CFTC Issued an Advisory Warning Against Insider Trading and Fraud on Prediction Markets Following Two Enforcement Cases on KalshiEX
The U.S. Commodity Futures Trading Commission (CFTC) has issued a formal enforcement advisory warning that insider trading, fraud, and market manipulation will not be tolerated on prediction markets, following two disciplinary cases involving contracts traded on KalshiEX, a federally regulated Designated Contract Market (DCM). The advisory, released on February 25, 2026, underscores that event-based contracts—commonly referred to as prediction markets—fall squarely within the CFTC’s jurisdiction under the Commodity Exchange Act (CEA). Both cases cited in the advisory involved the alleged misuse of material non-public information. Key Takeaways Federal Oversight Extends Fully to Prediction Markets In its statement, the CFTC’s Division of Enforcement emphasized that while Kalshi addressed the violations internally, federal authorities retain independent power to investigate and prosecute unlawful conduct on any registered exchange. The advisory references Section 6(c)(1) of the Commodity Exchange Act and Regulation 180.1(a)(1) and (3), provisions that broadly prohibit manipulative or deceptive schemes in connection with commodities trading. These anti-fraud rules apply to event contracts just as they do to traditional futures products. Beyond insider trading, the CFTC outlined other prohibited conduct relevant to prediction markets, including wash trades and pre-arranged transactions under Section 4c(a), disruptive trading practices, and broader fraud and manipulation violations. Under Section 5(d) of the Act, DCMs are required to maintain surveillance systems, preserve audit trails, and enforce exchange rules. The advisory reinforces that exchanges serve as the first checkpoint—but not the final authority—when it comes to market integrity. CFTC Chairman Mike Selig reinforced that position, stating that exchanges act as the first line of defense against insider trading in event markets. He warned that attempts at fraud, manipulation, or misuse of confidential information will result in enforcement action. Case One: Political Candidate Penalized for Trading on Own Contract The first case dates back to May 2025, when social media footage appeared to show a political candidate trading contracts tied to his own candidacy on Kalshi. According to the advisory, Kalshi’s compliance team contacted the trader the same day the activity surfaced. The individual admitted the trades violated exchange rules, which bar participants from trading contracts where they have direct or indirect control over the outcome. Kalshi imposed a financial penalty totaling $2,246.36. That figure included $246.36 in disgorged profits and a $2,000 fine. The trader was also banned from directly or indirectly accessing the exchange for five years. The CFTC noted that the conduct potentially breached Section 6(c)(1) and Regulation 180.1, given the conflict of interest and the risk of deceptive trading practices. Although the matter was handled at the exchange level, the agency made clear it could have pursued its own enforcement action. Case Two: YouTube Editor Fined Over Non-Public Information The second matter occurred between August and September 2025 and involved a trader who held a formal employment relationship with a YouTube channel connected to a listed event contract. The trader, reportedly an editor, had advance access to video content prior to public release. Kalshi’s review concluded there was reasonable evidence to believe that trades were executed using material non-public information. The exchange levied a $20,397.58 penalty, including $5,397.58 in disgorgement and a $15,000 fine. The individual was suspended from the platform for two years. The CFTC characterized the conduct as a potential misappropriation of confidential information in breach of a duty of trust—conduct commonly described as insider trading. The advisory makes clear that such behavior on event contracts is treated no differently than insider trading in other commodity or derivatives markets. A Clear Message to Market Participants The Enforcement Division used the Kalshi cases to send a broader warning to participants in the growing prediction market sector. The advisory reiterates that insider trading through misuse of confidential information, wash sales, pre-arranged trades, disruptive practices, and fraudulent schemes are all subject to federal enforcement. The agency also cited prior enforcement precedent to demonstrate that prediction markets are not outside its regulatory reach. While Kalshi’s internal compliance framework detected and sanctioned both violations, the CFTC’s message is direct: federal regulators retain full authority over misconduct on any DCM platform. As event-based contracts continue to gain popularity, particularly those tied to politics and media outcomes, the Commission signaled that oversight will be active and enforcement decisive.
MetaMask and Mastercard Launched a Self-Custodial Crypto Spending Card in the United States
MetaMask and Mastercard have officially rolled out a self-custodial crypto payment card across the United States, opening access in 49 states—including New York for the first time. The launch marks a significant step in bringing on-chain assets into everyday retail payments without requiring users to surrender custody of their funds. Developed by Consensys, the company behind MetaMask, the new MetaMask Card allows users to spend crypto anywhere Mastercard is accepted—more than 150 million merchant locations worldwide. The card is issued by Cross River Bank and powered by Baanx, now operating as Monavate. The nationwide expansion follows a limited pilot first introduced at ETHDenver 2025 and earlier availability across parts of Europe and Latin America. With U.S. general availability now live, MetaMask is also introducing a premium $199-per-year Metal Card tier alongside a virtual card that users can access shortly after approval. Key Takeaways A Self-Custodial Model With Instant Conversion Unlike many crypto debit cards that require users to preload assets onto centralized exchanges, the MetaMask Card keeps funds inside the user’s wallet until the point of purchase. When a transaction is initiated, crypto is converted in real time to complete the payment. MetaMask Product Lead Gal Eldar said the objective is to remove friction between blockchain finance and everyday spending. That positioning directly addresses a long-standing pain point for self-custody users. Historically, spending crypto outside the ecosystem required transferring assets to an exchange, converting them into fiat currency, and then moving funds to a bank account. The MetaMask Card bypasses that multi-step process. Enrollment requires identity verification and regulatory compliance checks, aligning the product with U.S. financial standards while maintaining wallet-level custody before conversion. Rewards Paid Onchain The card introduces crypto-native rewards. Standard cardholders can earn up to 1% back in mUSD on purchases, while Metal Card users receive up to 3% back on the first $10,000 spent annually. In addition to cashback, MetaMask is building a broader rewards layer where user activity—including transactions and card spending—earns redeemable points. These points may unlock ecosystem perks such as discounts or early access to certain offerings. The Metal Card also includes zero foreign transaction fees and additional premium benefits. It comes in a physical metal format, while both tiers support Apple Pay, Google Pay, and contactless payments. Sherri Haymond, Mastercard’s Global Head of Digital Commercialization, emphasized the collaboration’s broader goal: Security and Compliance Framework The card integrates Mastercard’s fraud protections, including Zero Liability coverage and ID theft protection features. Transactions move through Mastercard’s regulated payments infrastructure, even though assets remain in self-custody prior to authorization. However, users should be mindful of tax implications. Converting crypto to fiat at checkout may constitute a taxable event in the United States, depending on individual circumstances. Fees, supported tokens, and transaction limits will also affect the real-world value of crypto cashback rewards. The program is currently live in the U.S., United Kingdom, European Economic Area countries, Argentina, Brazil, Canada, Colombia, Mexico, and Switzerland, with additional markets planned. A Competitive Shift in Crypto Payments Alt text: MetaMask post on X announcing the card launch The launch reflects a broader race among wallet providers and payment networks to integrate stablecoins and digital assets into mainstream commerce. Instead of directing users toward centralized exchanges for liquidity, wallet-native cards now aim to keep activity within their own ecosystems. New York’s inclusion is particularly notable given the state’s strict regulatory posture toward crypto-linked financial products. Access in the state signals that the card structure has cleared key compliance thresholds. For Mastercard, the partnership deepens its presence in blockchain-based finance. For MetaMask, it represents a strategic push beyond wallet functionality into consumer payments. If adoption mirrors early pilots—where thousands used the card for routine purchases—the product could accelerate crypto’s presence at the checkout counter. Whether it becomes a mainstream payment alternative will depend on user experience, fees, regulatory clarity, and how seamlessly conversion occurs in real-world conditions. For now, MetaMask’s U.S. expansion places one of the largest self-custody wallets directly inside the traditional payments network—without requiring users to give up control of their assets before they spend.
The OCC Issued a Proposed Rulemaking to Implement the Genius Act, Seeking Public Comments on Stablecoin Regulations
The Office of the Comptroller of the Currency (OCC) has unveiled a sweeping proposed rule to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act, marking a significant step toward establishing a federal regulatory framework for payment stablecoins in the United States. The proposal, released as a notice of proposed rulemaking, sets out how the OCC plans to oversee permitted payment stablecoin issuers and certain foreign issuers operating under its jurisdiction. The agency is inviting public comment for 60 days, signaling that the framework remains open to refinement before being finalized. In a statement accompanying the release, Comptroller of the Currency Jonathan V. Gould emphasized the agency’s intent to strike a careful balance. Key Takeaways A New Regulatory Structure Under 12 CFR 15 Much of the proposed framework would be codified in a new section of federal banking regulations, 12 CFR 15. This section would outline standards for activities, reserve management, redemption rights, risk controls, reporting, supervision, and the approval process for issuers seeking authorization from the OCC. The rule also addresses how state-qualified payment stablecoin issuers could transition into the federal framework and details how the OCC would examine foreign issuers operating in the U.S. market. It includes provisions for revoking or rescinding approval in certain circumstances and establishes capital and operational backstop requirements. Beyond the new section, the OCC is proposing amendments to existing capital adequacy standards (12 CFR 3), prompt corrective action rules (12 CFR 6), assessment fees (12 CFR 8), and procedural rules (12 CFR 19), aligning them with the new stablecoin regime. Reserve, Redemption, and Risk Controls The GENIUS Act, enacted in July 2025, created the first comprehensive federal structure for payment stablecoins. The OCC’s proposal translates the statute’s core mandates into operational requirements. Among the most consequential provisions is the requirement that payment stablecoins be backed at least one-to-one with identifiable, highly liquid assets. Issuers would be expected to maintain transparent reserves and ensure that redemptions occur at par value—generally within two business days. Capital and liquidity requirements would not follow a one-size-fits-all formula. Instead, they would be calibrated based on an issuer’s risk profile. The proposal also requires issuers to maintain a principles-based risk management framework, covering cybersecurity, operational continuity, third-party dependencies, and transition planning. The rule further clarifies the OCC’s authority over subsidiaries of national banks or federal savings associations, federally chartered payment stablecoin issuers, state-qualified issuers operating under federal oversight, and certain foreign issuers. Coordination Across Federal Agencies While the proposal is comprehensive, it does not cover every regulatory obligation tied to stablecoin issuance. Requirements linked to the Bank Secrecy Act, anti-money laundering compliance, and sanctions administered by the Office of Foreign Assets Control will be addressed separately in coordination with the Department of the Treasury. The OCC’s rulemaking is part of a broader interagency effort to implement the GENIUS Act. Other primary regulators, including the Federal Reserve, the Federal Deposit Insurance Corporation, and the National Credit Union Administration, are expected to issue complementary regulations. Under the statute, the GENIUS Act will take effect on the earlier of 18 months after enactment—January 18, 2027—or 120 days after final implementing regulations are issued by the primary regulators. That timeline places pressure on agencies to finalize rules in a coordinated and timely manner. Industry Implications For banks, fintech firms, and crypto-native stablecoin issuers, the proposal represents both clarity and constraint. On one hand, it offers a clear federal pathway for stablecoin issuance, potentially reducing regulatory fragmentation between state and federal regimes. On the other, it introduces formal supervisory expectations similar to those applied to traditional banking institutions. The 376-page proposal underscores that payment stablecoins will be treated as a matter of financial stability and consumer protection, not merely innovation. If finalized largely as drafted, issuers will need to demonstrate robust governance, liquidity discipline, and operational resilience before entering—or remaining in—the U.S. market under federal oversight. With the comment period now open, industry participants have a narrow window to influence what could become the defining rulebook for U.S. dollar-backed stablecoins.