gm from the Day One Law team!

Today’s legal update covers:

• CFTC prediction market guidance

• Why we might not get market structure

• An important stablecoin adjustment

CFTC issues new guidance for prediction markets

The CFTC made a move on prediction markets earlier this month. The agency's Division of Market Oversight released new guidance clarifying how exchanges should oversee event contracts, the instruments that sit underneath platforms like Polymarket.

The core message: exchanges need to take manipulation seriously. The advisory reminds platforms that listed contracts must comply with the Commodity Exchange Act's prohibition on manipulation-vulnerable products, and gets specific about certain cases: contracts tied to sports, elections, or other real-world outcomes where a small number of people could realistically influence the result.

That last point matters. Regulators are flagging that when outcomes are concentrated, the incentive to manipulate isn't theoretical. Exchanges listing those products are expected to genuinely assess whether participants could move the needle on the underlying event, not just check a box.

The guidance also pushes for stronger surveillance programs and cleaner settlement processes, with an emphasis on transparent, reliable data sources.

Day One Law: The CFTC is signaling that exchanges listing event contracts should expect closer scrutiny around manipulation risk, especially where participants could plausibly influence outcomes. Platforms may need to strengthen listing standards, monitoring systems, and settlement data practices to stay comfortably within the Commodity Exchange Act.

Market structure compromises continue

Market structure talks are still moving, but not quickly. Lawmakers and industry groups continue working through the bill's remaining disputes, and the market has noticed: Polymarket odds have slipped from a mid-February high of 82 percent to 61 percent earlier this week.

Stablecoin yield is still the main sticking point. Senator Thom Tillis (R-NC) has emerged as an increasingly important figure in the debate and is sympathetic to banks’ claims about deposit flight. Reports indicate he's been meeting with both banking groups and crypto representatives, asking detailed questions about how stablecoin incentive programs work and whether they could realistically pull deposits away from traditional banks. His engagement has made him a key vote as negotiators search for bridging language. The bill could technically pass along party lines, but that path still runs through Tillis.

Lawmakers are still hunting for compromise language that could build broader support and allow the bill to move quickly once it hits the Senate floor.

On the Democratic side, there are some signals of flexibility. Senator Angela Alsobrooks (D-MD), generally aligned with banking industry interests, recently told a banking conference that a workable bill will require both sides to accept outcomes they don't fully like. That's not a concession, but it's a more pragmatic posture than we've seen.

The next few weeks will likely determine whether these negotiations produce actual text, or whether the effort to establish a comprehensive U.S. digital asset framework stalls out again before it ever reaches the floor. Congress published an explainer on the yield debate.

Day One Law: It’s difficult to handicap market structure passing as it enters a narrowing window. The stablecoin yield debate is now the central fault line, and if lawmakers can’t translate these discussions into legislative text soon, we could be relying on rulemaking from the SEC and CFTC.

SEC quietly adjusts broker rules for stablecoins 

The SEC quietly did something worth paying attention to. Through a staff FAQ from the Division of Trading and Markets, the agency clarified that broker-dealers can apply a 2% haircut to qualifying payment stablecoins when calculating regulatory capital. Previously, many firms assumed they had to treat stablecoin holdings far more conservatively, with some applying a full deduction that made holding them practically unworkable.

Commissioner Hester Peirce accompanied the FAQ with a public statement framing the move as recognition of stablecoins' growing role in blockchain-based financial infrastructure. The practical read: broker-dealers now have a clearer path to holding stablecoins without getting punished for it on their capital calculations.

Capital treatment has been a real barrier to institutional crypto participation. Broker-dealers operate under strict capital buffer requirements, and how an asset gets classified under those rules determines whether a firm can realistically hold or finance it. Moving qualifying stablecoins closer to the treatment applied to traditional low-risk instruments is a meaningful shift, even if it arrived through staff guidance rather than formal rulemaking.

If broker-dealers can hold stablecoins without punitive capital consequences, the tokens become more viable for settlement, trading infrastructure, and other institutional uses inside regulated markets. It’s the kind of quiet structural change that tends to matter more over time than flashier announcements.

Day One Law: By allowing a modest haircut rather than a full capital deduction, the SEC is implicitly acknowledging stablecoins as usable financial infrastructure within regulated markets. Over time, that shift could make stablecoins more practical for institutional settlement, liquidity, and trading workflows.

That’s it for your update

As always, please reach out if you have questions or just want to riff on what we’re seeing in the market and the implications of any of the above.

Talk soon.

Nick Pullman
Day One Law