can deposit it into a lending protocol to earn interest, supply it to a liquidity pool to earn trading fees, or use it as collateral, each adding a return on top of the base staking reward. This is the capital efficiency that plain staking cannot match: the same underlying ether earns its staking reward and a second yield simultaneously. It is also where smart-contract risk begins to compound, because the token now passes through a second protocol’s code in addition to the staking protocol’s own.

The third layer, and the dangerous one, is leverage, described earlier: borrowing against the token to acquire more of it and repeating the loop. Each turn of the loop multiplies the base yield, which is why advertised returns on some liquid staking strategies look far higher than the underlying staking reward could ever justify. The arithmetic that produces those headline numbers is leverage, and leverage is precisely what converts a survivable depeg into a forced liquidation.

The practical takeaway is to read any liquid staking yield as a signal of how many layers are involved. A return close to the base staking reward is a plain, relatively safe position. A return well above it means the token is deployed into other protocols, adding smart-contract exposure. A return far above the base almost always means leverage, and therefore liquidation risk in a depeg. The yield number is not just a reward; it is a readout of the risk stack beneath it, and matching the layer you accept to the risk you understand is the whole discipline of using these tokens well. The same logic governs every layered yield strategy in DeFi: more yield is always more of something else at risk.

The concentration problem

Beyond the depeg risk sits a subtler, more structural concern: one protocol dominates Ethereum liquid staking to a degree that worries people who think about the network’s health.

Lido, the issuer of stETH, has for long stretches controlled roughly a third of all staked ether, a share large enough that Ethereum researchers openly discuss it as a risk to the network itself. The reasoning is about consensus: if a single staking entity controls too large a fraction of validators, it gains outsized influence over block production and could, in extreme scenarios, threaten the neutrality or censorship-resistance the network depends on. This is not an accusation that Lido would misbehave; it is a structural observation that concentration itself is a vulnerability, regardless of the operator’s intentions, and it is why parts of the community actively encourage stakers to choose smaller providers.

Concentration also compounds the token-level risks. When one liquid staking token is embedded as collateral across nearly every major lending protocol, a serious problem with that token, a smart-contract bug, a governance failure, or a severe depeg, is not one protocol’s problem but a shock that ripples through all of DeFi at once. The dominant token’s ubiquity, which is a convenience in calm markets, becomes a transmission channel in stressed ones. The same dynamic appears wherever a single asset becomes foundational infrastructure, from stablecoins to the restaking protocols that layer additional yield on top of staked positions: dominance buys efficiency and sells fragility.

For an individual holder, concentration risk is mostly about awareness. Using the largest, most liquid token gives the tightest peg and the deepest DeFi integration, which is a real benefit; it also means holding the asset most entangled with everything else, so a systemic event touches it first. Diversifying across providers reduces personal exposure and, in aggregate, improves the network’s health, at the cost of slightly thinner liquidity in the smaller tokens.

The leverage stack, and why it magnifies everything

The feature that makes liquid staking tokens powerful, their usability across DeFi, also enables a leverage loop that turns a modest depeg into a cascade. Understanding this loop is essential to understanding why depegs matter beyond the inconvenience of a discount.

The loop works like this. A user stakes ether and receives a liquid staking token. They deposit that token as collateral in a lending protocol and borrow ether against it. They stake the borrowed ether, receive more of the liquid staking token, deposit that as collateral, and borrow again. Repeated, this stacks several layers of leverage on a single underlying position, each layer amplifying the yield in calm markets. It is a popular strategy precisely because the base staking reward, multiplied by leverage, produces attractive returns.

The danger is what happens when the token depegs. Each borrowing position has a liquidation threshold tied to the value of the collateral, and a depeg lowers that value. As the token slips below parity, leveraged positions approach liquidation; liquidations force the collateral token to be sold; that selling deepens the depeg; the deeper depeg triggers more liquidations. In stressed markets this becomes a self-reinforcing spiral, a domino run dressed in yield-farm packaging. The 2022 depeg was made sharper by exactly this dynamic, as leveraged holders were forced to unwind into a falling market.

The lesson for holders is that a liquid staking token held plainly is a fairly conservative instrument: it earns staking yield and, absent a solvency failure in the protocol, its worst realistic outcome is a temporary discount that arbitrage eventually closes. The same token levered several times over is a very different risk, one where a discount that a plain holder could simply wait out becomes a forced liquidation. The token did not change; the leverage around it did. Anyone evaluating liquid staking yields that look unusually high should assume leverage is involved and price the liquidation risk accordingly.

What to check before holding one

Liquid staking is a genuinely useful tool, and using it well comes down to a handful of concrete checks, not blanket caution.

Confirm the token design. Know whether you hold a rebasing token, whose balance grows, or a value-accruing one, whose price rises, because the two behave differently in your wallet and in any protocol you deposit them into. Value-accruing wrapped versions are generally the smoother choice for DeFi use.

Assess the redemption path. The peg’s strength depends on being able to redeem the token for the underlying asset, so check that direct withdrawals are live and how long the exit queue runs. A token with a fast, functioning redemption path has a stronger peg than one where exit depends entirely on selling into secondary-market liquidity.

Gauge the liquidity and the provider. Deep secondary-market liquidity is what lets arbitrage defend the peg between redemptions, so a token with thin liquidity is more prone to slipping and slower to recover, the same slippage dynamics that govern any thinly-traded swap. Weigh the largest provider’s tight peg and deep integration against its concentration risk, and consider whether spreading across providers suits your risk tolerance and, incidentally, helps the network.

Respect the layered smart-contract risk. Your capital passes through the staking protocol’s contracts, and if you deploy the token into lending or liquidity protocols, through those as well. Each layer is code that can contain bugs, and stacking layers stacks the places something can break, the same concentration-of-risk lesson that runs through every major bridge exploit. Favor audited, long-lived protocols, and treat any strategy promising outsized yield as a signal that leverage, and its liquidation risk, is present.

Held with these checks in mind, a liquid staking token does what it promises: it unlocks the value of a staked position so the same capital can work twice, earning a base reward while remaining liquid and productive. The depeg risk that defines the category is real but specific, a timing-and-liquidity event instead of a loss of the underlying stake, and it is most dangerous not to plain holders but to those who lever the token into a stack that turns a temporary discount into a forced sale. Understand which of those two users you are, and the risk becomes something you can size instead of something that surprises you.

The broader significance is worth a closing thought. Liquid staking tokens have become foundational plumbing for proof-of-stake economies: tens of billions of dollars of staked value now circulate as these receipts, and they underpin lending, trading, and collateral across DeFi. That ubiquity is a genuine achievement, turning otherwise idle staked capital into productive infrastructure. It also means the health of a few dominant tokens matters to the whole system, which is why the concentration and depeg risks discussed here are not merely individual concerns but systemic ones.

Using these tokens knowledgeably, favoring strong redemption paths, deep liquidity, and audited protocols, and staying alert to the leverage hiding behind unusually high yields, is how an individual participates in that system without being surprised by its failure modes.

Frequently asked questions

What is a liquid staking token?

A liquid staking token is a tradeable token you receive when you stake a proof-of-stake asset through a liquid staking protocol. It represents your staked position plus its accruing rewards, and it can be freely sold or used in DeFi while the underlying asset stays staked and earning. stETH from Lido and rETH from Rocket Pool are the best-known examples on Ethereum.

How is liquid staking different from regular staking?

Regular staking locks your tokens, making them unavailable for anything else until you unstake through an exit queue. Liquid staking gives you a receipt token that keeps your capital liquid, so you can trade it or use it elsewhere in DeFi while the underlying stake continues to earn rewards. The trade-off is added smart-contract risk and the possibility that the receipt token depegs.

What does it mean when stETH depegs?

A depeg means the liquid staking token trades below the value of the staked asset it represents, such as stETH trading below one ether. It usually happens when many holders want to exit faster than the redemption queue allows, so they sell on the open market and push the price to a discount. Importantly, a depeg is generally a liquidity and timing event, not a loss of the underlying staked asset.

Is my staked asset lost if the token depegs?

No. A depeg reflects a temporary market discount on the receipt token, not destruction of the underlying stake. The staked asset remains intact and continues earning, and once the redemption path clears and panic subsides, arbitrage typically restores the peg. The real risk is being forced to sell at the discount, which mainly affects leveraged holders facing liquidation.

Are rebasing and value-accruing tokens different?

Yes. A rebasing token like stETH stays pegged one-to-one and pays rewards by increasing your token balance over time. A value-accruing token like rETH or wrapped stETH keeps the balance fixed and pays rewards by rising in value against the underlying asset. Value-accruing versions integrate more smoothly into DeFi because their balance does not change unexpectedly.

Why is Lido’s dominance considered a risk?

Lido has often controlled roughly a third of all staked ether, and Ethereum researchers worry that any single staking entity holding too large a share of validators could gain outsized influence over the network’s consensus. It also means the dominant token is embedded across most of DeFi, so a serious problem with it would ripple widely. The concern is structural rather than an accusation of misconduct.

Can I lose money with liquid staking tokens?

Yes, through several channels: a smart-contract bug in the staking or DeFi protocols you use, a severe depeg that forces you to sell at a discount, or liquidation if you lever the token in a borrowing loop. Held plainly in an audited, liquid protocol, the risk is relatively modest, but stacking leverage on top substantially raises the chance of a forced loss.

What is the leverage loop with liquid staking tokens?

The loop involves staking to get the token, using it as collateral to borrow the underlying asset, staking that to get more of the token, and repeating to stack leverage and amplify yield. It works in calm markets but is dangerous in a depeg, because falling collateral value triggers liquidations that force selling, which deepens the depeg and triggers more liquidations in a self-reinforcing cascade.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Digital asset markets are volatile and you can lose your entire investment. Always do your own research. Information current as of July 7, 2026.

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Bitcoin Price Rebounds as Trump Calls Off Iran Strikes and Hints at a Deal

Published

2 hours ago

2 August 2026

NewsAdmin

Bitcoin’s price is on the move today, prompted by the latest developments on the US-Iran war front, but this time in the opposite direction.

After it slipped to another multi-week low yesterday evening, the cryptocurrency has rebounded by approximately $1,500 and now sits at around $63,500. The reason for this is the major de-escalation announced by the POTUS hours ago.

US President Trump announced on his social media platform, Truth Social, that although his country’s military remains “locked and loaded” to continue attacking Iran, they were asked by the Middle Eastern country and other nations in the region to pause the strikes for now.

He added that those countries are working on a new deal that would include the “immediate, complete and total opening of the Hormuz Strait, and an end to Iran’s nuclear threat.”

“Based on this request, I have agreed, for the future benefit of the WORLD and, likewise, the survival of a successful and prosperous Iran, to cancel the attack, subject to being able to rapidly make a DEAL. The Country of Israel joins me in this commitment. Get to work, everybody, and get it DONE.”

As mentioned above, BTC reacted immediately with a notable rebound. It had dipped to an 18-day low at $62,200 yesterday evening as the tension between the two had increased once again, with new planned strikes. In addition, there are other factors, such as ETF exodus and technical indicators, that suggested the cryptocurrency could face another leg down soon.

For now, though, the war developments appear to have the most significant impact on bitcoin’s price moves, and essentially every de-escalation brings back hope to the market. The actual impact is likely to be experienced on Monday morning, as it has happened numerous times in the past several weeks.

The post Bitcoin Price Rebounds as Trump Calls Off Iran Strikes and Hints at a Deal appeared first on CryptoPotato.

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Strategy Posts $8.2B Q2 Loss as Coinbase Revenue Falls 19%

Published

2 hours ago

2 August 2026

NewsAdmin

Leading Bitcoin treasury company Strategy’s results for the second quarter show a loss of over $8 billion, while crypto exchange Coinbase reported a 14% quarterly revenue loss.

According to the two companies’ latest earnings reports released on Thursday, Strategy lost over $8.23 billion in its operations after recording an unrealized loss of $8.32 billion in the second quarter of 2026. The largest crypto exchange by volume in the U.S., Coinbase, also suffered a 19% annual revenue decline, while its trading volumes went down 24% to slightly above $145 billion.

Q2 2026 Bitcoin Price Cooldown Sees Strategy Draw Losses

Strategy grew its BTC holdings by 846 units within the three-month period ending June 30. In its report, the company’s chief executive, Phong Le, said it reduced its convertible debt to just under $7 billion and increased its U.S. dollar holdings and Bitcoin per share by 12% and 5%, respectively. The Bitcoin treasury had seen a $10 billion income in the second quarter of 2025, but Bitcoin’s dull price performance this year has supposedly caused a net loss of $8.22 billion.

“Our objective is for STRC to trade over time at $99 to $100. If STRC trades below $100, we intend to repurchase STRC shares in a regular and disciplined manner, scaling our repurchases according to market price and liquidity. These repurchases are an attractive use of capital that reduces our future preferred dividend requirements at a discount while allowing independent market demand to establish a healthy and sustainable market,” the CEO explained.

In the total revenue column for the quarter, Strategy announced it had a 6.9% increase in the last 12 months, jumping from $114.5 million in Q2 2025 to over $122 million in Q2 2026. The gross profits made by the company’s business reached $81.6 million, which it counted as a 69% gross margin compared to the previous year’s second quarter’s $78.7 million.

“In the midst of this phase of muted bitcoin sentiment and market skepticism, we continue to evolve our business model and establish Digital Credit as a new asset class. Our plan is to return STRC to health with stable demand, high liquidity, and low volatility trading near par. We believe this is the best way to create shareholder value over the long term,” executive chairman and founder Michael Saylor told reporters.

Coinbase Revenue Drops after Trading Slump, Prediction Market Thrives

Meanwhile, Coinbase’s first half of the year continues to yield lower-than-expected earnings following a continued loss trend in both quarters, but its prediction market sector has risen by more than $100% quarter-over-quarter. The exchange revealed its revenue had taken a 19% hit in the 12 months ending June 30, and its transaction revenue dropped 21%. As seen in the report on net losses, the trading company’s earnings before interest, taxes, depreciation, and amortization reached $208 million, while it recorded over $300 million in losses after adjustments.

Coinbase’s fee collection from subscriptions and services slumped by 5% in the quarter but accounted for almost half of its net revenue in that period. Consumer transactional revenue also fell by 20% compared to Q1 2026, which the company attributed to a 24% decline in crypto spot trading volume. At the end of the quarter, the average amount of USDC held across Coinbase products hit a record high of $20 billion, accounting for more than 30% of all USDC in circulation.

The post Strategy Posts $8.2B Q2 Loss as Coinbase Revenue Falls 19% appeared first on CryptoPotato.

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FTX Case Advances as Polymarket Dispute and $35K Penalty Emerge

Published

7 hours ago

1 August 2026

NewsAdmin

Federal prosecutors are continuing to litigate the fallout from the collapse of FTX, as defense teams push back on what juries can hear and how certain market activities are regulated. In the Southern District of New York (SDNY), Michelle Bond—whose husband, former FTX executive Ryan Salame, is serving a 90-month sentence after pleading guilty in 2023—has asked the court to block references to that guilty plea in a campaign finance case.

At the same time, other SDNY-related crypto-adjacent legal fights are highlighting how prediction markets and event contracts can collide with insider-trading and commodity regulation arguments. Separate actions involving a former congressman’s Kalshi trades and a US soldier accused of making a large Polymarket bet underscore that courts may soon be forced to clarify both evidentiary rules and the legal classification of event contracts.

Key takeaways

Michelle Bond’s legal team asked SDNY to exclude evidence tied to Ryan Salame’s guilty plea, arguing it has little relevance to Bond’s alleged intent or knowledge.
In a separate CFTC case, former New York Rep. George Santos was ordered to pay $35,000 over trades on Kalshi’s event contracts, with the regulator citing misleading posts about his planned attendance at the 2026 State of the Union.
A US soldier accused of earning more than $400,000 on Polymarket event contracts is seeking dismissal, challenging whether the Commodity Exchange Act can clearly apply to event contracts as “swaps.”
Across these matters, the central pressure points are evidentiary fairness for defendants and regulatory clarity for prediction-market participants.

Bond seeks to bar Salame’s guilty plea in campaign finance fight

According to a Friday filing in the US District Court for the Southern District of New York, Michelle Bond’s attorneys asked the court to preclude the government from introducing evidence about Ryan Salame’s guilty plea or any “related plea materials” in her campaign finance case.

Bond faces charges over alleged unlawful campaign funding tied to her unsuccessful 2022 congressional run in New York. The prosecution’s theory, as described in the filing, is that contributions supporting Bond’s campaign were partially funded through FTX arrangements facilitated by Salame.

Salame pleaded guilty in 2023 and is currently serving a 90-month sentence connected to conduct arising from FTX’s 2022 collapse. In Bond’s motion, her lawyers argued that Salame’s plea—where he admitted to making political contributions in Bond’s name funded by transfers from accounts associated with an FTX-linked entity—should not be treated as evidence against Bond herself.

“The Court should preclude the government from introducing or referring to Mr. Salame’s guilty plea or any related plea materials, because their minimal probative value is substantially outweighed by the risk of unfair prejudice to Ms. Bond,” the filing states.

Bond’s team further said that the plea materials do not meaningfully bear on Bond’s state of mind. They characterized the plea as an admission of Salame’s own guilt, not proof of Bond’s knowledge or participation in the charged conduct, quoting from the motion: “[…] Mr. Salame’s plea materials lack any probative value as to Ms. Bond’s guilt, knowledge, or intent. Mr. Salame’s plea is an admission of his own guilt, not evidence of Ms. Bond’s state of mind or participation in any charged offense.”

How personal litigation could become part of the argument

Bond’s motion also requested that the court allow information connected to her “contemporaneous divorce and custody proceedings.” Her lawyers appear to be positioning that personal context to rebut the government’s characterization of Bond as an “ordinary ‘individual’ donor,” despite her and Salame having divorced before the alleged criminal conduct.

While the filing’s request reflects a broader strategy often used in criminal litigation—attempting to shape how jurors interpret the campaign contributions and the parties’ relationship—the court’s decision will determine what personal-history evidence, if any, is ultimately presented.

CFTC penalizes George Santos for Kalshi event-contract trading

Separate from the FTX-linked litigation, the US Commodity Futures Trading Commission (CFTC) has issued an order involving George Santos, a former member of the US House of Representatives who was expelled from Congress in 2023. The CFTC ordered Santos to pay $17,500 in a civil monetary penalty plus $17,570 in disgorgement from profits earned through prediction market trading on Kalshi.

According to the CFTC, the relevant trades were tied to event contracts betting on whether Santos would appear at the 2026 State of the Union in Washington, DC. The regulator said Santos posted on social media about his plans to attend or not attend the event, and that these posts contained “material misrepresentations and omissions.”

The CFTC added that after the posts, contract prices moved in a direction favorable to Santos’ positions, enabling him to earn over $17,500.

As part of the CFTC order, Santos is barred from trading on prediction market platforms for three years.

The case also sits in the shadow of Santos’ criminal proceedings. Earlier coverage notes Santos was sentenced to 87 months in prison in 2025 for wire fraud and aggravated identity theft, though he served only three months before his sentence was commuted by US President Donald Trump, as reflected in the article’s background.

Polymarket insider-trading allegations tested under “swap” debate

A more direct challenge to prediction-market regulation is underway in another SDNY matter. Gannon Ken Van Dyke, a US soldier accused of making more than $400,000 trading Polymarket event contracts, is attempting to dismiss the indictment.

As outlined in the background of the case, prosecutors allege that Van Dyke traded using nonpublic information connected to a military operation involving the removal of Venezuelan President Nicolás Maduro in January. The US Department of Justice alleges he used that alleged insider information to wager on whether Maduro would be removed from power, leading to criminal charges filed in April.

In a Friday SDNY filing, Van Dyke’s attorneys submitted a 51-page memorandum supporting a motion to dismiss. Among other arguments, they contend that the Commodity Exchange Act (CEA) is ambiguous in how it treats event contracts as “swaps,” which is relevant to three of the charges.

Van Dyke’s lawyers argue that the ambiguity affects basic fairness: if the “swap” definition is not clear across Congress, agencies, and courts, ordinary citizens may lack “fair notice” that their prediction-market wagers fall under the CEA.

“If Congress, executive branch agencies, and courts all find the ‘swap’ definition ambiguous, how can ordinary citizens have fair notice that prediction market wagers are covered by the CEA?” the filing asks.

The defense also contrasts with the position taken by the CFTC under Chair Michael Selig, which has argued it has “exclusive jurisdiction” over prediction markets by treating event contracts as “swaps.” The dismissal motion suggests that—at least for some counts—those jurisdictional assumptions may not survive if the law is too unclear.

Why these cases matter beyond one courtroom

Taken together, the filings point to two urgent fault lines for the crypto-adjacent prediction market space: what evidence courts allow juries to consider when guilt and intent are contested, and whether the regulatory framework—especially the CEA’s treatment of event contracts—offers enough clarity for enforcement.

As courts weigh motions like Bond’s request to exclude plea materials and Van Dyke’s bid to dismiss based on legal ambiguity, traders, builders, and public officials using event-contract platforms may want to watch how judges define relevance, prejudice, and “fair notice.” The next procedural rulings could signal how far prosecutors can stretch existing statutes—and how tightly defendants can force regulators to justify their classification theories.

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Crypto Hacks Drain $1.1B in First Half of 2026 Amid 212 Security Incidents

Published

8 hours ago

1 August 2026

NewsAdmin

The first half of 2026 was the most active six months for crypto exploits on record.

This is according to a new report from Blockaid, which shows hackers stole $1.1 billion across 212 incidents.

Crypto Hacks Top $1.1B in H1 2026

The Blockaid report found that four major incidents involving KelpDAO, Drift, Resolv, and CoW Swap made up roughly $707 million of the total losses.

KelpDAO suffered the largest loss, after hackers stole $292 million worth of crypto by faking a cross-chain message that siphoned off the protocol’s Ethereum reserves. Drift Protocol, a perpetuals exchange built on the Solana chain, also suffered a similarly huge hit, as it was exploited for $285 million within 12 minutes.

Blockaid linked both cases to TraderTraitor, a state-sponsored North Korean subset of the larger Lazarus Group. Humanity Protocol’s $32 million loss was also connected to the same attacker cluster, bringing DPRK-linked losses to $609 million, which is about 55% of all funds stolen during the period.

The pace of attacks also increased through the year, with monthly incidents going from 18 in January to 57 in June. April proved to be the most painful month, as the KelpDAO and Drift Protocol hacks wiped out a combined $577 million to push total losses in that month to $635 million.

Privileged key misuse was the most costly attack type in the first half of 2026, with losses of approximately $790 million, or close to three-quarters of all funds stolen in the period, said Blockaid. Unbacked mint exploits came second in value, led by the $80 million Resolve breach. But the hacks at the code level caused the most casualties, accounting for nearly four out of five attacks by count.

Attack Vectors Change as New Threats Emerge

The report named AI agents as a new target after hackers in May used a prompt injection attack to fool Bankr’s AI agent into approving an unauthorized transaction for about $216,000.

Cross-chain bridges also took a major hit, with attackers breaching the verification systems of KelpDAO and Taiko through forged proofs and attestations accepted by the destination chains.

In addition, security teams faced newer attack methods in 2026, with Blockaid identifying four incidents involving EIP-7702 wallet delegation attacks, where a wallet can hand control to a smart contract. Legacy smart contracts also continue to be a common vulnerability, with data showing around five cases in May and June, including two involving Aztec Connect and one targeting Raydium’s AMM V3.

Recent incidents outside the report period showed the same pressure on crypto infrastructure. For instance, on July 23, AFX Trade, BSquaredNetwork, and Verus were hit in separate attacks on the same day that collectively caused more than $35 million in losses. Recall that Verus had already suffered another exploit about two months earlier, and Blockaid linked both incidents to the same bridge contract and bug class.

Recovery results varied depending on the type of attack. Per the report, code-related incidents sometimes allowed teams to freeze funds or negotiate returns, while attacks involving stolen keys usually ended with the money moving through mixers or cross-chain routes.

The post Crypto Hacks Drain $1.1B in First Half of 2026 Amid 212 Security Incidents appeared first on CryptoPotato.

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Michael Saylor and team maintain 12% dividend for STRC

Published

8 hours ago

1 August 2026

NewsAdmin

Strategy signals another bitcoin buy as company needs just 2% annual BTC growth to cover dividends

Holders of Strategy’s (MSTR) high-yielding preferred stock STRC will not see a dividend increase in August.

Led by Executive Chairman Michael Saylor, Strategy is maintaining the current 12% dividend on the shares.

STRC investors may have been expecting as much as a 50-basis-point hike in the dividend as Strategy has customarily raised the payout anytime the stock traded sizably below its par value ($100) for the month.

As recently as July 1, Strategy had lifted the dividend 50 basis points following June’s plunge in STRC to as low as $71.

While that hike — along with Strategy’s sale of some bitcoin to fund dividends, and a bit of stabilization in the price of bitcoin — helped STRC bounce in July to the current $89.46, that level is still significantly below par.

CEO Phong Le yesterday said Strategy’s Corporate Objective is for STRC to trade at $99-$100 over time.

Nevertheless, the company is under no obligation to raise the dividend and chose not to do so this month.

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Key On-Chain Legal Updates This Week

Published

9 hours ago

1 August 2026

NewsAdmin

A Friday filing in the U.S. District Court for the Southern District of New York (SDNY) seeks to limit what prosecutors can use in the campaign-finance case involving Michelle Bond, the wife of former FTX Digital Markets co-CEO Ryan Salame.

Bond’s attorneys argued that evidence tied to Salame’s 2023 guilty plea—while relevant to his own conduct—should not be admitted against her because it carries a risk of unfair prejudice and, in their view, offers little direct proof of Bond’s knowledge or intent. The motion also asks the court to factor in details from Bond’s contemporaneous divorce and custody proceedings.

Key takeaways

Michelle Bond wants the court to exclude evidence and “related plea materials” tied to Ryan Salame’s guilty plea, arguing they are not probative of her state of mind.
Bond’s campaign-finance charges stem from allegations that contributions to her 2022 congressional bid were influenced by FTX-linked activity facilitated by Salame.
The SDNY motion also requests inclusion of information about Bond’s divorce and custody proceedings, contending she was not an “ordinary” donor.
Separately, the CFTC ordered former congressman George Santos to pay $35,000 in total—$17,500 in penalty and $17,570 in disgorgement—over trades connected to Kalshi prediction market event contracts.
A soldier accused of making more than $400,000 on Polymarket event contracts linked to a military operation asked the SDNY court to dismiss charges, citing ambiguity in how “swap” definitions apply to event contracts under the Commodity Exchange Act.

Bond asks SDNY to keep Salame’s guilty plea out of her case

Bond faces campaign finance charges tied to her unsuccessful 2022 congressional run in New York. According to the criminal allegations, contributions to her campaign were partly funded through FTX-related channels that were facilitated by her husband, Ryan Salame.

In the latest SDNY filing, Bond’s legal team asked the court to preclude prosecutors from introducing Salame’s guilty plea and related plea materials. The filing points to the core logic of the request: Bond is not being tried for Salame’s admissions, and the defense claims the government’s use of those materials would not meaningfully establish Bond’s guilt, knowledge, or intent.

Bond’s attorneys argued that Salame’s plea is an admission of his own conduct, not evidence about Bond’s mental state or participation in the charged offense. They said the materials’ probative value is substantially outweighed by the risk of unfair prejudice to Bond.

Prosecutors are expected to weigh heavily on the narrative connecting alleged campaign funding to the conduct of individuals tied to FTX’s collapse. Bond’s motion, however, signals an effort to narrow what jurors are allowed to consider—particularly evidence that may influence them emotionally or circumstantially rather than strictly proving the elements of the charges against her.

Why the defense is raising divorce and custody proceedings

Alongside the evidentiary dispute over Salame’s plea, Bond’s filing also requested that the court include information related to Bond’s divorce and custody proceedings that were underway around the same time as the alleged crime.

Bond’s lawyers’ position is that the circumstances of her family life affect how her campaign-related donor status should be viewed. The filing argues that Bond should not be treated as an ordinary individual donor solely because she is facing personal charges in connection with her political bid, even if she and Salame were not married at the time of the alleged conduct.

Whether and to what extent these family-law details will be admissible is likely to be a key procedural issue. It can shape the tone and framing of the case—especially if the government seeks to portray the campaign finances as closely connected to Salame’s network rather than to Bond’s independent circumstances.

George Santos ordered to pay over Kalshi predictions market trading

In a separate development involving prediction markets, the U.S. Commodity Futures Trading Commission (CFTC) ordered former New York representative George Santos—who was expelled from Congress in 2023—to pay a total of $35,000. The figure breaks down into a $17,500 civil monetary penalty and $17,570 in disgorgement of profits.

The regulator said the action was tied to Santos trading on event contracts on Kalshi connected to whether he would attend the 2026 State of the Union address in Washington, DC. The CFTC stated that Santos made social media posts about his plans to attend or not attend the event and that those posts contained “material misrepresentations and omissions.”

According to the CFTC, after the posts, the contract prices moved in a way that became favorable to Santos’ positions and allowed him to make more than $17,500.

As part of the same order, Santos was barred from trading on prediction market platforms for three years. The order also comes against the backdrop of criminal proceedings: Santos was sentenced to 87 months in prison for wire fraud and aggravated identity theft in 2025, but served only three months before his sentence was commuted by U.S. President Donald Trump, as noted in earlier reporting.

Polymarket insider-trading allegations head toward dismissal arguments

Another SDNY filing, this time from the defense of Gannon Ken Van Dyke, challenges the legal foundation of allegations that he profited from Polymarket event contracts using nonpublic information.

The U.S. Justice Department says Van Dyke was involved in a military operation connected to the removal of Venezuelan President Nicolás Maduro in January, and prosecutors allege he later used insider information to bet whether Maduro would be removed from power—leading to criminal charges announced in April. The defense filing argues Van Dyke is facing accusations involving more than $400,000 in alleged profits from Polymarket event contracts.

Van Dyke’s attorneys filed a 51-page memo supporting a motion to dismiss the indictment based on multiple legal theories. One focus is the Commodity Exchange Act’s treatment of event contracts as “swaps,” which the defense characterizes as ambiguous.

While the CFTC under Chair Michael Selig has asserted that the agency has “exclusive jurisdiction” over prediction markets by treating event contracts as “swaps,” Van Dyke’s lawyers say the uncertainty itself is enough to dismiss at least some charges. In the filing, they argue that if lawmakers, executive agencies, and courts consider the “swap” definition ambiguous, then ordinary citizens cannot reasonably have fair notice that prediction market wagers fall under the CEA.

The case is expected to proceed on a timeline that could lead to trial in late 2026 or early 2027, based on a schedule submitted in June, and Van Dyke has pleaded not guilty to all charges.

The defense’s arguments also extend beyond Van Dyke’s personal exposure. The filing suggests the ruling could matter for lawmakers and government officials who have used prediction markets in connection with political events or public statements. Earlier coverage referenced by the filing indicates that Trump’s teleprompter operator reportedly placed more than $100,000 in bets on Kalshi event contracts tied to presidential speeches, underscoring how prediction markets can draw interest from political circles.

Across these cases, courts are being asked to decide what evidence is fair game, what definitions govern crypto-adjacent instruments, and how much clarity regulators must provide before individuals can be held criminally liable—issues that could determine how future crypto and prediction-market enforcement plays out.

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What Happened In Crypto Legal News This Week

Published

9 hours ago

1 August 2026

NewsAdmin

What Happened In Crypto Legal News This Week

Wife of former FTX executive seeks to preclude her husband’s guilty plea

In a Friday filing with the US District Court for the Southern District of New York (SDNY) over campaign finance charges, Michelle Bond’s legal team asked the court to consider precluding evidence related to former FTX Digital Markets co-CEO Ryan Salame, her husband who is currently serving a 90-month sentence after he pleaded guilty in 2023.

Bond faces campaign finance charges alleging that her unsuccessful 2022 congressional run in New York was partially funded by contributions from FTX facilitated by Salame. As part of the filings this week, Bond asked the court to exclude evidence of her husband’s guilty plea and “related plea materials,” in which the former executive admitted to making “political contributions in [his] name that were funded by transfers from the bank accounts” of an entity tied to FTX.

Bond’s lawyers added:

“[…] Mr. Salame’s plea materials lack any probative value as to Ms. Bond’s guilt, knowledge, or intent. Mr. Salame’s plea is an admission of his own guilt, not evidence of Ms. Bond’s state of mind or participation in any charged offense.”

The motion also requested the court include information related to Bond’s “contemporaneous divorce and custody proceedings,” arguing that though she and Salame were not married at the time of the alleged crime, the former FTX executive was not an “ordinary ‘individual’ donor” contributing to her campaign.

The criminal case is one of the latest involving individuals tied to the defunct crypto exchange following its 2022 collapse. Salame, former FTX CEO Sam Bankman-Fried and former Alameda Research CEO Caroline Ellison were all sentenced to prison for their role in the misuse of customer funds and related charges.

Former congressman ordered to pay $35,000 over Kalshi bet

George Santos, a former New York House representative who was expelled from Congress in 2023, was ordered to pay a $17,500 civil monetary penalty and $17,570 in disgorgement from profits earned over bets placed on prediction markets platform Kalshi. The order from the US Commodity Futures Trading Commission (CFTC) stemmed from Santos trading on event contracts betting on his appearance at the 2026 State of the Union address in Washington, DC.

“While buying and selling positions in this market, Santos posted on social media about his plans to attend or not attend the SOTU,” said the CFTC. “In his social media posts, Santos made a series of material misrepresentations and omissions about whether he would attend the SOTU. After these posts, the SOTU contract prices moved in a direction that was favorable to Santos’ positions which allowed him to make over $17,500.”

February X post about his State of the Union attendance. Source: George Santos

Santos is barred from trading on prediction market platforms for three years as part of the order. He was also previously sentenced to 87 months in prison for wire fraud and aggravated identity theft in 2025, but served only three months before his sentence was commuted by US President Donald Trump.

US solider accused of making $400,000 Polymarket bet seeks to dismiss charges

Gannon Ken Van Dyke is a US soldier who faces charges for allegedly making more than $400,000 on Polymarket event contracts using nonpublic information tied to a military operation involving the removal of Venezuelan President Nicolás Maduro in January. He was involved in the operation removing Maduro, according to the US Justice Department, and allegedly used insider information to bet whether the Venezuelan president would be removed from power, leading to criminal charges in April.

In a Friday SDNY filing, Van Dyke’s legal team filed a 51-page memo in support of a motion to dismiss the indictment based on different legal theories, including that the Commodity Exchange Act (CEA) at the center of three of the charges was “ambiguous” in treating event contracts as “swaps.”

Although the CFTC under Chair Michael Selig has claimed that the agency has “exclusive jurisdiction” over prediction markets on the basis that event contracts are treated as “swaps,” Van Dyke’s lawyers said the lack of clarity was sufficient to dismiss some of the charges.

The case is expected to have significant implications for lawmakers and government officials using prediction markets. Trump’s teleprompter operator reportedly made more than $100,000 using Kalshi event contracts related to the president’s speeches.

Based on a schedule filed in June, Van Dyke is potentially looking at a trial beginning in late 2026 or early 2027. He has pleaded not guilty to all charges.

Magazine: Here’s why the CLARITY Act’s ethics deal may be so hard to reach

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Goldman traders are on pace for a record year. A close-up look at how they’re doing it

Published

10 hours ago

1 August 2026

NewsAdmin

Goldman traders are on pace for a record year. A close-up look at how they're doing it

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Bitcoin cold-wallet attack spreads to 4,500 addresses as losses near $89 million

Published

10 hours ago

1 August 2026

NewsAdmin

Russia-linked Grinex exchange halts operations after $13 million ‘state-backed’ hack

The attacker working through Coldcard-generated keys is now emptying wallets worth a few thousand dollars each.

Galaxy Research flagged a third wave of sweeps early Sunday, roughly 208 bitcoin drained from 1,912 addresses between Friday midday and Saturday morning UTC.

That is just over a tenth of a bitcoin per victim. The July 30 opening wave averaged close to a full coin, 1,083 bitcoin from 1,196 addresses in 41 minutes.

Observed losses across all three waves now total 1,367 bitcoin, nearly $89 million, from 4,585 addresses.

Wave three sends each victim’s coins to its own destination rather than the handful of shared collector addresses that made the first two easy to map, and parks them in pay-to-witness-script-hash outputs, a format that can carry multisignature or timelock conditions, instead of the plain single-key outputs used before.

It batched an average of six victims into each sweep where wave one took exactly one at a time, and it scanned only the default derivation path, the standard branch of the key tree a wallet checks first, instead of testing several branches per seed.

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XRP Price Dips to ‘Battlefield’ Zone, but Analysts See Major Reversal Opportunity

Published

11 hours ago

1 August 2026

NewsAdmin

Perhaps due to the quickly re-escalating tension in the Middle East, the cryptocurrency market has posted fresh losses over the past few hours, with BTC dropping to $62,000 after failing to reclaim the $63,000 support during the day.

XRP was not spared, as it just slipped below $1.05. The asset was rejected at $1.20 during the mid-July rally after the favorable US inflation data for June, and eventually lost the coveted $1.10 support. Now, it fights for the last line of defense before the bulls would have to defend the $1.00 zone.

Popular analyst EGRAG CRYPTO outlined the significance of the $1.05 level, calling it the ‘battlefield’ region. Although he noted earlier today that the cross-border token had managed to maintain that level, he acknowledged the predominantly bearish structure of lower highs on the 4-hour chart.

The short-term path of recovery would be a successful defense of $1.05 before XRP can bounce above $1.083 and eventually reclaim the $1.10 level, which now acts as resistance.

EGRAG laid out an even more promising road ahead for the asset if it manages to continue its recovery, with the “major price target” set at $1.30.

However, a decisive breakdown below $1.05 would essentially mean that XRP will head toward the notable liquidity zone at around $1.00, he warned.

Mikybull Crypto also believes XRP has the strength to stage a surprising comeback. The analyst claimed that the asset’s bullish reversal run is currently loading despite the negative outlook.

His long-term chart compares the current market structure with the one from two years ago when XRP was highly compressed at around $0.60. Once it broke out the upper boundary, though, it rocketed to a fresh all-time high within less than a year.

“Before the last run, I screamed for you to buy at a crazy discount. The opportunity is presenting again,” he said now.

History is not on XRP’s side at the moment, though, as August has been quite a painful month for the asset. As reported earlier today, the cross-border token was deep in the red in all four previous editions.

The post XRP Price Dips to ‘Battlefield’ Zone, but Analysts See Major Reversal Opportunity appeared first on CryptoPotato.

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