Launchy Regulatory Roundup #81 - Federal, State Target Prediction Markets Insiders

Court Rejects Crypto Dev Safe Harbor

Marco Manoppo & Muhammad Reynaldi Ariananda Arkiang
March 29, 2026

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In Today's Edition:

Headline: Federal, State Target Prediction Markets Insiders 👀
Global Legal Roundup
Case Study: Court Rejects Crypto Dev Safe Harbor 🔎

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HEADLINE

Federal, State Target Prediction Markets Insiders

Source: The Block

State of play: Bipartisan lawmakers and state governments are closing in on prediction market insider trading, introducing legislation and executive orders to bar officials from profiting on nonpublic information.

The PREDICT Act bars Congress members, the president, federal employees, and their families from trading contracts tied to political or policy outcomes.
Violators face a civil fine of 10% of the transaction value and full forfeiture of profits to the US Treasury.
California Governor Newsom issued an executive order barring state appointees from using confidential information to bet on prediction markets.
Onchain analysis flagged accounts with over 90% success rates on military event bets, netting nearly $1M in profits with no confirmed link to officials.
Kalshi and Polymarket have both tightened restrictions and surveillance tools, as the CFTC moves to establish clearer federal rules for the sector.

What’s Next: The PREDICT Act heads to a Congressional vote as the CFTC pushes toward federal rules, with more states likely to follow California's lead.

Why it Matters: With Kalshi and Polymarket surpassing $20B in combined monthly volume, unchecked insider activity turns prediction markets from forecasting tools into extraction mechanisms for officials with nonpublic information.

Our Take: Enforcement is the real question. Fines only work if violations are detected, and 90%-plus success rates with no confirmed official link signals a gap between what's happening and what's provable.

GLOBAL LEGAL ROUNDUP

America:

🇺🇲 Sen. Warren targets Bitmain-Trump family ties.
🇺🇲 White House clears path for crypto in 401(k) market.
🇺🇲 Coinbase declines to support updated Clarity Act draft.
🇺🇲 Crypto frustration boils over as stablecoin fight stalls bill.
🇺🇲 Stand With Crypto launches voter hub, endorses candidates.
🇺🇲 David Sacks leaves post to go to broader White House tech role.
🇺🇲 Nvidia faces certified class action over crypto revenue disclosures.
🇺🇸 CFTC forms new task force to shape crypto, AI and prediction markets.
🇨🇦 Canadaproposes crypto political donation ban.
🇧🇷 Brazil passes law allowing seized crypto to be used for public security.

Europe:

🇬🇧 UK’s Starmer backs pause on crypto political donations.

APAC:

🇦🇺 Binance fined $6.9M over compliance and onboarding failures.
🇯🇵 Japan’s financial watchdog flags KuCoin for OTC derivatives transactions.

CASE STUDY

Court Rejects Crypto Dev Safe Harbor

IMG: Michael Lewellen

State of play: A Texas court dismissed crypto developer Michael Lewellen's lawsuit seeking preemptive legal protection for his non-custodial software, leaving a significant regulatory gap unresolved for builders in the space.

Lewellen sued to block fed money transmitter laws on his non-custodial crowdfunding software, arguing compliance was impossible due to its privacy features.
Chief Judge O'Connor dismissed the case, ruling Lewellen failed to show a substantial prosecution threat under the DOJ's memo on unwitting violations.
The dismissal was without prejudice, leaving room to refile if enforcement threats grow.
Coin Center argued the DOJ memo offers no real protection, citing active Tornado Cash and Samourai Wallet prosecutions.
Lewellen is pushing Congress to pass the Blockchain Regulatory Certainty Act to exempt non-custodial developers from money transmitter rules.

Our Take: The dismissal exposes a core problem: a non-binding DOJ memo is being treated as a substitute for actual legal clarity. Non-custodial developers remain in a gray zone where the rules are unwritten and the consequences are criminal.

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