US Regulators Advance Crypto and Prediction-Market Rules
The week brought several regulatory developments affecting crypto trading platforms, prediction markets and digital-asset businesses. In the United States, the Commodity Futures Trading Commission (CFTC) began considering a federal framework for certain leveraged retail crypto transactions while also addressing how event contracts and conventional gambling products should be treated under derivatives law.
In Europe, regulators focused on stablecoins that do not meet the requirements of the Markets in Crypto-Assets Regulation (MiCA) and plans to strengthen supervision of major cross-border financial firms. Meanwhile, a settlement involving Celsius co-founder Alex Mashinsky highlighted the continuing role of state-level enforcement in the digital-asset sector.
These developments are at different stages. Some involve requests for public comment or proposed rules, while others set out supervisory expectations or resolve an enforcement matter. Their legal effects therefore depend on the specific action rather than representing a single, comprehensive change to crypto regulation.
CFTC Considers Rules for Leveraged Retail Crypto Transactions
On October 5, the CFTC issued an advance notice of proposed rulemaking on retail crypto-asset transactions. The notice begins a process to examine how Section 2(c)(2)(D) of the Commodity Exchange Act applies to certain retail commodity transactions involving crypto assets, referred to in the notice as CTXs.
The provision covers specified transactions offered to retail customers on a leveraged, margined or financed basis. The CFTC is seeking feedback on potential safeguards against abusive practices, requirements designed for crypto markets and the possibility of establishing a crypto-asset-market subcategory within designated contract market registration.
The notice is an initial step, not a final rule. Comments are due 60 days after publication in the Federal Register. Following that process, the agency may decide whether to issue a formal proposal and what requirements it should contain.
For trading platforms and other businesses, the potential framework could clarify how certain leveraged retail products are treated under federal commodities law. It does not, by itself, create a comprehensive federal licensing regime for spot crypto markets. Businesses may still need to consider applicable state licensing, money-transmission and consumer-protection requirements.
CFTC Addresses Event Contracts and Gambling Products
On October 9, the CFTC announced a proposal concerning the treatment of certain event contracts as swaps. The proposal covers qualifying contracts linked to events involving areas such as politics, sports, culture and weather. Under the proposed approach, contracts meeting the definition would be treated as commodity derivatives within the CFTC’s exclusive jurisdiction.
The agency also issued an interim final rule excluding specified activities from the definition of a swap. The exclusion addresses products such as conventional sportsbook wagers and casino games. The rule is intended to distinguish those activities from event contracts regulated under federal derivatives law. It becomes effective upon Federal Register publication, and the agency is accepting comments.
The two actions address different aspects of the legal boundary between prediction markets and gambling. The proposal remains subject to the rulemaking process, while the interim final rule has a separate effective-date mechanism. Operators should examine contract terms, settlement conditions and the nature of the underlying event rather than assuming that a product’s branding determines its regulatory status.
ESMA Sets Expectations for Noncompliant Stablecoins
On October 8, the European Securities and Markets Authority (ESMA) published an opinion on services involving stablecoins that do not comply with MiCA. The guidance addresses asset-referenced tokens and e-money tokens that fail to meet the European Union’s regulatory requirements.
ESMA’s position is that crypto-asset service providers authorized under MiCA should stop providing EU clients with services involving noncompliant tokens. The activities covered include trading-platform operation, exchange, order execution, investment advice, transfers, custody and portfolio management.
National regulators are expected to oversee compliance and ensure that firms use appropriate technical, contractual and organizational controls. Where customers have existing exposure, that exposure should be addressed as soon as possible and no later than three months after publication of the opinion. Any temporary continuation of services should be limited to activities needed for liquidation, conversion, withdrawal, transfer or safekeeping.
For authorized providers, the guidance makes stablecoin reviews and access controls an important compliance priority. Firms need to consider not only whether a token is listed for trading but also whether it is accessible through custody, routing, transfer or portfolio services.
EU Moves Toward Direct Supervision of Major Crypto Firms
On October 9, the Council of the European Union agreed on key elements of its negotiating position for the Market Integration and Supervision Package.
Under the Council’s position, ESMA would directly supervise the most significant cross-border crypto-asset service providers (CASPs). The approach is narrower than the European Commission’s original proposal, which would have transferred supervision of all qualifying providers to ESMA. The Council also supports changes to ESMA’s governance and a two-year transition involving ESMA and national personnel.
The package is not yet final law. The Council must complete the formal adoption of its position, and negotiations with the European Parliament can proceed once Parliament has adopted its own position.
If implemented, the approach could result in direct ESMA oversight for certain large, cross-border providers while national authorities continue supervising other firms. Crypto businesses operating across Europe should monitor the legislative process and assess how their scale, structure and cross-border activity may affect future supervisory arrangements.
New York Settlement Resolves Case Against Celsius Co-Founder
On October 9, New York Attorney General Letitia James announced a settlement involving Celsius co-founder and former CEO Alex Mashinsky. The settlement permanently bars Mashinsky from participating in the securities, commodities and cryptocurrency industries and establishes conditional payment obligations of up to $35 million.
The Attorney General’s 2023 lawsuit alleged that Mashinsky made misleading statements about Celsius’s safety, investment practices and financial condition while engaging in unregistered activity. Mashinsky is also serving a separate federal criminal sentence.
The settlement illustrates how state-level enforcement can remain significant alongside federal criminal proceedings and bankruptcy-related processes. For crypto businesses and executives, representations about platform safety, investment practices, customer assets and risk management can create legal exposure, making accurate disclosures and appropriate compliance controls important.
What These Developments Mean for Crypto Businesses
The week’s actions show regulators addressing different parts of the digital-asset market through separate legal tools. The CFTC is examining the treatment of leveraged retail transactions and event contracts; ESMA is setting expectations for services involving noncompliant stablecoins; the EU Council is developing a framework for supervising major cross-border firms; and New York has resolved an enforcement matter involving a former crypto executive.
Businesses should distinguish proposals from rules already in effect and supervisory opinions from legislation that still requires approval. Monitoring official announcements, reviewing product structures and documenting compliance procedures can help firms understand which requirements apply to their activities as these processes develop.
