The U.S. Securities and Exchange Commission and Commodity Futures Trading Commission published interpretive guidance explaining how they might define what is or isn’t a security in crypto; the CFTC also issued a no-action letter for a non-custodial wallet provider to facilitate derivatives and prediction markets transactions; Arizona is filing criminal charges against a prediction market provider; and by the way we kind-of-sort-of have hints of movement on market structure legislation.

What a week, huh?

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The narrative

The U.S. Securities and Exchange Commission published interpretive guidance this week — joined by the Commodity Futures Trading Commission — laying out how it approached the question of what in crypto it will deem a security.

Why it matters

What is, and isn’t, a security has long bedeviled the industry. We had efforts at somewhat defining this from the SEC in the past — Bill Hinman’s “When Howey met Gary (plastics)” speech, for example — but this week’s interpretative guidance is one of the most specific efforts to define this for the industry.

Breaking it down

The SEC laid out several categories it saw in the crypto space, with one of these categories being digital securities. These are cryptocurrencies that meet the definition of a security under any other context, but happen to be tokenized, the guidance said. For example, if a crypto asset meets the prongs of the Howey Test, it’s a security.

This is the category of tokens the SEC will oversee.

Other categories include payment stablecoins, digital tools, digital collectibles and digital commodities, which are generally not securities unless the issuers or operators take actions that might meet securities regulations, such as fractionalizing the tokens in question.

“We establish a straightforward taxonomy of crypto assets — most of which are not securities — and clarify how the Supreme Court’s Howey test applies when a crypto asset is part of an investment contract,” SEC Chair Paul Atkins and Commissioners Hester Peirce and Mark Uyeda wrote in an oped for CoinDesk.

The CFTC said it would sign on to the guidance and administer it under the Commodities Exchange Act.

“Market participants — from innovators and issuers to individual investors — should review this interpretation to better understand the regulatory jurisdiction between the SEC and CFTC,” the CFTC said in a press release. “The interpretation will be published on CFTC.gov and in the Federal Register.”

Congressman Troy Downing (R-Mont.) called the guidance “very positive,” but said Congress still needed to pass market structure legislation as a future administration could undo the interpretative guidance.

“Just having another two or three years of this and then having ambiguity out there doesn’t make most people comfortable on doing any kind of big investment,” he told CoinDesk. “But it’s a great start because this is exactly what the industry wants, and it allows some people to move forward.”

Chris LaVigne, a partner at the law firm Withers, said the guidance “predictably concludes that most crypto assets and many common crypto activities are not securities,” though the agency kept some discretion to being an enforcement action in this area.

“The guidance moves the securities inquiry away from the asset or activity itself (which are mostly deemed digital commodities not within the purview of the SEC) and re-centers the analysis on the transactions and representations in which these assets or activities arise or are marketed,” he said. “By doing so, the SEC did not completely eliminate uncertainty or its enforcement role, because it concludes that a crypto asset that is not a security can nonetheless be sold as part of an investment contract if it is marketed with promises of profit derived from the issuer’s essential managerial efforts.”

A crypto that was marketed as a security may eventually be deemed something else “once those promises are fulfilled or no longer operative,” he said. This might affect securities more broadly than just crypto assets.

It’s less clear what may constitute a commodity under the guidance.

Jason Gottlieb, a partner at Morrison Cohen, said the Commodity Exchange Act defines commodities as a list of products (excluding onions and motion picture box office receipts), services and other issues “in which contracts for future delivery are presently or in the future dealt in.”

This legal definition diverges from the definition seemingly being used in the guidance. The CFTC’s approach to crypto over the past decade has evolved since some early lawsuits, where it claimed jurisdiction over bitcoin BTC$68,619.34, leading it to seemingly have jurisdiction over non-security cryptocurrencies. But this definition needs to be codified by market structure legislation, he told CoinDesk.

“People need to understand that jurisdiction is still uncertain. The SEC is clearly saying ‘we don’t have jurisdiction if the token does not meet these criteria,’” he said. “Just because the SEC does not have jurisdiction does not mean the CFTC does.”

Gottlieb said he was part of a case before the Seventh Circuit Court of Appeals seeking to gain clarity on this question, but market structure legislation would be needed to cleanly grant the CFTC jurisdiction over all non-security cryptocurrencies.

The status of that legislation also remains up in the air. Senator Cynthia Lummis (R-Wyo.), speaking at the DC Blockchain summit earlier this week, said she anticipated a markup may happen in the final weeks of April. The issue of stablecoin yield may be resolved with an agreement that stablecoin issuers and their partner firms would not describe their products using bank terminology, though she cautioned that she hadn’t seen any specific language yet.

The flip side, several individuals told me, is that the Clarity Act might require the SEC to go back to the drawing board on how it’s defining securities in crypto. But this falls under the category of bridges that can be crossed when they’re reached.

Senator Tim Scott (R-S.C.), the chair of the Senate Banking Committee, said lawmakers are also close to agreements on issues like ethics and quorums on the regulatory agencies — some of the outstanding areas of disagreement on the bill.

Downing said he saw an April time frame as doable for advancing market structure legislation. The closer lawmakers get to the end of the year, however, the less likely it would be that anything could be passed, he said, pointing to the midterm election. “But I don’t think it’s impossible.”

Senator Kirsten Gillibrand (D-N.Y.) said on stage at the DC summit that she was “optimistic” there would be a markup soon, which would then lead to the Banking and Agriculture Committee’s bills combining.

The combined bill would need to incorporate areas of bipartisan agreement, she said.

“One of the issues that I think is very important that people should be aware of is the Senate wants an ethics provision,” she said. “I think the House would have had even more support on the Democratic side if they had retained their ethics provisions in their bill. It’s very important that members of Congress do not get rich off of this industry, because they have access to non-public information, because they have positions of power and authority.”

Downing said the market structure bill needed to address consumer protections and money laundering, without being so restrictive that companies would be scared to do anything.

“Nobody wants bad actors in their space and nobody wants that reputation of bad actors using this as a tool to do bad things,” he said. “… If you bring those [provisions] in too narrow, nobody’s going to do anything innovative.”

He said he understood why banks might be concerned about the yield issues.

“Community lenders, community banks are worried about depositors all exiting the market, in which case you’re not doing mortgages on small farms in Montana, right?” he said.

Late Friday, Senators Angela Alsobrooks and Thom Tillis told Politico they had reached an agreement on the yield issue, though the details had not been shared with the banking or crypto industries as of press time.

Kalshi was just ordered to cease offering most of its prediction markets in the state of Nevada for at least two weeks, pending a hearing on April 3.

The order came after an appeals court refused to grant an administrative motion that could have blocked the state court’s action. Earlier in the week, the state of Arizona filed criminal charges against Kalshi, alleging some of its election and other contracts violate state law.

In Nevada, a judge ruled that Kalshi can’t offer sports, election or entertainment-related event contracts at least temporarily.

According to the order by Judge Jason Woodbury, the record in Nevada’s case against Kalshi so far suggests that it offers products defined by state law, making its conduct subject to Nevada’s gaming regulators.

“The question of federal preemption in this regard is nuanced and rapidly evolving,” the judge wrote. “At the moment, the balance of convincing legal authority weighs against federal preemption in this context.”

The Arizona action goes further, alleging misdemeanor violations on small bets placed on professional football and college basketball games, upcoming elections and on whether bills become law and whether public figures will show up to sporting events.

“Arizona law prohibits operating an unlicensed wagering business, and separately bans betting on elections outright,” Arizona Attorney General Kris Mayes’ office said in a press release.

Kalshi co-founder Tarek Mansour called the charges a “total overstep” that “have nothing to do with gambling or the merits.”

There’s a broader growing backlash to prediction markets. Senator Catherine Cortez-Masto, who represents Nevada, wrote an opinion piece saying prediction markets “blatantly violate state and tribal laws and regulations.”

“To ensure responsible gaming, casinos, sportsbooks and online gaming sites have to follow minimum age requirements, participate in integrity monitoring and support critical consumer protections, like programs that help people with gambling addictions,” she said. “Yet, this past year, emboldened by limp and overly permissive federal regulators like the Commodity Futures Trading Commission (CFTC), so-called ‘prediction markets’ have transformed themselves into illegal sportsbooks, offering their users illicit sports wagers.”

This week

• There are no hearings or public meetings scheduled (at least pertaining to crypto).

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at [email protected] or find me on Bluesky @nikhileshde.bsky.social.

You can also join the group conversation on Telegram.

See ya’ll next week!

TLDR:

• BCRED reported a 0.4% loss in February 2025, its first monthly decline since September 2022’s 1.3% drop.
• Investors withdrew $3.7 billion from BCRED in Q1 2025, surpassing the fund’s typical quarterly redemption volume.
• Blackstone wrote down loans for select borrowers, including software firm Medallia, per a letter to financial advisers.
• Blackstone shares have dropped over 28% this year as banks tighten lending and rivals cap investor withdrawals.

Blackstone’s private credit fund, BCRED, recorded its first monthly loss in over three years in February 2025. The $82 billion fund reported a total loss of 0.4%, drawing attention to growing pressures across the private credit sector.

Investor concerns around liquidity, credit quality, and withdrawal surges have grown steadily this year. This development marks a turning point for one of the largest private credit vehicles in the world.

BCRED Reports February Loss as Withdrawals Surge

BCRED’s last recorded monthly loss before February was in September 2022, when it posted a decline of 1.3%. The February 2025 loss of 0.4% comes as investor sentiment around private credit has noticeably shifted.

For context, the Morningstar LSTA index of publicly traded leveraged loans fell 0.8% in February, per Morningstar’s website.

During the first quarter of this year, Blackstone’s fund faced a larger-than-usual wave of redemption requests. Investors pulled $3.7 billion from BCRED, a figure that exceeded typical quarterly withdrawal volumes.

The fund allows investors to withdraw a portion of their holdings every quarter, which adds a layer of liquidity pressure.

Financial news reporter Kristen Shaughnessy shared the development on social media, drawing wider public attention. The post referenced a Financial Times report citing a letter sent to financial advisers by Blackstone. According to that report, customer service software firm Medallia was among the companies whose loans were written down.

BCRED wrote down the value of a “select” number of loans during February, per the Financial Times report. Despite this, Blackstone maintained that the fund has delivered a 9.5% annualized total return since inception for Class I shares. The firm also noted that BCRED has outperformed the leveraged loan market by 100 basis points so far this year.

Private Credit Sector Faces Growing Scrutiny From Banks and Investors

Private credit funds have come under growing scrutiny due to weakening credit quality across the sector. Their high exposure to vulnerable sectors such as software has raised concerns among analysts and investors. Additionally, a lack of transparency has made it harder for market participants to assess underlying risks.

These concerns have spilled over onto Wall Street, where some major U.S. banks have tightened lending to the private credit industry.

JPMorgan Chase marked down the value of certain loans to private credit players earlier this month. That move is expected to reduce available lending to funds operating in the space.

Morgan Stanley and BlackRock were among the firms that moved to limit withdrawals from their own funds. Both firms acted following a surge in redemption requests from investors. This pattern across multiple funds points to a broader trend of tightening liquidity across private credit markets.

Shares of Blackstone, the world’s largest alternative asset manager, have lost more than 28% of their value so far this year.

That decline mirrors the broader unease investors have expressed toward the alternative asset space. As the sector navigates these pressures, fund managers are being watched more closely than at any point in recent years.

TLDR:

• XRP open interest is falling across major exchanges, with Binance still holding the largest derivatives market share.
  
• Liquidation spikes and soft taker volume confirm that leveraged XRP positions are actively being unwound market-wide.
  
• XRP has gained dual commodity classification from the SEC and CFTC, marking a turning point in regulatory clarity.
  
• ETF inflows of $1.44B and Ripple’s $2.7B in acquisitions reflect rising institutional confidence heading into 2026.

XRP open interest continues to contract across major derivatives exchanges, reflecting an ongoing deleveraging trend in the market.

Despite this broad decline, Binance maintains the largest share of XRP open interest among top platforms. At the same time, a growing set of regulatory and institutional developments is taking shape in 2026.

Analysts are watching closely to see whether these catalysts can reverse the current market structure.

Binance Dominates as Leveraged Positioning Unwinds

Binance remains the primary venue for XRP leveraged trading, holding the most open interest across major exchanges.

However, the exchange’s own 24-hour data shows continued weakness in positioning, with no strong recovery in sight.

Net taker volume on Binance also remains soft, which points to limited aggressive demand from new buyers. This combination suggests the market is still in a reset phase rather than entering a fresh expansion.

Liquidation data adds further weight to this view. Recent liquidation spikes show that forced leverage cleanup has played a role in driving open interest lower.

Rather than reflecting fresh long conviction, the current structure points to position unwinding. Speculative appetite across XRP derivatives continues to fade as a result.

The overall trend across exchanges mirrors what Binance is showing internally. Open interest is falling in a broad and sustained manner, not in isolated bursts.

This pattern typically follows periods of elevated speculation and leverage buildup. For open interest to recover, the market would need stronger directional participation from both retail and institutional traders.

Until that recovery arrives, the market structure for XRP derivatives remains under pressure. Binance will likely continue to lead the space by volume and open interest.

However, the gap between Binance and other exchanges may shift if conditions improve on other platforms. Traders are watching these metrics carefully as a leading signal for XRP’s next move.

Regulatory and Institutional Catalysts Are Aligning in 2026

On the fundamental side, a series of developments are converging that some analysts say could drive a major move.

XRP has been officially classified as a digital commodity by both the SEC and the CFTC, bringing long-awaited regulatory clarity.

The CLARITY Act markup is targeting April, and Ripple CEO Brad Garlinghouse has placed the odds of passage at 80 to 90 percent. Additionally, a stablecoin yield compromise is reportedly near completion.

Institutional interest is also building at a fast pace. XRP-related ETFs have pulled in $1.44 billion in inflows, while Evernorth has filed its S-4 for a Nasdaq listing.

Ripple has also made over $2.7 billion in acquisitions and is expanding its global footprint. A Ripple National Trust Bank application is currently under review as well.

Crypto analyst X Finance Bull noted on X that in 2024, XRP ran from $0.49 to $3.60 on news alone. The analyst argued that the 2026 setup carries heavier weight, with regulation, infrastructure, and institutional capital aligning together. That framing has drawn attention from traders reassessing their positions.

Whether the derivatives market responds to these catalysts remains to be seen. Open interest recovery alongside stronger volume would signal a shift in market sentiment. For now, XRP sits at a crossroads between fading speculative leverage and growing structural support.

Fidelity Investments told the US Securities and Exchange Commission (SEC) on Friday that it should continue to develop the regulatory framework for broker-dealers to offer, custody and trade crypto assets on alternative trading systems (ATS).

The letter from the US’ third-largest asset manager was in reply to a call for comments earlier this month by the regulator’s Crypto Task Force.

Fidelity said it is “critical” for the SEC to develop a comprehensive regulatory framework and clear rules of the road for tokenized securities trading, including rules for trading tokenized securities issued by third parties. 

Tokenized instruments have different issuance structures, legalities, and valuation models, the letter said. For example, tokenized real-world assets (RWAs) span entirely different asset classes like equities, real estate, bonds, or private credit. 

“Tokenization models vary significantly in structure and in the rights afforded to holders,” the letter said. The company explained:

“In some models, the crypto asset represents a holder’s indirect interest in the underlying security through a securities entitlement, while in others, the crypto asset may constitute a securities‑based swap, which may be offered only to eligible contract participants.” 

Fidelity also urged the SEC to bridge the regulatory gap between centralized and decentralized trading systems to “consider how intermediated and disintermediated trading venues can evolve and coexist,” the company’s general counsel, Roberto Braceras, wrote.

This includes overhauling existing reporting rules to reflect that decentralized finance (DeFi) trading platforms and other “disintermediated” systems cannot produce the detailed financial reporting required by the SEC because there is no central authority.

Additionally, Fidelity recommended that the SEC issue guidance permitting broker‑dealers to use distributed ledger technology for ATS and other recordkeeping purposes.

Overhauling reporting requirements to reflect this technological reality removes “undue burden” from decentralized systems, the letter said.

The Securities and Exchange Commission, under the leadership of Chairman Paul Atkins, has repeatedly signaled support for 24/7 capital markets and has given the regulatory approval for financial companies to experiment with tokenized trading.

Related: SEC interpretation on crypto laws ‘a beginning, not an end,’ says Atkins

US regulators say tokenized securities are subject to the same capital rules as underlying assets

Tokenized securities, which include equities, debt instruments, real estate investment trusts (REITs) and other securitized assets, are subject to the same banking capital requirements as the underlying assets they hold.

This view was shared in a joint policy statement published in March from the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). 

“The technologies used to issue and transact in a security do not generally impact its capital treatment,” according to the agencies.

Magazine: When privacy and AML laws conflict: Crypto projects’ impossible choice