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Genna Garver is joined by John D’Agostino of Coinbase Institutional and Chris Kennedy of Regions Bank on the most recent episode of The Crypto Exchange. They discuss their working paper, “Banks May Preserve the Deposit – but Lose the Depositor,” which is aimed at community and regional bank boards. Listen to the full episode here.
Binance estimated the loss at about $6.3 billion, roughly four times the Bybit theft of February 2025. TRM Labs’ onchain tracing puts the figure at approximately $6.36 billion across 10 blockchains, most of it moved in about 20 minutes starting at 20:05 Coordinated Universal Time (UTC) on October 29. Binance’s preliminary investigation points to a compromised DevOps engineer’s laptop that allowed an attacker to access a service container and submit unauthorized withdrawals, while TRM’s analysis points to a compromise of Binance’s hot wallet signing infrastructure, and Binance has yet to publish a root cause. TRM attributes the attack with high confidence to TraderTraitor, the North Korean unit the Federal Bureau of Investigation (FBI) named for the Bybit hack. Within hours, Tether, Circle, Ripple, and World Liberty Financial froze about $2.67 billion in stablecoins tied to the flows (TRM’s count as of 00:30 UTC on October 30), and the attacker still controls roughly $2.4 billion in assets beyond any issuer’s reach. On CNBC the morning after the disclosure, Commodity Futures Trading Commission (CFTC) Chairman Michael S. Selig said the hack “proves our exact point in proposing regulations for crypto markets earlier this month,” that the market still lacks “the same sort of safeguards that we have here in the U.S.,” and that the CFTC wants to make it possible for “these exchanges to come and register.” The freezes also show the stablecoin issuers can stop funds at scale within hours, which is the technical capability the GENIUS Act requires permitted issuers to maintain for lawful orders, even though at least some of these freezes appear to have been voluntary rather than compelled. For more information, click here and here.
U.S. Senator Katie Boyd Britt sent a letter to Securities and Exchange Commission (SEC) Chair Paul S. Atkins raising concerns about the rapid introduction of perpetual derivatives tied to U.S. stocks. While expressing support for responsible financial innovation, Britt asked how these products should be classified under existing securities and derivatives laws, whether the proposed framework adequately protects investors, and how the SEC and the CFTC will coordinate oversight. She noted that the SEC and CFTC issued a Joint Request for Comment in June that closed on August 24, and that on May 29 the CFTC permitted a designated contract market (DCM) to list a bitcoin perpetual as a futures contract, limiting that determination to digital commodities. The CFTC’s related nonbinding policy statement recognized that perpetuals referencing equity securities or narrow-based security indexes implicate SEC interests. Several DCMs submitted proposals in September to list perpetual contracts tied to individual U.S. stocks, and certain filings could become effective in November. The CFTC’s classification of certain digital-asset perpetuals as futures is also being challenged in federal court. Senator Britt urged the SEC to address several questions in coordination with the CFTC before retail offerings begin, including whether trading in a perpetual could be used to manipulate the price of the underlying security, whether the SEC, the Financial Industry Regulatory Authority (FINRA), and securities exchanges will have enough information for cross-market surveillance, what investor protections apply to synthetic exposure to public companies, what the implications are for capital formation, and what harm could result if a court later finds the products were improperly classified. For more information, click here.
The SEC alleges that BG Wealth Sharing Ltd. and DSJ Exchange Pty Ltd., two foreign-operated Colorado-incorporated entities, raised more than $130 million from tens of thousands of investors, many located in more than 40 U.S. states and multiple U.S. territories, from at least October 2025 to June 2026 by promising risk-free returns from “SI-generated signals” for crypto asset trading. BG Wealth filed a false Form ADV and DSJ a false Form D, which were publicly viewable and shared with investors as supposed proof of SEC approval, and the defendants also displayed fake certificates bearing the SEC’s seal. The SEC filed suit in the U.S. District Court for the Northern District of California on October 29 and has removed the filings. The SEC credits the Texas State Securities Board, Utah Division of Securities, and four other state and provincial regulators, among other authorities. Separately, on October 28 the SEC filed its DEBT Box case in the U.S. District Court for the District of Utah against Jason Anderson, Schad Brannon, Roydon Nelson, Blox Lending, and Digital Licensing, with Business Funding Solutions, LLC named as a relief defendant. It alleges DEBT Box raised at least $200 million from more than 100,000 retail investors from November 2021 through August 2023 by selling license agreements tied to crypto assets purportedly associated with real-world projects such as oil, natural gas, agriculture, beverage distribution, and real estate. The SEC alleges DEBT Box received no revenue from those projects, and that Anderson and Blox instead used more than $101 million of investor money to buy project tokens and remove them from circulation (buy and burn) to hide the absence of revenue, which had the purpose and effect of Ponzi payments. Brannon, Nelson, and Digital Licensing have consented to judgments, subject to court approval, with two-year injunctions against participating in securities offerings and sales (other than for their own accounts) for the individuals and about $1 million in combined penalties and disgorgement (plus prejudgment interest). For more information, click here and here.
The Depository Trust Company (DTC), a Depository Trust & Clearing Corporation (DTCC) subsidiary, switched on its Tokenization Service, which mints blockchain “digital twins” of securities held in DTC custody and lets users convert between the traditional and tokenized form and deliver tokens to a wallet of their choice. Twenty DTC participants have signed agreements to access the service, with more to be onboarded on a rolling basis. The service is currently integrated with the Canton Network and DTCC’s private Besu network, with additional blockchain networks to be added in 2027, and follows the SEC’s December 2025 no-action letter authorizing DTC to tokenize Russell 1000 constituents, exchange-traded funds (ETFs) tracking major indices, and U.S. Treasury securities. The tokens retain the ownership rights, investor protections, and economic entitlements of the underlying security. For more information, click here.
Ripple National Trust Bank received final Office of the Comptroller of the Currency (OCC) approval, completing the organization process that began with conditional approval in December 2025. The bank will manage the segregated reserves backing Ripple USD (RLUSD), act as collateral trustee for those reserves for the benefit of RLUSD holders, and offer fiduciary digital asset custody. RLUSD itself continues to be issued by Standard Custody & Trust Company, Ripple’s New York Department of Financial Services (NYDFS)-regulated limited-purpose trust company, with The Bank of New York Mellon as primary reserve custodian. Ripple National Trust Bank (RNTB) adds federal OCC supervision to the regulatory infrastructure supporting RLUSD, so the stablecoin now sits under both state and federal oversight. For more information, click here.
The Division of Examinations released its fiscal 2027 priorities for the 34,000-plus registrants it covers. Tokenization appears twice: as a high-risk area for clearing agency examinations, alongside risk management of defaults, recovery and wind-down, securities lending, and operations, and as an “emerging trend” under Regulation Systems Compliance and Integrity (Reg SCI), together with SI, extended trading hours, and quantum computing. Transfer agents will be examined on their use of emerging technology to perform transfer agent functions, which may include tokenized share registers. The priorities use “super intelligence (SI)” rather than AI and say the Division will prioritize policies and procedures for monitoring SI, including its use in fraud prevention and detection, back-office operations, anti-money laundering (AML) and Regulation Best Interest (Reg BI) compliance, and trading functions. Examinations will assess whether algorithms lead to advice or recommendations consistent with investors’ investment profiles or stated strategies. For more information, click here and here.
The final rule is now at 91 FR 67000 (Docket OCC-2025-0372, RIN 1557-AF41, 195 pages), with the January 18, 2027, effective date stated in the rule. The rule implements the GENIUS Act through new 12 CFR part 15 and makes updates to 12 CFR parts 3, 6, 8, and 19. The OCC received approximately 328 comments on its March 2, 2026, proposal. The Federal Register also carries two OCC Agency Information Collection Activities notices: one for the application form, “Applications for Licensing or Registration to Issue Payment Stablecoins under the GENIUS Act” (91 FR 66939), and one for the “Reporting Forms and Instructions for Permitted Payment Stablecoin Issuers Subject to the Jurisdiction of the Office of the Comptroller of the Currency” (91 FR 66916). Comments on the forms are due by November 23. For more information, click here, here, and here.
The Office of Information and Regulatory Affairs received the CFTC’s final rule on Data Reporting Requirements for Certain Event Contracts (RIN 3038-AF73) on October 20, listed as not economically significant with no legal deadline. The listing indicates the rule is under Executive Order 12866 regulatory review and is tied to the Dodd-Frank Act. The rule, proposed in June, would require DCMs listing event contracts to report position and trading data to the Commission, and its arrival at the Office of Management and Budget (OMB) means the first final prediction-market rule of the Selig Commission could publish within weeks. In his remarks at the Agricultural Commodity Futures Conference on October 22, Selig said, “The Commission will not take a one-size-fits-all approach to 24/7 trading,” and that he has “said repeatedly that agricultural commodities may not be appropriate for continuous trading as seen in perpetual contracts.” He added that markets in agricultural commodities should not be “dragged into a 24/7 model simply because the technology exists to make it possible.” For more information, click here and here.
The comment period on the SEC’s proposed Regulation Crypto Assets (File No. S7-2026-27) closed October 20 with hundreds of letters and a clear split. New York Attorney General (AG) Letitia James asked the Commission to withdraw the proposal “in its entirety,” arguing it exceeds the SEC’s exemptive authority under Securities Act Section 28 and Exchange Act Section 36, that the new definition of “qualified purchaser” under § 18(b)(3) would exempt purchasers in initial offerings and secondary markets from state registration and qualification requirements, and that the startup exemption’s disclosure, financial reporting, and immediate-sale provisions leave retail investors exposed: “The market has demonstrated that it is ill-suited for the more relaxed, permissive regulation contemplated in the Proposal.” Massachusetts Secretary of the Commonwealth William Galvin urged the Commission not to move forward with the proposal as written, to create a registration pathway, and to remove all preemption of state securities regulation. California’s Department of Financial Protection and Innovation (DFPI) argued the proposal would undermine state oversight of fraudulent investment opportunities. For more information, click here, here, and here.
Trading and Markets staff published four FAQs on the September 17 Innovation Exemption order. A tokenized securities venue (TSV) must post its public notice on its website at least 30 calendar days before commencing operations, and in the staff’s view should do so after its operations and access standards are established and ready for production. A TSV cannot operate or trade any Tokenized national market system (NMS) Stock before the end of the 30-calendar-day public notice period. It may list in its public notice Tokenized NMS Stocks for which it has provided Issuer Notice and indicate that the objection period is pending. If it receives a timely Notice of Issuer Objection, it must amend its public notice to indicate the objection and cannot make that stock available for trading. The SEC publishes the list of persons that have given notice of intent to operate under the TSV Exemption. The FAQs give the email addresses for questions, comments, TSV Commission Notices, and Covered Firm Notices. The staff’s views carry no legal force. The Securities Industry and Financial Markets Association (SIFMA), in a comment letter published October 19, wrote that several TSVs have already published notices and may begin operating within 30 days. It said certain recommendations, including affirmative issuer consent, a longer objection period, and a universal issuer opt-out, would require the Commission to amend the order. SIFMA also welcomed statements by Atkins and Commissioner Mark Uyeda that they expect notice-and-comment rulemaking to follow. For more information, click here and here.
The two CFTC rulemakings were published in the Federal Register on October 19. The interim final rule excluding casino-style gambling products (sportsbook wagers, casino games) from the “swap” definition took effect on publication, and the proposed rule expressly including event contracts on sports, politics, cultural, and weather-related events in the definition is out for comment. Both comment periods close November 18. The Commission says the interim final rule reflects its longstanding position and that event contracts differ from gambling products in structure: event contracts trade on CFTC-registered exchanges at market-set prices and are centrally cleared, while gambling products are typically bilateral transactions with a “house” at prices the house sets. The proposal states that the two rules together are intended to clarify the boundary between the Commission’s jurisdiction over derivatives markets and state and Tribal jurisdiction over casino-style gambling. For more information, click here and here.
The Commission issued an order dated October 16 registering tZERO DCO, LLC as a derivatives clearing organization under § 5b of the Commodity Exchange Act. The order permits tZERO to clear fully collateralized futures, options on futures, and swaps, and defines a fully collateralized position by reference to Commission Regulation 39.2. The order rests on tZERO’s representations that it will comply with the derivatives clearing organization (DCO) core principles and the Commission’s regulations, perform self-regulatory functions over clearing members, and keep clearing member funds separate from its own, treating funds in any clearing member account as member property under the U.S. Bankruptcy Code. The order is subject to its terms and conditions: any new or amended Commission regulation affecting it would apply and supersede the applicable terms, and the Commission may condition, modify, suspend, terminate, or otherwise restrict it. It also states that changes to or omissions in the material facts may require a new or amended order. For more information, click here.
Patrick Witt, executive director of the President’s Council of Advisors for Digital Assets, is leaving government service and returning to the private sector. He announced his departure in a late October 14 post on X, calling his time in the administration “the privilege of a lifetime.” A White House official confirmed that Witt’s detail had expired and said crypto and the CLARITY Act “will continue to be a priority for the President.” CoinDesk reports that the White House does not currently have a publicly named crypto head and that a successor has not yet been named. It also notes the earlier departures of Bo Hines and Harry Jung. For more information, click here and here.
Robinhood’s 10-Q states that on October 2, Robinhood Derivatives, LLC (RHD) received a cease-and-desist letter from the Ohio Casino Control Commission demanding that it stop offering sports-related event contracts in Ohio. On October 26, RHD agreed to cease offering new sports-related event contracts in Ohio by November 2, 2026, in exchange for the Commission’s agreement to refrain from enforcing its state gaming laws during the pendency of RHD’s and other prediction-market operators’ appeals in the Sixth Circuit and the U.S. Supreme Court. The 10-Q describes similar arrangements elsewhere. In Michigan, RHD agreed to cease offering sports-related event contracts and to close existing ones, in exchange for the state’s agreement to refrain from enforcement while appeals are pending, and RHD’s appeal of the denial of its preliminary injunction motion remains pending in the Sixth Circuit. In Nevada, RHD agreed to cease offering new sports-related event contracts as of December 1, 2025, and to explore unwinding longer-duration open contracts, in exchange for the state’s agreement to refrain from enforcement during RHD’s appeal. The Ninth Circuit affirmed denial of RHD’s motion in August 2026, and RHD has conditionally petitioned the Supreme Court for certiorari. In Washington, the State agreed to nonenforcement of certain state laws against RHD for event contracts trading while related Ninth Circuit proceedings are pending. In Massachusetts, the district court dismissed RHD’s amended complaint as unripe, and RHD has appealed to the First Circuit. The 10-Q also states that RHD filed suits seeking injunctive relief from state gaming law enforcement in Nevada and New Jersey (August 2025), Massachusetts (September 2025), and Michigan and Washington (March 2026). It reports that in June 2026 RHD filed an unopposed motion to intervene as a plaintiff in the CFTC’s action against Connecticut, which remains pending. The 10-Q notes that Robinhood has in the past decided, and may in the future decide, to stop offering certain new event contracts because of actual or threatened state enforcement actions. For more information, click here and here.
Comments on the Department of Revenue’s draft proposed rules for the Digital Asset Tax Act, posted September 28, were due October 30. In a joint letter dated October 30, a16z, the DeFi Education Fund, and Uniswap Labs argue that the Draft Rules should follow the definition of “broker” that the act adopts from federal law (Section 6045(c)(1)(D)), should be consistent with the Illinois Digital Assets and Consumer Protection Act (DACPA), which they say excludes decentralized exchanges (DEX) and interfaces from digital asset business activity, and should apply the Act only to businesses that are actually able to collect the tax. They ask the Department to confirm that neither a DEX nor its interface is a “digital asset broker,” to define “protocol fees” and “interface fees” and state that neither makes a person a broker, to replace the private-key recordkeeping requirement in § 497.155(a)(3) with public keys, and to exclude from the tax a user’s withdrawal of its own assets to a wallet the user controls and the movement of assets between blockchains (bridging). On timing, they ask that the Draft Rules not take effect until an Illinois court has had a chance to rule on the tax and in no event before July 1, 2027, “consistent with the agreement reached between the Crypto Council for Innovation, the Blockchain Association, and the Illinois Attorney General for stay relief.” The Department’s September 28 notice states that the posted draft proposed rules have not been filed with the secretary of state or submitted to the Joint Committee on Administrative Rules (JCAR). For more information, click here and here.
The Michigan Gaming Control Board (MGCB) announced that QCX LLC, doing business as Polymarket US, has agreed to stop offering new sports-related event contracts to Michigan customers and to close any remaining open customer positions by the end of the day Eastern time on November 25. The stipulation was approved by the U.S. District Court for the Western District of Michigan. In exchange, the state has agreed not to take enforcement action against Polymarket U.S. so long as the company remains in compliance. The release says the agreement follows similar agreements recently reached with Coinbase Financial Markets, Inc. and Robinhood Derivatives, LLC. Polymarket U.S. sued state officials in federal court in March 2026. The court denied its request for a temporary restraining order in March and its motion for a preliminary injunction in June 2026, and Polymarket’s appeal of that ruling is pending before the Sixth Circuit. On September 10, the Michigan Department of Attorney General notified Polymarket U.S. that it would take legal action if the company did not cease offering sports-related event contracts to Michigan residents. MGCB Executive Director Henry Williams said: “If you want to offer sports wagering to Michigan residents, you need a Michigan license.” AG Dana Nessel said the agreements are part of efforts to ensure gaming in Michigan occurs in licensed and regulated ways. For more information, click here.
Attorney General Letitia James announced settlements with four top promoters of the NovaTech crypto pyramid scheme: Martin Zizi ($2.9 million), Frantz Ciceron ($2.05 million), James Corbett ($750,000), and Ricardo Roy Sr. ($275,861). Each will pay disgorgement for the benefit of victims and has been permanently barred from the securities, commodities, and cryptocurrency industries. The office also filed an inquest seeking $1.3 billion in damages and disgorgement from NovaTech’s founders Cynthia and Eddy Petion, who are subject to a default judgment issued in August 2025 after they fled the country. That judgment also banned the Petions from the securities, commodities, and cryptocurrency industries. NovaTech investors deposited more than $1 billion worth of cryptocurrency from August 2019 through April 2023, but less than $26 million was ever traded on NovaTech’s trading platform. The Petions falsely marketed NovaTech as a registered hedge fund broker and recruited investors in prayer groups, WhatsApp group chats, and advertisements in Haitian Creole. More than 11,000 New Yorkers invested in NovaTech and AWS Mining and lost tens of millions of dollars. The claims against the promoters included false and misleading statements in the offer and sale of securities, acting as unregistered brokers, and engaging in an illegal pyramid scheme. For more information, click here.
In a comment letter submitted October 19, four state-regulator associations (the Conference of State Bank Supervisors (CSBS)), the National Conference of State Legislatures, the National Association of State Credit Union Supervisors, and the Money Transmitter Regulators Association) said Treasury’s proposed rule to implement the GENIUS Act’s safe-harbor provision threatens parity between state and federal stablecoin issuers. They recommend that Treasury clarify that state-approved issuers may continue operating while the Stablecoin Certification Review Committee reviews the approving state’s certification and during any period provided to cure an initial denial, and provide a safe harbor for issuers in states that file conditional certifications indicating that compliant state laws will be in place by January 18, 2028. In an October 20 post, CSBS’s Yevgeny Shrago says NYDFS recommended that Treasury confirm this through a legal opinion, and that CSBS suggested a safe harbor for issuers during Committee review. He also says Treasury’s principles for reviewing state laws, which the GENIUS Act required to be finalized by July 18, 2026, remained incomplete as of October 19. CSBS says Treasury’s proposal offers federally approved applicants a safe harbor while their applications are pending, with no corresponding protection for state-approved issuers. For more information, click here and here.
On Friday, October 16, Crypto.com’s prediction market exchange and Novig sued Missouri officials in federal court asking judges to bar the state from enforcing its sports wagering laws against their event contracts. The North American Derivatives Exchange (Nadex), the CFTC-registered exchange behind Crypto.com’s OG prediction markets platform, filed its lawsuit in the Western District of Missouri against AG Catherine Hanaway. The suit argues that the Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over its contracts and preempts state gambling law, and it seeks a declaratory judgment and a permanent injunction. The complaint says Hanaway “incorrectly addressed” her letter to Foris DAX, Inc. instead of the exchange, and that obtaining a license is not an option because Missouri’s constitution allows only two direct mobile sports wagering licenses and both have been awarded. Novig filed its lawsuit in the Eastern District through its exchange operator, Ludlow Exchange LLC, and asks for a preliminary and permanent injunction. It argues the court should preserve the status quo while the Eighth Circuit, which covers Missouri, hears an appeal on the same question in a case from Iowa. Hanaway sent letters on September 16 and 17 giving each of six operators 30 days to stop offering sports event contracts to Missourians or obtain a license from the Missouri Gaming Commission and pay the state’s 10% wagering tax. The letter to Crypto.com also said the platform lets users as young as 18 trade, while Missouri’s minimum age for sports betting is 21. For more information, click here.
A week after the Delaware Supreme Court affirmed the Court of Chancery order requiring Empery Digital to seat ATG Capital’s nominees on the ballot, the company filed a Form 8-K with preliminary results of its October 14 annual meeting. Per the independent inspector of elections, stockholders elected eight nominees to the nine-member board. The press release names nine individuals, thanks departing director Orn Olason, and welcomes E. Taylor Robertson and Aaron T. Morris as new directors, which reads as the dissident nominees winning seats. The company says certified results on all proposals will follow in a later Form 8-K. The outcome closes out the first contested election at a digital asset treasury company to reach the Delaware Supreme Court. For more information, click here and here.
Three themes run through this issue. First, federal agencies are building out the rulebook on their own authority. The OCC finalized its GENIUS Act issuer rule, the CFTC published its event-contract swap rules and registered tZERO as a derivatives clearing organization, and the SEC issued Innovation Exemption FAQs and put tokenization into its fiscal 2027 examination priorities. The DTC’s tokenization service also went live.
Second, state officials are pushing back. State regulators and AGs urged the SEC to withdraw or reconsider Regulation Crypto Assets, and four state-regulator associations asked Treasury to protect state-approved stablecoin issuers during certification review.
Third, prediction markets remain a state-by-state contest. Michigan reported agreements with Polymarket, Robinhood, and Coinbase, Robinhood agreed to stop new sports event contracts in Ohio, and Crypto.com’s exchange and Novig sued Missouri’s AG.
We’ll continue monitoring these developments and publish our next issue on November 19. As always, if you have questions about how any of these developments affect your business, please reach out to a member of our Digital Assets + Blockchain team.
The Digital Assets + Blockchain Newsletter is a newsletter from Troutman Pepper Locke’s Consumer Financial Services practice.
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