US CFTC Enforcement Division Issues Prediction Markets Advisory
On 25 February 2026, the US CFTC’s Division of Enforcement issued an Advisory on Enforcement Authority over Event Contracts following the public release of two enforcement cases involving misuse of non public information and fraud on KalshiEX, a designated contract market.
- KalshiEX identified and penalised a political candidate trading on their own candidacy. The designated contract market also sanctioned a YouTube editor trading on advance content knowledge. KalshiEX subsequently reported both incidents to the US CFTC. The agency advisory affirms that the CFTC retains absolute authority to police illegal trading practices. Prohibited acts include pre-arranged non-competitive trading, wash sales, and the misappropriation of confidential information. These actions violate Section 6(c)(1) of the United States Commodity and Exchange Act and Regulation 180.1.
- The advisory establishes an enforcement baseline for prediction market integrity. It reaffirms designated contract markets as self-regulatory organisations. These entities must independently maintain audit trails, conduct surveillance, and enforce internal rules.
- The US CFTC will directly investigate and prosecute violations where federal action is warranted.
To read this news in detail click here
US CFTC Reaffirms Exclusive Jurisdiction Over Prediction Markets in Ninth Circuit Filing
On 17 February 2026, the US CFTC filed an amicus curiae brief in the U.S. Court of Appeals for the Ninth Circuit in North American Derivatives Exchange, Inc. v. State of Nevada. The brief confirmed the US CFTC’s exclusive jurisdiction over U.S. commodity derivatives markets, including event contract markets commonly referred to as prediction markets.
- The intervention advances three legal arguments. First, event contracts constitute swaps under Section 1a(47) of the United States Commodity and Exchange Act (CEA). Second, the Act field-preempts state gambling laws regarding designated contract market listings. Third, state gambling laws face independent conflict preemption.
- The CFTC has filed only eight amicus briefs since 2000. Chairman Michael S. Selig affirmed event contracts enable risk hedging and portfolio management. These products qualify as commodity derivatives within the CFTC’s regulatory remit.
- The filing positions federal regulatory authority against state gaming enforcement. The CFTC aims to establish federal preemption over state-level legal challenges. Multiple appellate courts face this jurisdictional question. The Third, Fourth, and Ninth Circuits are expected to issue rulings in the coming months. This establishes a definitive federal posture defending exclusive jurisdiction over prediction markets.
To read this news in detail click here
US DOJ Sentences Paxful Holdings Inc. to USD 4 Million Criminal Penalty for Travel Act and Bank Secrecy Act Violations
On 11 February 2026, the US DOJ announced that Paxful Holdings Inc., an online peer to peer virtual currency trading platform, was sentenced to pay a criminal penalty of USD 4 million. The sentence followed Paxful’s guilty plea to conspiracies to promote illegal activities, violate the United States Bank Secrecy Act (BSA) and knowingly transmit funds derived from criminal offences. Paxful pleaded guilty in December 2025 in the United States District Court for the Eastern District of California. Court documents established that the appropriate criminal penalty was USD 112,500,000. The US DOJ determined that Paxful lacked the ability to pay more than USD 4 million. Paxful received a 25 per cent reduction from the bottom of the applicable sentencing guidelines fine range. This credit reflected cooperation with the investigation and remedial measures undertaken.
- From 2015 to 2019, Paxful operated without know your customer (KYC) requirements. The company presented fabricated anti-money laundering (AML) policies to third parties. Paxful failed to file suspicious activity reports until November 2019. During this operational period, the platform facilitated 26.7 million trades valued at USD 3 billion.
- The platform knowingly transferred virtual currency for illicit advertising networks, including Backpage. Paxful routed nearly USD 17 million in Bitcoin to illicit activities sites. The platform earned at least USD 2.7 million from this specific arrangement. Founders internally termed this revenue stream the “Backpage Effect.” In July 2024, co-founder Artur Schaback pleaded guilty to failing to maintain an effective AML programme. FinCEN concurrently assessed a USD 3.5 million civil money penalty against Schaback.
- This enforcement action establishes direct criminal liability for peer-to-peer cryptocurrency exchanges. Marketing non-compliance as a platform feature constitutes grounds for conviction. Virtual asset service providers may consider to maintain compliance with Bank Secrecy Act, FinCEN registration, and transaction monitoring protocols. Platforms face direct criminal liability for profits derived from third-party illicit transactions.
To read this news in detail click here
US DOJ Sentences Fugitive Daren Li to 20 Years for USD 73 Million Cryptocurrency Investment Fraud
On 9 February 2026, the US DOJ Criminal Division announced the sentencing of Daren Li, aged 42, to 20 years in federal prison. The court also imposed three years of supervised release. Li had pleaded guilty on 12 November 2024 in the Central District of California to conspiring to launder funds obtained from victims through cryptocurrency scams and related fraud.
- The operation originated from scam centres in Cambodia. Co-conspirators contacted targets via social media and dating platforms. They established trust through fabricated personal or professional relationships. Victims subsequently deposited funds into spoofed cryptocurrency trading exchanges. The syndicate also utilised technical support scams. They induced wire and cryptocurrency transfers to resolve fabricated computer issues.
- Li controlled bank accounts receiving USD 73.6 million in victim funds. The group routed USD 59.8 million through US shell companies. These funds were converted into virtual assets to obscure origins. Eight co-conspirators have pleaded guilty to date. Li is the first sentenced defendant directly receiving victim funds. The United States Secret Service led the investigation alongside multiple international agencies.
- This sentencing establishes a legal deterrent against pig butchering operations. These schemes utilise social engineering and spoofed digital platforms. Virtual asset service providers must enforce strict transaction monitoring protocols. Institutions should systematically flag high-volume deposits routed through shell entities.
To read this news in detail click here
Director of Division of Investment Management, United States Securities and Exchange Commission Intriguing Speech on “Artificial Intelligence and the Future of Investment Management”
On 3 February 2026, the Brian Daly, Director, Division of Investment Management, United States Securities and Exchange Commission addressed a speech titled Artificial Intelligence and the Future of Investment Management at the Investment Company Institute Winter Board Meeting. The Division of Investment Management acknowledged uneven AI adoption across advisers and funds. Liability exposure was identified as a primary concern. The US SEC invited direct engagement from market participants deploying AI systems. It also raised the possibility of using large language models to modernise investor disclosures.
- The SEC acknowledged uneven AI adoption across advisers and funds. The Division identified liability exposure as the primary impediment to integration. The regulator invited direct engagement from market participants deploying AI systems.
- The SEC indicated reluctance to initiate prescriptive AI rulemaking. The Division compared current AI challenges to historical regulatory shifts involving algorithmic trading and electronic delivery. The regulator encourages industry dialogue, pilot programmes, and no-action engagement to navigate existing rules drafted in a pre-digital environment.
- The Division of Investment Management is evaluating whether large language models can replace static PDF prospectuses. Officials questioned whether AI disclosure tools constitute marketing or necessitate investment adviser registration. It was further noted that AI integration does not dilute fiduciary duties under the United States Investment Advisers Act. Firms should consider to maintain strict supervisory controls, audit trails, and model governance to ensure compliance with the Books and Records Rule.
To read this news in detail click here
US DOJ Completes USD 400 Million Forfeiture of Assets Tied to Helix Darknet Bitcoin Mixer
On 29 January 2026, the US DOJ announced the completion of a forfeiture exceeding USD 400 million in seized cryptocurrencies, real estate and monetary assets. These assets were tied to the operation of Helix, a darknet cryptocurrency mixing service. Judge Beryl A. Howell of the United States District Court for the District of Columbia entered the final order of forfeiture on 21 January 2026. The order declared the assets forfeited to the United States government.
- Helix operated between 2014 and 2017 as a Bitcoin tumbling service. It blended user cryptocurrency to obscure transaction sources and destinations. The platform processed 354,468 Bitcoin, valued at USD 300 million during operation.
- Helix integrated its API directly with major darknet marketplaces to facilitate direct withdrawals. Larry Dean Harmon operated the mixer and the Grams darknet search engine. Harmon pleaded guilty to money laundering conspiracy in August 2021. He received a 36-month prison sentence in November 2024. The IRS Criminal Investigation Cyber Crimes Unit and the FBI investigated the case.
- This action constitutes one of the largest global asset recoveries connected to a cryptocurrency mixer. It establishes regulatory precedent regarding privacy-enhancing crypto tools lacking anti-money laundering controls. Platforms obscuring transaction trails face criminal liability irrespective of the operational timeline. Blockchain forensics can trace and recover crypto assets years after underlying offences.
To read this news in detail click here
US DOJ Sentences Chinese National Jingliang Su to 46 Months for USD 36.9 Million Digital Asset Laundering Conspiracy
On 27 January 2026, the US DOJ announced the sentencing of Chinese national Jingliang Su, aged 45, to 46 months in federal prison. The United States District Judge R. Gary Klausner of the Central District of California also ordered Su to pay USD 26,867,242.44 in restitution.
Su pleaded guilty in June 2025 to one count of conspiracy to operate an illegal money transmitting business. He was part of an international criminal network that targeted 174 American victims through a digital asset investment conspiracy. The operation was similarly carried out from scam centres in Cambodia.
- Overseas co-conspirators contacted victims via unsolicited communications and online dating services. They directed targets to spoofed cryptocurrency trading platforms. Victim funds were laundered through US shell companies and digital asset wallets.
- Su joined Axis Digital to execute crypto conversions and fund transfers. Su has remained in federal custody since December 2024. Co-conspirators Jose Somarriba and ShengSheng He received prison sentences of 36 months and 51 months, respectively. Eight co-conspirators have pleaded guilty. The USSS Global Investigative Operations Center led the investigation. Multiple international and federal agencies provided operational assistance.
- This case establishes stablecoin conversion and shell entities as primary laundering conduits. Cryptocurrency exchanges must enforce strict know your customer (KYC) protocols for corporate accounts. Institutions should mandate enhanced due diligence (EDD) for opaque beneficial ownership structures. The Financial Action Task Force 2025 report links USD 51 billion of 2024 illicit on-chain activity to fraud schemes.
To read this news in detail click here
US CFTC Chairman Selig Announces Senior Staff Appointments
Between 20 January and 2 March 2026, US CFTC appointed senior staff members. On 20 January 2026, the first round of staff appointments was announced, which are as follows:
-
Michael Passalacqua joins the CFTC as senior advisor to Chairman Selig.
- Prior to joining the Commission, Passalacqua practiced law in the New York office of Simpson Thacher & Bartlett LLP,
- he focused on financial regulatory matters involving crypto assets and blockchain technologies.
- On 26 January 2026, Alex Titus was named Chief Advisor to the Chairman.
- Titus joined the US CFTC from the White House Council of Economic Advisers, where he served as Chief of Staff under Chairman Stephen Miran.
-
On 23 February 2026, four additional appointments were announced. These included:
- Brooke Nethercott as Director of the Office of Public Affairs,
- Emma Johnston as Senior Agriculture Advisor,
- Meghan Tente as Senior Advisor and Elizabeth Mastrogiacomo as Senior Advisor.
-
On 2 March 2026, Chairman Selig announced three further senior appointments:
- David I. Miller as Director of Enforcement,
- Mel Gunewardena as Director of the Office of International Affairs and Senior Markets Advisor, and
- Alan Brubaker as Director of the Office of Legislative and Intergovernmental Affairs.
To read this news in detail click here
