Election Gambling Can Be Manipulated? 🧐
Election gambling harms public interest: CFTC. Crypto to sway elections in battleground states? US SEC's aggressive crypto policies cost retailers $15B? SBF files an appeal challenging conviction.
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Do prediction markets harm public interest?
CFTC thinks so.
The US Commodity Futures Trading Commission (CFTC) filed an emergency motion to stay a federal judge's ruling that allowed prediction platform Kalshi to offer betting on the 2024 US congressional elections.
Why? CFTC claims that prediction markets are vulnerable to "spectacular manipulation", which could harm public interest.
In fact it is working on a proposal to ban election contracts across all regulated exchanges.
Valid fears? Predictions markets could mean big money.
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With election betting, these platforms have become even bigger.
How big?
Consider Polymarket. Largest crypto prediction platform.
It has already accumulated $920 million in bets for the winner of the 2024 US presidential election.
With so much money riding on the outcome of the event, CFTC fears it could allow people to manipulate markets.
“Documented cases of market manipulation have already been realised in the very markets Kalshi points to.”
In its motion demanding for a stay on Kalshi’s election contracts, CFTC flagged that Polymarket experienced "spectacular manipulation" by traders.
Read: Do Predictions Markets Matter?
See-saw battle: Kalshi claimed the stay would cause “irreparable harm" to its business.
CFTC argued that any financial losses Kalshi might incur are minor compared to the potential harm of allowing election gambling.
Yaakov Roth of Jones Day, Kalshi's lead attorney.
“We are the ones who were trying to comply with the law, and the beneficiaries of the delay are the actors who don't want to comply with the law."
CFTC called the argument "sophomoric."
"A pharmacy does not get to dispense cocaine just because it is sold on the black market.”
Background: Kalshi launched its first election market on September 12. Albeit only for a few hours.
Then? Well, the platform was forced to suspend trading after a federal appeals court issued a stay in response to the CFTC's emergency motion.
In a September 6 ruling, a judge backed Kalshi and said CFTC exceeded authority in attempting to block platforms offering election betting.
Industry’s response: Crypto community celebrated the ruling.
Nick Tomaino, founder of the crypto fund 1confirmation said at the time.
“[This is] great news for anyone who believes that having skin in the game is a fundamental aspect of being American.”
Pro crypto lawyer Rep. Ritchie Torres urged CFTC to focus on unregulated election markets.
“I encourage you to focus on promoting responsible innovation, regulating exchanges, protecting consumers, and safeguarding the sanctity and integrity of elections from illegal and unregulated actors.”
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Crypto to Sway Elections in Battleground States
Says who? Dr Tonya M Evans, a law professor at Pennsylvania State University.
Where? In states such as Pennsylvania, Georgia, and Arizona, where small shifts in voter sentiment could impact election outcomes.
"The race really isn't about winning over the general population, but about navigating the Electoral College game. That means that if there are small voter shifts in crucial states, [like] Pennsylvania, Georgia, Arizona, etc, that could move the needle."
Impact on voters: Quite a bit.
About 73% of adults said a candidate's crypto policies would influence their voting decisions, as per crypto exchange Gemini.
Who will it matter to?: Voters with multiple issues may not be swayed solely by candidates' crypto positions.
Crypto lobbying: Both the parties have received $14 million collectively by pro-crypto political action committee.
In The Numbers 🔢
$15 billion
That’s what US Securities and Exchange Commission "gross overreach" has cost retail investors, alleges pro-crypto attorney and senate candidate John Deaton.
Deaton won the Massachusetts primary, and plans to hold the SEC accountable for its regulatory actions against small investors.
He will face crypto critic US Sen. Elizabeth Warren in November 2024 elections.
In a recent court filing, the SEC clarified that it no longer views cryptocurrencies themselves as securities.
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CEO of Blockchain Association, Kristin Smith
“Why operate in a country that is openly hostile to what you are building?”
The SEC is expected to increase enforcement actions in September, particularly in the crypto sector, as it approaches its fiscal year-end on September 30, 2024.
This trend reinforced by the $1.5 million settlement with eToro.
Aligns with the SEC's historical pattern of ramping up enforcement in September.
SEC Chair Gary Gensler has requested for a $2.6 billion budget for 2025 to strengthen crypto market oversight.
The SEC has had a record-breaking year for crypto enforcement.
Nearly $4.7 billion in actions against crypto firms and executives in 2024, a 3,000% increase from 2023. A total of $7.42 billion in fines since 2013.
Sam Bankman-Fried Files An Appeal
Judicial bias and unfair trial proceedings.
Claims Sam Bankman-Fried, the former CEO of FTX, the bankrupt crypto exchange.
SBF has filed a 102-page appeal challenging his fraud conviction and 25-year prison sentence.
Judge Lewis Kaplan presumed SBF's guilt. Blocked crucial evidence. Influenced the jury. Said SBF’s legal team.
That’s not all.
FTX was never insolvent and customer funds can be repaid, the lawyers claimed.
Background: In November 2022, a jury in New York found SBF guilty of all seven criminal counts of defrauding the customers, lenders and investors of FTX.
In March 2023, US District Judge Lewis Kaplan sentenced him to 25 years in prison for misappropriating $8 billion from clients.
The Surfer 🏄
MicroStrategy has acquired 18,300 more bitcoins at an average price of $60,408, bringing its total holdings to 244,800 BTC valued at $14 billion. The company reports a 4.4% BTC yield this quarter and 17% year-to-date, with its shares up 91% in 2024.
Four stablecoin issuers—Paxos, Tether, Techteryx, and Circle—have frozen nearly $5 million in stablecoins tied to North Korea's Lazarus hacking group. Followed by an investigation by blockchain analyst ZachXBT, who criticised Circle for taking 4.5 months longer than the other issuers to freeze the tokens.
An early Ethereum investor and the founder of longevity research firm Amaranth Foundation, James Fickel has lost over $43.7 million since January 10 by betting on Ethereum against Bitcoin. His debt on Aave has surged to $132 million.
Norway town Hadsel shut down a local Bitcoin mining facility due to noise complaints. Closure represents 20% of local power provider Noranett's income. That’s 20% increase in electricity bills for the residents.
Russia's Komi Republic plans to build 15 new crypto mining data centres, with the first two costing $27.6 million in Mikun and Sindor. Follows recent legislation legalising cryptocurrency mining.
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