V Lee and Jesse Brooks host Ryan Miller, a partner at Morrison and Forrester's financial services group in New York. Miller previously worked at the CFTC during Dodd-Frank implementation and served as counsel to then-Chairman Gary Gensler, later becoming general counsel at FTXUS before joining MoFo.

The conversation covers the CFTC's aggressive regulatory agenda under new Chairman Michael Selig, including joint guidance with the SEC on digital asset classification and upcoming rulemaking on prediction markets. They examine the ongoing debate between permissioned networks like Canton versus public blockchains for institutional adoption.

The discussion concludes with analysis of recent court verdicts against Meta and YouTube that could impact crypto platforms, where courts ruled that product design itself can constitute harm, potentially affecting everything from prediction markets to DeFi protocols.

CFTC's New Regulatory Approach Under Chairman Selig

Chairman Michael Selig is running the CFTC alone with no other commissioners nominated, pursuing an aggressive agenda focused on digital assets and prediction markets with intentional shift from 'regulation by enforcement to regulation by regulation' - Ryan

Joint CFTC-SEC interpretive guidance released March 17th provides first tangible joint agency pronouncement on crypto token taxonomy, clearly placing most major digital assets on the commodities side of regulatory categorization

CFTC announced innovation task force March 24th led by Michael Pasalaqua to examine digital assets, AI, and prediction markets, working with private industry to determine necessary rulemaking around blockchains and DeFi

Agency faces staffing constraints as it's funded by Congress rather than fees, unlike the SEC which has multiples more staff despite derivatives markets being as large as equities markets by notional value

Prediction Markets Regulation and Insider Trading Concerns

NFL's position on prediction markets could determine whether these products ultimately land in traditional gaming or federally regulated CFTC markets, as 'the NFL is the most powerful organization in the United States' - Ryan

CFTC already has enforcement tools under Dodd-Frank prohibition on misappropriating government information for trading derivatives, covering government employees trading on confidential information

Corporate employees should update insider trading policies to cover prediction markets participation, as existing anti-fraud laws and confidentiality agreements already create liability for trading on employer information

Institutional prediction markets show promise beyond sports betting for economic hedging and expressing views on developments unrelated to capital structure, like 'how many cars is Tesla going to sell this year' - Ryan

Canton vs Public Blockchain Architecture Debate

Canton's permissioned network requires issuers to retain full admin control, making enforcement dependent on operator good faith rather than independently verifiable open source code like public blockchains

Major institutions including Goldman Sachs and DTCC are building on Canton rather than permissionless blockchains due to concerns about hacks, cyber issues, and code exploits on public networks

Stablecoins demonstrate successful hybrid model being permissioned at mint/redeem and sanctions compliance level while remaining permissionless on secondary markets

Cross-chain interoperability between Canton and public blockchains creates trust and verifiability challenges when public side cannot verify state on permissioned networks

Product Design Liability in Crypto Platforms

Meta and YouTube verdict establishes that product design itself can be the source of harm, with courts examining whether products are 'addictive or harmful by design' including gamified experiences and reduced friction

Prediction markets wrapping election and war betting in 'frictionless execution with trending markets, real-time ads, notifications' could face liability as 'engineered wagering' rather than neutral infrastructure - Jesse

Pump.fun and similar platforms collapse 'token issuance, social virality, and retail speculation into one loop' creating market structures that reward attention like social media platforms - Jesse

Financial services historically address addictive product concerns through disclosure requirements and suitability restrictions rather than design limitations, but crypto platforms may need to consider user suitability in design process