Federal Banking Agencies Strip Reputation Risk From Guidance, CFTC Vacates Prior Digital Asset Consent Order and Moves Forward on Prediction Markets Litigation

The Federal Reserve, FDIC and OCC jointly reissued interagency guidance documents to further remove references to reputation risk, part of a broader supervisory effort to address debanking that has featured prominently in the digital asset industry’s access to banking services. On Capitol Hill, the Senate Banking Committee reported the CLARITY Act and members of Congress urged the Labor Department to rescind a proposed rule that would ease the inclusion of digital assets and other alternative investments in 401(k) plans. The SEC separately published a draft strategic plan that identifies digital asset rulemaking as a regulatory priority. An SEC Commissioner also noted the Crypto Task Force’s interest in giving transfer agents flexibility to record securities held at blockchain addresses.

Prediction markets litigation remained active. The CFTC moved to block state gambling enforcement against a registered contract market in Rhode Island, the latest in a series of jurisdictional suits, and charged a technology company engineer with insider trading in event contracts alongside a parallel criminal action. Wisconsin moved to dismiss the CFTC’s suit filed in April, arguing the state’s enforcement actions would not impair the Commission’s regulatory efforts.

The CFTC asked a federal court to vacate a 2025 consent order with a digital asset company, stating that the underlying complaint should not have been filed and would not be brought under the Commission’s current enforcement standards. The action reflects the agency’s continuing reassessment of digital asset enforcement matters inherited from prior Administrations. CFTC staff confirmed that certain crypto asset perpetual contracts may be treated as foreign futures and issued a no-action position addressing the posting of customer digital commodities and payment stablecoins as margin with a foreign broker affiliate. The guidance follows the Commission’s approval of a bitcoin perpetual futures contract.

Regulatory Updates

Federal Banking Agencies Remove Reputation Risk References From Interagency Guidance

• On June 2, the Federal Reserve Board, the FDIC and the OCC jointly reissued 15 interagency guidance documents removing references to so-called reputation risk, describing the change as complementing earlier actions that formally ended the use of reputation risk in supervision. The reissued documents remove references to reputation risk in a wide range of topics, including requirements for customer identification programs, cybersecurity and subprime lending.
• The agencies stated that they removed references to reputation risk to avoid its possible misuse as pressure on banks to restrict access to financial services based on customers’ protected beliefs, speech or lawful business activities. The action follows an April 2026 final rule by the OCC and FDIC codifying the prohibition on reputation-risk-based supervision and a February 2026 Federal Reserve proposal to the same effect, and it forms part of a broader supervisory effort to address debanking, a concern that has featured prominently in discussion around the digital asset industry’s access to banking services.

CFTC Joins Crypto Trust Company in Motion to Vacate Prior Consent Order

• On May 27, the CFTC announced that it has joined a digital asset company in a motion for relief from judgment, a matter originally filed in the U.S. District Court for the Southern District of New York in June 2022 and resolved by consent order in January 2025. The parties are jointly asking the court to vacate the consent order’s prospective provisions, including injunctive relief, while leaving in place provisions already satisfied, such as the civil monetary penalty.
• The CFTC stated that, after a comprehensive review of the investigation, the evidence and the charging decision, and in light of changes in federal digital asset policy, the Commission concluded the complaint would not have been brought under current enforcement standards.

CFTC Staff Categorizes Certain Crypto Perpetuals as Foreign Futures

• On May 29, the CFTC’s Market Participants Division issued an interpretation and a no-action position in response to a request from a registered futures commission merchant, concerning its plan to offer certain digital commodity derivatives listed on its affiliated foreign board of trade, which is a Virtual Asset Service Provider (VASP) regulated by the Dubai Virtual Assets Regulatory Authority (VARA).
• In CFTC Staff Letter No. 26-17, staff confirmed that the perpetual contracts described in the letter may be categorized as foreign futures under Commission Regulation 30.1.
• Subject to specified conditions, the division stated that it would not recommend enforcement against the futures commission merchant for posting customer-owned digital commodities and payment stablecoins with its foreign broker affiliate as margin for foreign futures and foreign options positions, including where the foreign broker has obtained a right of re-use over the customer assets.
• Separately, the CFTC permitted the listing of a perpetual contract that references the spot price of bitcoin and also issued a Policy Statement Concerning the Listings of Perpetual Contracts. The Policy Statement states that, “[g]iven the unique characteristics of perpetual contracts, which tend to vary based on the underlying asset they reference, the Commission is of the view that the case-by-case review process detailed in Commission Regulation 40.3 is appropriate for the listing of perpetual contracts that reference asset classes that are not [similar to bitcoin].”

CFTC Sues to Block State Prediction Markets Enforcement in Rhode Island

• On May 28, the CFTC moved to intervene in litigation in the U.S. District Court for the District of Rhode Island to halt the state’s application of state gambling laws against CFTC-registered designated contract markets. A registered contract market had filed suit late the prior week after being threatened with state enforcement, and the state filed a parallel complaint seeking civil penalties.
• The CFTC argues that the Commodity Exchange Act vests it with exclusive jurisdiction over event contracts and preempts state laws purporting to regulate designated contract markets. The Rhode Island action is the latest in a series of jurisdictional suits that includes filings involving Arizona, Connecticut, Illinois, New York and Minnesota.

CFTC Charges Technology Company Engineer With Insider Trading in Event Contracts

• On May 27, the CFTC filed a complaint in the U.S. District Court for the Southern District of New York against a software engineer at a major technology company, alleging that he used nonpublic information concerning the company’s annual public list of its most-searched terms to trade related event contracts on a prediction markets platform, generating approximately $1.2 million in profits.

CFTC Rescinds Policy Regarding Denials of Settlements in Enforcement Actions

• On June 3, the CFTC announced the rescission of its decades old policy that the CFTC would not accept settlement offers where the defendant continues to deny the allegations in the complaint or administrative order. This brings the CFTC in line with recent SEC policy changes.

Wisconsin Moves to Dismiss CFTC Prediction Markets Suit

• On May 29, Wisconsin moved to dismiss the suit the CFTC filed in April challenging the state’s application of its gambling laws to CFTC-registered prediction markets platforms. The state argued that the Commission lacks standing because it has identified no concrete injury to its own operations and that its asserted sovereign injury is too abstract, contending that sports-related event contracts are already unlawful under federal law and that the state’s enforcement actions would not impair the Commission’s regulatory efforts.

SEC Commissioner Addresses Privacy Technologies and Transfer Agent Flexibility for Tokenized Securities

• On May 27, SEC Commissioner Hester M. Peirce delivered remarks on privacy-enhancing technologies in financial services regulation. Commissioner Peirce observed that current rules require transfer agents to record the name and physical address of securityholders, and she suggested that allowing transfer agents the flexibility to record that a security resides on a blockchain at a public address could reduce the personal information collected and stored. She invited developers of technologies that can satisfy know-your-customer and anti-money laundering objectives while limiting collection of personally identifiable information to engage with the Crypto Task Force.

CFTC Streamlines Product Self-Certification Filing Process

• On June 1, the CFTC announced enhancements to its electronic filing system for product self-certifications, allowing exchanges to submit a single set of certification documents covering multiple comparable contracts in one consolidated submission. The Commission described the change as reducing duplication in light of the rise in new and innovative products, a process that registered exchanges use to list digital asset derivatives.

Congressional Updates

Senate Banking Committee Reports CLARITY Act

• On June 1, the Senate Committee on Banking, Housing and Urban Affairs acted to formally report H.R. 3633, the Digital Asset Market Clarity Act of 2025, with an amendment in the nature of a substitute offered by Chairman Tim Scott, placing the bill on the Senate Legislative Calendar under General Orders.
• Banking industry representatives continue to express dissatisfaction with the stablecoin yield rules amended in the legislation, vowing to fight the bill as it advances in Congress.

Congress Members Urge Labor Department to Rescind 401(k) Alternative Assets Rule

• On June 1, Senate Banking Committee Ranking Member Elizabeth Warren (D-MA), Senate Health, Education, Labor and Pensions Committee Ranking Member Bernie Sanders (I-VT) and House Education and Workforce Committee Ranking Member Bobby Scott (D-VA) urged the Department of Labor to rescind a proposed rule that would make it easier for 401(k) plans to offer alternative investments, including digital assets, private equity, private credit and real estate. The Labor Department proposed the rule, titled Fiduciary Duties in Selecting Designated Investment Alternatives, in March 2026 following an executive order directing the agency to facilitate access to alternative assets in retirement plans.
• The lawmakers argued that the proposal’s safe harbor would weaken fiduciary standards under the Employee Retirement Income Security Act by presuming prudence rather than requiring fiduciaries to demonstrate it, and that it would function as an end-run around the SEC’s accredited-investor framework governing retail access to private markets. The letter, submitted as the rule’s comment period closed, cited numerous concerns tied to expanding access to alternative investments in retirement plans, including the lack of liquidity preventing timely access to retirement funds, increased risk from exposing unsophisticated investors to higher volatility assets, abuse of discretion by private equity managers by including overvalued assets into plan investment vehicles, and higher fees and expenses. The letter also raised conflict-of-interest concerns regarding administration officials’ ties to the digital asset and private investment industries.

Additional Updates

New York DFS and European Banking Authority Sign Stablecoin Supervision MOU

• On June 2, the New York State Department of Financial Services and the European Banking Authority signed a memorandum of understanding to facilitate the exchange of supervisory and confidential information related to stablecoins. The nonbinding agreement establishes a framework for information sharing and supervisory coordination covering stablecoin activity in New York and the European Union, including entities the European Banking Authority directly supervises under the Markets in Crypto-Assets Regulation, and provides for mutual assistance and coordination in crisis situations. The scope of the MOU is limited to the stablecoin-related activities of supervised entities. The agreement reflects growing cross-border coordination as formal U.S. and EU stablecoin frameworks take shape.