Stefan Schropp

Requesting a public access line now (couldn't get one in time for today) and will post it here when I get it. Second week in a row this Court will end its Friday with a marathon hearing though. Godspeed to all involved.

AZ asked to brief the laches argument, pointing to the 1-month delay between the state court filing and the CFTC's TRO Motion. Expect the CFTC to counter with AZ's 10-month delay between the cease & desist letter and the criminal charges. On irreparable harm, Court was clear that an arraignment is a "big deal" but welcomed briefing. The Court made clear that it felt it had a handle on the preemption merits from Kalshi's TRO, but expect both parties to include some of that in their briefing.

Kalshi case update from AZ (see qt 🧵 for background): The Court just wrapped an hour+ status conference on the Gov't's TRO/PI Motion. AZ offered to stay the state criminal case for 30 days after Monday's arraignment, which the government declined. So the Court set a hearing for 2pm pt tomorrow on the government's TRO motion, and ordered supplemental briefing by noon tomorrow. Somebody get oxygen tanks to the lawyers. More details below.

Update: The AZ federal court just denied Kalshi's request for a PI, finding (on an open question with split authority) that the Anti-Injunction Act prevents it from enjoining the state proceeding. BUT the key point is this quote from the order: "The AIA does not apply to injunctions issued at the request of the United States or administrative agencies enforcing applicable federal law.” So the AIA won't stand in the way of this 👇motion.

The entire preemption argument is insane to me. Board of Trade of the City of Chicago v. Christie Grain & Stock Co., 198 U.S. 236 (1905) was the first case where we said cash-settled futures were valid financial instruments, which prevented them from getting swept up in old state laws on gambling that covered time bargains and forward contracts. So it’s clear Congress knew that creating a federal regulatory framework took financial instruments out of the hands of state gambling regulators, as it had already done so. Not to mention the slippery slope it unlocks - if based on the topic of a contract, and not its form, the states can overrule the exclusive and subjective authority of the CFTC on classifying an instrument as “gambling” then what draws the line? Can California ban weather markets if they feel rainfall doesn’t have enough economic merit? Can Ohio decide credit default swaps are gambling because they have binary event based outcomes? Can each state create a patch work of regulation for forward dated cash settled corn markets? No, of course not. Subject over form cannot be the basis for the divide, which is exactly why in Dodd-Frank Congress had to expressly outline which matters of subject were banned and give the CFTC subjective authority (“societal good”) guidelines for the remainder. So if it quacks like a duck, but has an engine, and a loud speaker, perhaps it’s not a damn duck! /end of my rage rant

@adamscochran Or, as Kalshi’s counsel made clear on Friday, that a sponsor might hedge the risk that the player they sponsor underperforms…

Heaven forbid that an advertiser hedge on game outcomes that would impact the eyeball on their ads. Or a nearby vendor hedge on a game because getting crushed early means people leave early and don’t come to the bar after. Or the countless other cases! Truly wild they claim no economic benefit.

NEW: CFTC filed a Motion for PI/TRO in Arizona federal court this afternoon, seeking to enjoin the State's criminal enforcement action against Kalshi. CFTC previewed this at the hearing on Kalshi's TRO request Friday, and it does not disappoint. 🧵 below.

And here is the link to the full motion: storage.courtlistener.com/recap/gov.usco…

After the motion was filed, Judge Liburdi set a status conference for 10am pt tomorrow morning. Checking on a public access line and will post it here if I get one, but h/t to DOJ and the CFTC for a very strong brief on a very tight timeline.

“The yield prohibition in the GENIUS Act—and its proposed reinforcement through the CLARITY Act—may be motivated by the concern that competitive stablecoin returns will draw deposits out of the banking system and contract lending. Our model shows that this concern is quantitatively small.”

If you’re working in crypto policy, bookmark this page 👇. There’s work to be done, and @mparker5102 just made you a giant to-do list.