Natural bedfellows
Crypto trading and prediction markets share the stage
Prediction markets and crypto share a predilection for trading.
Kamala makes a belated crypto promise.
Stablecoin regulations to boost Treasury demand.
ETH EFT decision window extended.
The FBI creates its own crypto, captures scammer.
Come back baby please, ’cause we belong together.
A rising tide
Predicting a wave: The convergence between the rise of crypto and that of prediction markets in the current electoral cycle in the US appears to be no coincidence, particularly because the one appears to have expanded the potential for the other.
Next gen: “Blockchain technology allows for decentralized, trustless platforms, which have helped attract a new generation of users,” says Nadav Trenter Moser, chief revenue officer for the new B2B and B2C prediction markets website PredictionNews.com.
“This tech infrastructure creates more trust in the market mechanisms, providing a new level of security and accessibility,” he adds.
The offshore crypto-based precision market provider Polymarket has broken through over the course of this year with its much quoted markets on the US election.
Meanwhile, the more traditional political betting trading outfit Kalshi recently won a landmark legal case against the Commodity Futures Trading Commission over the right to offer political betting markets.
Piff, paff, poof: Over and above these two examples, Moser argues that the success of DeFi platforms has introduced many to the broader concept of financial markets beyond traditional systems, thus “making prediction markets a natural progression for crypto enthusiasts looking for innovative trading or betting opportunities.”
“The ability to create liquidity in ways previously impossible has broadened the appeal of prediction markets within crypto circles,” Moser says.
“In essence, while prediction markets have their own appeal, the rise of crypto has amplified that interest by introducing new technologies, liquidity and decentralized governance models that align with the ethos of prediction markets.”
Beyond the vote: There has been much speculation that prediction markets might struggle once the election is over. Former FanDuel founder and now the founder of crypto-based betting operators BetDEX and BetHog, Nigel Eccles, has suggested Polymarket in particular might struggle beyond the November ballot.
But Moser argues that once you have product market fit and user adoption “you can’t put the genie back in the bottle or the toothpaste back in the tube.” “Election markets have indeed been an overwhelming majority of the funds raised on these platforms; however, we are seeing interesting markets and categories emerge,” he suggests.
This includes markets as varied as what Elon Musk does next, aspects of economics including Fed funds decisions, culture such as the top-grossing movies and current affairs such as developments in the Middle East.
“Getting to another $1bn single market will be hard to top,” Moser says of the current Trump/Harris market.
“However, the aggregation of endless million/tens of millions dollar markets will make prediction markets interesting moving forward.”
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Loose change
Ripple is launching a stablecoin, RLUSD (Ripple USD), and has named its global exchange partners – Uphold, Bitstamp, Bitso, MoonPay, Independent Reserve, CoinMENA, and Bullish – who will make the token available worldwide. RLUSD is issued under a New York Trust Company Charter.
Regulators in the United Arab Emirates have granted AED Stablecoin LLC in-principle approval to launch AE Coin, the country’s regulated stablecoin. The token will be pegged to the dirham.
Lawyers at Bronstein, Gewirtz & Grossman, LLC are investigating potential claims on behalf of purchasers of OpenSea NFTs. The Web3 marketplace recently received a Wells notice from US regulators alleging the non-fungible tokens sold on its platform were unlicensed securities and that enforcement action was impending.
Coinbase is urging a court to make the SEC hand over documents about how securities laws relate to crypto, especially Ethereum, according to The Block. Frustrated by delays and the SEC’s claim it might take three years to comply, Coinbase is seeking a partial summary judgment to speed things up. The SEC had previously said it was exempt from FOIA requests but later backtracked.
What we’re reading: Tim Heath on why the Gulf is the place to be when it comes to investing in key areas such as crypto and AI.
On social: Pat Berisha, who runs the Sporting Crypto newsletter, posted about the newly released blockchain game Off the Grid. The game is built on Avalanche and Berisha said there are plans for a token and the ability to mint rare items as tradeable NFTs.
So far, he said, the numbers are “unbelievable” with 5.5m wallet addresses and 53m transactions.
And already it is the #3 shooter game on Twitch
“There are only 500m active wallet addresses in Web3… one game creating/accruing the equivalent of 1% of that entire pie is insane.”
The rivals’ crypto moves
I have the concepts of a plan: Vice-President Kamala Harris has teased a policy stance around cryptocurrencies for the first time. In a pitch to black males, sent out via email blast and mentioned briefly at the stump, the Democratic presidential nominee supports “a regulatory framework for cryptocurrency and other digital assets so black men who invest in and own these assets are protected.”
With no other details, Harris promised to “make sure owners of and investors in digital assets benefit from a regulatory framework so that black men and others who participate in this market are protected.”
Inkblots: The Harris plan is being credited with encouraging a broad upward move in the crypto markets early this week. Matt Hougan, CIO at Bitwise, suggested in a blog that Harris’s comments were “more Rorschach test than policy.”
“If you’re anti-crypto, you can see Harris pushing for tough regulation of crypto in the name of ‘protecting’ investors,” he said.
“If you’re pro-crypto, you can see Harris pushing for regulatory clarity and a pathway forward for the industry.”
Still, Hougan added, the statement does at least show Harris “recognizes that crypto matters enough to an important demographic that she’ll take the time to call it out.”
“That’s good news,” he added. “She knows crypto exists, it matters, and it isn’t going away.”
“But it’s not the full-hearted embrace that crypto advocates have been hoping for.”
The tree of liberty: Meanwhile, Harris’s opponent, former President Donald Trump, has been unashamedly courting the crypto vote, and on Tuesday launched a new digital token project to whitelisted investors.
World Liberty Financial (WLFI), endorsed by Don and his sons, sold $5m in the first hour, but gremlins crashed the site with transactional data citing “technical difficulties.”
By early evening ET ~610m WLFI tokens had been sold with 19.4bn tokens remaining.
The WLFI roadmap suggests the initial offer will look to raise $300m and sell 20% of the token supply at a $1.5bn fully diluted valuation.
The WLFI token can’t be traded, serving as the governance token for the yet-to-be-released Ethereum decentralized protocol.
Stable doors
Not another one: A US senator has published draft legislation promising a clear regulatory framework for stablecoin issuers.
Sen. BIll Hagerty, a member of the Senate Committee on Banking, said he wished to free stablecoins’ full potential to enhance payment systems and support demand for US Treasuries.
“For too long, these benefits and the broader promise of stablecoins have been hindered by the lack of clear regulations,” Hagerty said. “My draft legislation provides much-needed clarity, putting in place the legal framework necessary to unlock this technology’s full potential for the benefit of Americans.”
Senator Hagerty’s discussion draft builds upon the Clarity for Payment Stablecoins Act, introduced by House Financial Services Committee chair Patrick McHenry.
Ether EFT delay
Time is on my side: The US Securities and Exchange Commission (SEC) is giving itself more time to review a proposed rule change that would allow options trading on Ethereum exchange-traded funds.
In a filing by the agency, December 3 is the new deadline date, with the original 45-day review window due to close on October 19.
The proposal, filed by Cboe Exchange on August 19, would amend Exchange Rule 4.3 to allow the listing and trading of options on shares of the nine Ethereum ETFs, including products from Fidelity, Grayscale and BlackRock’s iShares.
The extension was necessary as the SEC “finds it appropriate to designate a longer period… so that it has sufficient time to consider the proposed rule change.”
The catch a thief
Join them, beat them: Federal agents created their own fake cryptocurrency as part of a $25m fraud sting that led to charges against 18 individuals and companies.
Operation Token Mirrors targeted “on-demand market manipulation” on trading platforms, creating massive fake trading volumes.
ZM Quant, an allegedly fraudulent market maker, was enlisted to support trading in NexFundAI, a token designed to invest in AI projects.
While ZM Quant staff allegedly advised on pumping the token’s price for profit, they later found out NexFundAI was created by the FBI to take down the operation.
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