Senate Banking Advances Market Structure, Senate Confirms Warsh as Fed Chair, NCUA Proposes Stablecoin Issuer Standards, Prediction Markets Litigation Continues

The Digital Asset Market Clarity Act of 2025 advanced out of the Senate Banking Committee by a bipartisan vote of 15-9. The legislation will need to be combined and reconciled with the Senate Agriculture Committee’s portion of the market structure legislation before it is considered on the Senate floor. On stablecoin yield, the text prohibits a “covered party” from paying “any form of interest or yield” to a stablecoin holder “solely in connection with the holding” of payment stablecoins. Sec. 404(c)(1). The text allows for activity-based or transaction-based rewards and provides the SEC, CFTC and Treasury Department with rulemaking authority to further define the scope.

The National Credit Union Administration (NCUA) issued a Notice of Proposed Rulemaking outlining the operational and risk management standards for an NCUA-licensed permitted payment stablecoin issuer, as required by the GENIUS Act. The comment period closes on July 17.

The CFTC filed an amicus brief in the U.S. Court of Appeals for the 6th Circuit asserting its exclusive jurisdiction over prediction markets.

Congressional Updates

Market Structure Legislation Advances Out of Senate Banking Committee

• On May 14, the Digital Asset Market Clarity Act of 2025, with amendments, advanced out of the Senate Banking Committee by a bipartisan vote of 15-9. The legislation will need to be combined and reconciled with the Senate Agriculture Committee’s portion of the market structure legislation before it is considered on the Senate floor.
• On May 12, Senate Banking Committee Chairman Tim Scott (R-SC), Subcommittee on Digital Assets Chair Cynthia Lummis (R-WY) and Sen. Thom Tillis (R-NC) released the updated draft and summary of the “Digital Asset Market Clarity Act” as an amendment in the nature of a substitute to the House-passed market structure legislation ahead of the Committee markup on May 14.
• On stablecoin yield, the text prohibits a “covered party” from paying “any form of interest or yield” to a stablecoin holder “solely in connection with the holding” of stablecoins. Sec. 404(c)(1). The text allows for activity-based or transaction-based rewards and provides the SEC, CFTC and Treasury Department with rulemaking authority to define the scope. Stablecoin yield has been a point of contention between the crypto and banking industries.
  • Prohibition on Stablecoin Yield. “No covered party shall, directly or indirectly, pay any form of interest or yield (whether in cash, tokens, or other consideration) to a restricted recipient — (A) solely in connection with the holding of such restricted recipient’s payment stablecoins; or (B) on a payment stablecoin balance in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.” Sec. 404(c)(1).
  • Activity-Based or Transaction-Based Rewards Permitted. “The prohibition under paragraph (1) shall not apply with respect to rewards or incentives based on bona fide activities or bona fide transactions that are not economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit pursuant to the regulations promulgated under paragraph (3).” Sec. 404(c)(2).
  • Rulemaking on Yield. No later than one year after the date of enactment of the Act, the SEC, CFTC and Treasury Department shall jointly issue regulations through notice and comment rulemaking to clarify the circumstances in which the prohibition and permissible rewards and incentives shall apply. Such rulemaking should include a nonexhaustive list of permissible activity-based or transaction-based rewards or incentives.
• Ranking Member of the Digital Assets Subcommittee Ruben Gallego (D-AZ) and Sen. Angela Alsobrooks (D-MD) voted with the Republicans to advance the legislation out of the Committee after reaching agreement on several bipartisan amendments led by Sen. Lummis that were passed during the markup. Both Sens. Gallego and Alsobrooks said their support for the legislation on the Senate floor is contingent to further changes being made to the legislation. Sens. Mark Warner (D-VA), Catherine Cortez Masto (D-NV) and Raphael Warnock (D-GA) said they would continue to participate in the negotiations in hopes of supporting the legislation on the Senate Floor.
• Several outstanding concerns about the bill include the treatment of DeFi, anti-money laundering provisions and ethics-related issues related to elected officials.

Senate Confirms Warsh as Fed Chair and Fed Designates Powell Chair Pro Tempore During Transition

• On May 12, the Senate voted to confirm Kevin Warsh to the Board of Governors, and the next day confirmed Warsh as the next chair of the Federal Reserve.
• On May 15 (the date Jerome Powell’s term as chair expired), the Federal Reserve Board issued a press release announcing Powell as chair pro tempore until Warsh is sworn in as the new chair.
• Stephan Miran’s resignation from the Board is structured to take effect when or shortly before his successor on the Board is sworn in.

Regulatory Updates

NCUA Announces Proposed Rule for Permitted Payment Stablecoin Issuer Standards

• On May 15, the National Credit Union Administration (NCUA) announced a Notice of Proposed Rule Making outlining the operational and risk management standards for an NCUA-licensed permitted payment stablecoin issuer, as outlined in the GENIUS Act.
• The proposed rule is currently available for review in the Federal Register, where stakeholders will be able to submit comments. The comment period on the proposed rule will close on July 17.

FinCEN Issues Alert on the Use of Financial Facilitators and Digital Asset Infrastructure

• On May 11, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network issued an alert to assist financial institutions in identifying actors suspected of funding and facilitating procurement networks supporting the Islamic Revolutionary Guard Corps and mitigating those risks through the filing of suspicious activity reports.

Additional Updates

Prediction Markets Update

• On May 15, the American Gaming Association and the Indian Gaming Association sent a letter to members of the Senate and House, urging them to include explicit language in the digital asset market structure legislation to ensure that “sports betting and casino-style gambling cannot be conducted nationwide through federally registered platforms under the guise of ‘event contracts.’”
• On May 12, CFTC Chairman Michael Selig gave an interview to Axios, in which he framed prediction markets and sportsbooks as fundamentally distinct categories.
• On May 12, the CFTC filed an amicus brief in the U.S. Court of Appeals for the 6th Circuit asserting the CFTC’s exclusive jurisdiction over prediction markets. The amicus brief outlines how the current regulatory structure preempts state laws as applied to CFTC-regulated markets.