As good as it gets
Polymarket dependent on the election cycle, says ex-FanDuel founder
Nigel Eccles warns on Polymarket sustainability.
Binance at loggerheads with India over $86m tax bill.
SEC cries foul over Coinbase Gensler subpoena.
Crypto crime bills multiplying.
I'm gonna tell you how it's gonna be.
Predictable
Polymorph: The former founder of FanDuel has warned that Polymarket might struggle to translate election year interest in prediction markets into a sustainable business, even as senior Democrats lobby the US commodities regulator to ban “for profit” betting on the race for the White House.
Headline news: Polymarket has hit the headlines in recent weeks as interest in the US presidential election peaked with Donald Trump’s attempted assassination attempt and Joe Biden’s announcement that he was dropping out of the race.
Now, Nigel Eccles, founder and CEO at BetHog and blockchain-based betting exchange BetDEX, has posted on X to warn that every election cycle has “seen the emergence of a go-to prediction market with mainstream press coverage.”
“Every one of those prediction markets faded immediately post election,” he said.
Fade and die: Eccles noted the “vast majority” of betting volumes on Polymarket at present is on the election, with only three of the top 20 markets non-election related – two on rate cuts and one on next year’s Super Bowl.
“Unfortunately, outside of elections, news tends to be very messy,” he added.
“Even simple questions like ‘Will X happen by Y?’ often throw up outcomes no one anticipated.”
Additionally, he said many news stories have “no real market outcome” while most major news stories “just aren’t as closely watched and analyzed to nearly the same degree as elections.”
“I've been a fan of prediction markets for about 20 years and I'm a fan of Polymarket in particular, but their real challenge will start on November 6th,” he concluded.
Money for nothing: Meanwhile, in the US legislature, an additional challenge to Polymarket has emerged after eight senior Democrat figures lobbied the US commodities regulator to ban betting on the 2024 presidential election, arguing that the race for the White House is not a “for-profit enterprise.”
In a letter to the Commodity Futures Trading Commission chair, Rostin Behnam, the five senators and three representatives said such markets “could influence and interfere with elections and further erode public trust in democracy.”
“Allowing billionaires to wager extraordinary bets while simultaneously contributing to a specific candidate or party, and political insiders to bet on elections using non-public information, will further degrade public trust in the electoral process,” the letter stated.
“Political bets change the motivations behind each vote, replacing political convictions with financial calculations,” they added, urging the agency to promptly finalize and implement a ban.
Decentralized wagering platform Polymarket said it has tracked more than $500m in bets placed on the outcome of the election so far.
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Loose change
Buy the dip: The crypto markets suffered along with the rest of the financial markets from Monday’s carry-trade crash, with both Bitcoin and Ether nursing hefty falls on Monday, only for both to recover some ground the following day.
But as of late Tuesday, the pair were still off by 14% and 22% respectively.
🎢 Bitcoin and Ether enjoy the ride
Allez les blocs: France’s financial regulator, L’Autorité des Marchés Financiers, is reviewing the registration applications of crypto-asset service providers (CASPs), as new European Union regulations enter force.
The Markets in Crypto-Assets Regulation requires CASPs to register in any of the EU’s countries in order to serve the bloc.
France has become the first major EU economy to accept CASP applications.
Passport to riches: Xapo Bank, the Gibraltar-licensed digital banking for crypto, claims it has become the first licensed bank in the UK to offer a combined interest-bearing USD and Bitcoin account.
Xapo made use of a passporting regime that allows firms based in Gibraltar to extend its banking license to the UK, under an agreement by the Financial Conduct Authority, Prudential Regulation Authority, the Bank of England and Gibraltar authorities.
Every inch a Saylor: Metaplanet, publicly traded in Japan, is plowing $58.76m into Bitcoin via a new stock offering. Following a recent board meeting, the company, known for investments and real estate, said it wants to raise around $69.13m by issuing stock acquisition rights to all common shareholders.
Echoing the strategy of, er, MicroStrategy, Metaplanet wants to become Japan’s top Bitcoin holding company by hoovering up BTC.
US tech firm MicroStrategy announced during its Q1 results it now owns 1.1% of the global supply of BTC, worth about $14.5bn.
By designating Bitcoin as a primary reserve asset, Metaplanet said it aims to guard its balance sheet from the erosive effects of inflation and Japan’s turbulent economic landscape.
Binance’s tax fight
No place to hide: Binance is battling Indian authorities over an $86m show cause tax notice. India claims the world’s largest cryptocurrency exchange evaded its goods and services tax from July 2017 to March 2024.
India’s Goods and Service Tax Intelligence team has briefed media that Binance raked in more than $476m in fees that were credited to the account of a Binance Group company , Nest Services Limited, based in Seychelles.
“We are currently reviewing the details of the notice and are fully cooperating with the Indian tax authorities,” a Binance spokesperson said.
A separate source at the exchange said the group would challenge the bill.
Investigators contacted Binance offices in Seychelles, Cayman Islands and Switzerland for more information, but claimed the exchange repeatedly ignored their messages.
Every penny counts: Under Indian law, all crypto service providers and investors must pay a 1% tax deducted at source on every crypto transaction, regardless of value. In addition, all profits booked on crypto investments are subject to a 30% tax.
Local Indian exchanges such as WazirX and CoinDCX have handled the taxation issue by implementing internal systems, but Binance has yet to follow suit.
Other international exchanges, such as Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex and Bitfinex, are expected to receive similar notices.
Back in January, the exchange was banned from India for non-compliance with local regulations, before service was resumed in April upon payment of a $2m penalty.
Pay me or go to jail: Binance is also embroiled in tax evasion issues in Nigeria, where one of the exchange’s most senior compliance executives, Tigran Gambaryan, has been detained since January.
Gambaryan has been accused of laundering more than $35m and engaging in specialized financial activities without a license.
He claims Nigerian officials demanded a bribe and locked him up upon refusal.
SEC’s Coinbase compliant
Give me everything: The US Securities and Exchange Commission (SEC) has claimed Coinbase is on shaky ground after submitting a “breathtakingly broad” subpoena covering “essentially all documents that in any way relate to crypto.”
Court papers filed Monday reveal the agency’s angst over the exchange’s request for communications and other records of its staff, including chair Gary Gensler.
Coinbase maintains the size of the subpoena is necessary as it prepares a defense in its blockbuster case against the SEC over claims it has been operating as an unregistered securities exchange, broker and clearing agency.
The SEC also charged Coinbase with the unregistered sale of securities in connection with its staking products.
In April, the agency served the SEC with a notice demanding documentation, following up with a request for Gensler’s personal communications related to crypto over the course of his tenure and four years before he was appointed chair.
Touch too much: A similar subpoena was served on Massachusetts Institute of Technology (MIT), where Gensler taught blockchain technology prior to his appointment at the SEC, before Coinbase backed down and said it wouldn’t seek records outside of the chair’s agency role.
In response, SEC lawyers blasted Coinbase’s approach as “blatant impropriety” in a letter to the judge presiding over the case.
In a pre-trial hearing, District Judge Hon. Katherine Polk Failla for the Southern District of New York said she was “kind of surprised and not in a good way” regarding Coinbase’s attempts to serve MIT.
The judge told Coinbase’s lawyers to file a motion to compel to help the parties move along the discovery process.
Coinbase has reworked its request, but its lawyers aren’t entirely satisfied.
“If the SEC is going to engage in an unprecedented regulation by enforcement campaign, the least they owe to those they target – and the public – is transparency,” wrote Coinbase chief legal officer Paul Grewal on social media platform X.
Multiplying legals
One more step along the road we go: The US House of Representatives has passed legislation aimed at stopping the use of digital assets for illicit finance.
The Financial Technology Protection Act of 2023 would form a group within the Department of Treasury to propose regulatory changes for tackling the misuse of cryptocurrencies and other digital assets, with representatives from all the major US financial regulatory agencies.
The bill’s passing follows several recent US legislative attempts to establish greater regulatory oversight for crypto.
Whether the bill will clear the Senate, required to become law, is unclear despite bipartisan support in the House, due to the charged nature of crypto and its links to the US political system during the current election cycle.
It’s no secret: Separately, bipartisan legislation has also been introduced to strengthen the US Secret Service’s authority to investigate crypto-related criminal activities.
According to a joint press release, the Combating Money Laundering in Cyber Crime Act aims to update the existing laws with a view of authorizing the Secret Service to “investigate new forms of criminal activity involving digital assets.”
Senator Cortez Masto said crypto assets are often used to fund criminal activity, which “poses a direct threat to the security and safety” of the US.
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