CoinDesk

A panel of judges grilled attorneys for the U.S. Commodity Futures Trading Commission and prediction-betting platform Kalshi over the company's efforts to launch political prediction markets in the U.S., without indicating whether they'd allow Kalshi to offer these products while reviewing a lower court's ruling on the products.

CFTC General Counsel Rob Schwartz and Jones Day Partner Yaakov Roth took turns explaining why an appeals court should or should not block Kalshi from listing these events contracts.

The Thursday hearing came days after a federal judge ruled that the CFTC could not block Kalshi from listing political prediction markets, letting the company list contracts predicting how control of the House and Senate might play out. But it only lasted for a few hours, since the CFTC quickly filed for an emergency stay, which the appeals court granted on a temporary basis.

During the 2.5-hour hearing, the judges did not seem especially impressed by either party, saying various arguments or explanations did not make sense and drilling into specific terms of the Commodity Exchange Act and what they mean. The judges did not get to asking what an event contract actually is until more than two hours into the hearing.

The CFTC's Schwartz called D.C. District Court Judge Jia Cobb's Sept. 12 ruling "seriously flawed," and said it could allow Kalshi – and other companies – to immediately launch "high-stakes" betting markets.

"If that happens, the harm to the public is going to be profound at a time, and I don't mean to be dramatic, but Americans broadly believe that our democracy is under threat," Schwartz said.

"In order to obtain a stay, the commission has to show two things: merit, and that there will be some harm, irreparable harm, absent the stay, and they can't make either of those," Roth said in his opening statement.

Kalshi saw $50,000 deposited in its two political events contracts in the eight hours or so that the products were live before the CFTC filed for an emergency stay, Roth said.

Market manipulation concerns

The CFTC's arguments revolve around the agency's stated inability to police the underlying events – namely, U.S. elections.

Market participants could distort markets to suggest one candidate is doing better than another, Schwartz said, and it would be more difficult to correct than other markets.

A judge posed the hypothetical question of whether a counterparty might take the other side of a bet made for manipulative purposes: "Somebody will take the other side and eat their lunch. Is that what's supposed to happen?"

That is what should happen, but political prediction markets may be susceptible to manipulation that cannot be easily corrected, Schwartz said.

"It's because the sources of information that they absorb and reflect are opaque and unreliable. I am talking about polls with undisclosed methodologies, so, bad methodologies, fake polls, pollsters with agendas, inaccurate news, fake news, on and on," he said. "Normal futures contracts have an objective indicator that is reliable, kind of a published index report."

If these markets are manipulated, that would both harm the market participants and could even undermine election integrity, Schwartz said. Later in the hearing, he drew a distinction between political event contracts and other types of bets that could be placed.

"There's really very little monkeying around you can do with an earthquake," Schwartz said, responding to one example.

Roth, speaking on Kalshi's behalf, pushed back, saying the more robust a market is, the less susceptible it would be to that type of manipulation.

He pointed to the $1 billion already bet on Polymarket, which does not offer services in the U.S. after a settlement with the CFTC, saying the regulator's argument essentially suggests having an overseas vendor provide these products may be better than Kalshi doing so.

"The most important thing I want to make is that the way to reduce that risk is to allow Kalshi markets to offer because right now, this activity is happening and being reported to voters based on markets that are not regulated, that are open to foreign traders, that have no surveillance. … There's no transparency," he said. "We don't know who's buying, who's selling cryptocurrency. If this was happening on Kalshi's markets, we would have this whole suite of regulatory provisions that apply."

'Irreparable harm'

The CFTC needed to show there was a risk of "irreparable harm" in allowing Kalshi to continue listing and trading its events contracts. Todd Phillips, an assistant professor of law at the Georgia State University Robinson College of Business, told CoinDesk it was "unclear if [the CFTC] did that" over the course of the hearing.

The regulator could have done a better job explaining what event contracts actually are and how a state prohibiting gambling on elections counts as gaming for the purposes of the Commodity Exchange Act, he said.

On the other hand, Kalshi also faced tough questioning from the panel of judges on the appeals court.

"Kalshi is making an argument that 'you should allow us to do something that 29 states prohibit, and that's big," he said. "That would be effectively overturning the law in more than half the country.

Marc Hochstein contributed reporting.

Edited by Bradley Keoun.

Sky, the decentralized finance lender previously known as MakerDAO, will move forward with a plan to offboard wrapped bitcoin (WBTC) as collateral, following a vote that closed on Thursday and garnered overwhelming support from the project's community.

The matter has been closely followed in crypto markets, since the Sky platform has $200 million of loans collateralized by the token, and since WBTC is one of the biggest cryptocurrencies, with nearly $10 billion outstanding.

BA Labs, an influential advisor to the project, had initially floated the idea of reducing exposure to WBTC in August, before confirming the plan last week with an official proposal to move ahead with the vote to eliminate the exposure entirely.

This week's Sky vote, which went live on Monday and was open for three days, and saw 88% of participants vote in favor of ditching wBTC in five separate proposals for a five-step offboarding process. Some 12% abstained.

Following the vote, Sky will move forward with the offboarding of WBTC, with the first phase starting on Oct. 3 and culminating in the final phase on Nov. 28.

BA Labs, in its proposals to offboard WBTC, had cited perceived risks from Tron founder Justin Sun's involvement with BiTGlobal, the custodian for the underlying assets. BitGo, the original custodian for WBTC, announced in August that it planned to transition control of the asset to a joint operation with BiT Global, which has regulated operations based in Hong Kong.

Sun told CoinDesk last week that WBTC has a "sterling track record that is unmatched by any competing offers recently floated by the skeptics."

WBTC is a token that allows investors to use bitcoin (BTC) on other blockchains, such as Ethereum, and often is at the center of the DeFi lending space as collateral. WBTC currently has a $9.7 billion market capitalization.

Separately, The Defiant reported that the community behind Aave, the biggest DeFi lender, is unconvinced of the need to offboard WBTC as collateral.

Read more: DeFi Lending Giant Sky Sets Vote to Offload Wrapped Bitcoin as Justin Sun Concerns Linger

Edited by Bradley Keoun.

• Ether has bounced off its 200-week simple moving average, reinforcing long-term support.
• Bitcoin fights to stay above $62K while attempting to break past key resistance levels, including the short-term holder realized price at $61,998. Ether (ETH) rose 2.5% in the past 24 hours, trading at around $2,434. More importantly, the second largest cryptocurrency has found key support at its 200-week simple moving average (SMA) of $2,298.

The 200-week SMA is a widely used tool for gauging long-term momentum. If the price of an asset rises above the marker, it is generally considered to be in an uptrend, and vice versa. The move higher was triggered after the U.S. Federal Reserve's decision to cut rates by 50 basis point (bps), setting the current target rate between 4.75% and 5.00%.

Ether has bounced off this support multiple times, including on Aug. 5, when broader markets experienced a selloff triggered by the yen carry trade unwind. This support has held for much of September.

Ether price chart. (Glassnode)In the meantime, bitcoin (BTC) was changing hands at around $62,000 marking the first higher low for the token since its March all-time high, signaling constructive price action. Traders expect the rally to be short lived.

To push further into bullish territory, bitcoin will need to break through the $65,000 resistance level, to mark a higher high and continue the upward momentum.

Bitcoin is also attempting to reclaim the short-term holder (STH) realized price of $61,998. The realized price represents the average on-chain acquisition cost for the entire supply, while the STH realized price reflects the average cost for coins moved within the last 155 days, which are the most likely to be spent.

Bitcoin short-term holder realized price and MVRV. (Glassnode)Over the past six months, bitcoin has struggled to remain above this level. A sustained move above the STH realized price would suggest a more robust continuation of the bull market.

Looking ahead, macroeconomic factors could further influence both bitcoin and ether’s prices. On September 20, Japan is set to release inflation data, with expectations for both headline and core inflation to come in slightly hotter year-over-year, according to Trading Economics.

Additionally, the Bank of Japan (BoJ) will announce its interest rate decision, with markets expecting a pause at 0.25%. These events could add volatility to crypto markets, particularly as global monetary policy continues to influence investor sentiment across risk assets, including cryptocurrencies.

While a weak Japanese Yen would be bullish for bitcoin, a strong Japanese Yen would be bearish for bitcoin. While, the Hong Kong Monetary Authority (HKMA) also cut its base rate by 50 bps to 5.25% on September 19, mirroring the Fed's interest rate cut. Hong Kong’s monetary policy tends to mirror the U.S. as the local currency is pegged to the U.S. dollar.

Bitcoin ETFs experienced their first outflow since September 11, with a total outflow of $52.7 million, according to data from Farside. The outflows were from Ark's ARKB ($43.4 million), Grayscale's GBTC ($8.1 million), and Bitwise's BITB ($3.9 million). Total inflows into bitcoin ETFs now stand at $17.4 billion.

As bitcoin and ethereum grapple with key technical levels, broader macroeconomic conditions, particularly in Japan and the U.S., may play a significant role in shaping price movements in the coming days.

Edited by Parikshit Mishra.

• Cathedra Bitcoin pivots from mining to data centers to increase bitcoin holdings per share, responding to industry pressures created by the bitcoin halving and low mining revenue.
• Metaplanet focuses on boosting bitcoin holdings per share monthly, resulting in a 587% increase in stock value year-to-date.

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• 02:04Could We Still See a Crypto Bill This Year?; FTX’s Accounting Firm to Pay SEC $1.95M in Settlements Bitcoin (BTC) has emerged as a significant treasury asset for public companies, a trend catalyzed by MicroStrategy's (MSTR) decision to incorporate bitcoin into its corporate treasury in August 2020, resulting in an over 800% increase in its stock value. According to BitcoinTreasuries.net, public companies hold approximately 354,316 BTC, about 1.69% of the total bitcoin supply of 21 million.

This move has inspired a following, with several other companies adopting bitcoin to diversify and protect themselves from inflationary pressures. Notable among these are Metaplanet (3350), Semler Scientific (SMLR) and most recently, Cathedra Bitcoin (CBIT).

Cathedra Bitcoin, a publicly traded company on the TSX Venture Exchange in Canada, has made a strategic shift from focusing solely on bitcoin mining to developing and operating data centers. The change comes as the mining industry faces increasing challenges due to the bitcoin halving. The Hashrate index, which tracks bitcoin mining revenue, is at a relatively low 43 (petahash/second) PH/s, with an all-time low of 36 PH/s, causing many public miners to struggle in 2024.

Cathedra's goal is now to maximize bitcoin holdings per share by moving away from mining to create a more sustainable cash flow. This pivot allows the company to continuously acquire more bitcoin, focusing on long-term growth in bitcoin holdings rather than costly operational ventures.

"Going forward, we will make all capital allocation decisions with the intention of maximizing our shareholders’ per-share bitcoin holdings," the company said.

Also active in the bitcoin treasury arena is Metaplanet, led by CEO Simon Gerovich. Similar to Cathedra, Metaplanet is also prioritizing growth in its bitcoin holdings. Gerovich has emphasized the company's goal of boosting its holdings each month, a strategy that has led to significant gains. Year-to-date, Metaplanet's stock value has increased by 587%, reflecting the market's positive response to its strategic approach.

Metaplanet's bitcoin per share development (Metaplanet)MicroStrategy remains a pioneer and the most significant participant in the bitcoin treasury space. Under Michael Saylor's leadership, the company continues to innovate and expand bitcoin adoption. On Sept. 18, it announced the pricing of a $875 million convertible senior notes offering, upsized from an initial $700 million.

The notes carry a 0.625% interest rate and mature in 2028. The proceeds will be used to redeem $500 million in high-interest 6.125% senior secured notes at a redemption price of 103.063% of the principal amount, reducing the company's interest payments. The remaining funds will be used to buy more bitcoin. The offering also includes an option for initial purchasers to buy up to an additional $135 million in notes.

In a recent 8-K filing, MicroStrategy introduced an innovative concept called "bitcoin yield," which measures the percentage change in the company's bitcoin holdings relative to its assumed diluted shares outstanding, including both Class A and Class B shares. From January 1 to Sept.12 the company's bitcoin yield was 17%, with a quarter-to-date yield of 4.4%.

MicroStrategy's bitcoin yield indicator (MicroStrategy)According to the MSTR-tracker, the bitcoin per share ratio is currently about 0.0012. This metric suggests that long-term shareholders are experiencing accretive value in their bitcoin holdings.

(MSTR-Tracker)Edited by Sheldon Reback.

• Network activity indicates potential price movements as increased transactions signal growing adoption or trading interest.
• However, open interest has remained largely unchanged since July, suggesting a cautious or steady market sentiment. A significant uptick in network activity could spell good news for bullish bets on Dogecoin (DOGE), the Shiba Inu-inspired memecoin that’s the largest by market cap in a multibillion-dollar cohort.

Network transactions crossed over 1.93 million transactions in the past week, IntoTheBlock data shows, beating that of other popular tokens such as Shiba Inu (SHIB), floki (FLOKI), pepe (PEPE) and others.

This marks the highest weekly transaction for the cryptocurrency since early July, indicating a resurgence of interest and usage of DOGE. Dogecoin has consistently maintained a higher number of transactions than other memecoins, the data shows.

However, current transaction volume remains below peak levels, so far in 2024, observed in February, which saw weekly transactions soaring above 10 million.

A spike in transactions suggests a potential revival of user engagement and could be indicative of growing adoption or increased trading activity - leading to higher prices.

For now, however, futures bets on DOGE have remained largely steady since late July amid a holiday period and a generally flat market. Open interest - or the number of unsettled futures bets - has hovered around the $500 million mark, CoinGlass data shows, indicating new money did not enter the DOGE market.

Edited by Parikshit Mishra.

SINGAPORE –– Solana Labs's phone designing subsidiary is slated to ship its second crypto phone in 2025, Solana Mobile announced at the Token 2049 conference on Thursday.

Called Seeker, the upcoming handheld will be a major hardware improvement over Solana's first mobile phone, with better battery, a stronger camera and a lighter design than the Saga, said Emmet Hollyer, who runs Solana Labs' phonemaking project.

It will also incorporate improvements specific to crypto. Units will ship with a specialty-built crypto wallet that ties into the device's partitioned Seed Vault key storage. Users of the wallet will be able to ute crypto transactions more seamlessly on Seeker than they could on Saga, Hollyer said.

Seeker represents Solana's second big bet on a product line that at one time was approaching the precipice of failure. Its predecessor Saga was bailed out from piddling sales figures last year when crypto traders realized they could buy units to collect token airdrops worth more than the device itself.

Saga's turabout into a sellout rejuvenated Solana Labs' interest in pushing crypto deeper into mobile devices by creating custom hardware and software. Saga and now Seeker are built on Android-enabled devices that have their own app store for crypto developers in the Solana eco.

Anticipation of the new model has been intense. Solana committed to building a second phone after securing over 100,000 in pre-orders in early 2024. The capital infusion and buyer commitments helped Solana Mobile access better supply chain deals than was possible with the first edition, Hollyer said.

Solana Dapp store

One of the Saga's big appeals as a smartphone alternative to iPhone and off-the-shelf androids was its debut of an independent app store, called the dapp store. Developers could build highly-tailored crypto apps and then launch it through the dapp store without incurring the high fees of Apple's App Store and Google Play.

Seeker's Dapp store improves on its predecessor with better discoverability of different apps, Hollyer said. That variance is possible only because of a surge in interest among builders. While a handful of teams built apps for Solana's first phone, "tons of teams are reaching out" for guidance on building for Seeker, according to Hollyer.

"When we announced this phone and people saw that we had presold 100,000 of them, eco teams have been chomping at the bit."

The store will also better track toke rewards users are accruing, he said. Hollyer anticipates Seeker will have plenty of payday potential from the many teams planning to issue rewards to owners of the phone.

New capabilities

Seeker will be more permissive about third-party apps gaining access to its "digital exhaust" like GPS data, cellular data and compute that device manufacturers usually lock down, said Hollyer.

This comes with tradeoffs. Usually, devices treat this internal intelvery carefully for privacy and other concerns. But all that data is valuable, especially for crypto projects building decentralized physical infrastructure networks (DePIN).

Solana Mobile consulted with user-bootstrapped cellular network Helium and other Solana DePIN teams to figure out what sensor data they might want to harness in Seeker. Otherwise forgettable "digital exhaust" data points might help a team better track the growth and performance of their physical infrastructure, for example.

"We think that those are going to be unbelievable opportunities for our users to earn and engage and interact," Hollyer said.

Edited by Sam Reynolds.

• Despite recent underperformance, ether is potentially a contrarian bet into the year-end, the report said.
• Bitwise noted that the majority of stablecoins are issued on the Ethereum blockchain and more than 60% of all DeFi assets are locked on the network.
• Ethereum is like the Microsoft of blockchains, the asset manager said. Ether (ETH), the second-largest cryptocurrency, seems to be liked by nobody right now, but the native token of the Ethereum blockchain's underperformance could reverse as the year draws to a close, Bitwise said in a report on Tuesday.

The asset manager noted that year-to-date ether is little changed, while bitcoin (BTC) is up 38% and Solana's sol (SOL) has risen 31%.

Ether's recent underperformance stems from risk related to November's U.S. presidential election, rising competition from Solana and other blockchains, challenged tokenomics and a mixed response to the introduction of spot exchange-traded funds (ETFs) in the U.S., the report said.

Still, it's not all doom and gloom. The majority of stablecoins are issued on Ethereum, more than 60% of all decentralized finance (DeFi) assets are locked on the blockchain and the popular prediction market Polymarket also settles on the layer-1 chain, Bitwise noted.

"Ethereum has the most active developers, the most active users, and a market cap that is 5X bigger than its closest competitor," wrote Matt Hougan, chief investment officer at Bitwise.

"It's like the Microsoft (MSFT) of blockchains," Hougan wrote. Everyone wants to talk about about newer companies and their game-changing tech such as Google (GOOG), Slack (WORK) and Zoom (ZM), "but Microsoft is still larger than all of them put together."

Ether's challenges are not "existential" and the market may reuate the cryptocurrency closer to the U.S. election. "It looks like a potential contrarian bet through the end of the year," the report said.

Read more: Will Ether's Supply Crunch Lead to Higher Prices in Q4?

Edited by Sheldon Reback.

• Eight founding members have started what they call the Decentralized AI Society (DAIS) to fight the possibility of tech giants holding an AI monopoly.
• The chairman of DAIS is Michael Casey who was formerly CoinDesk’s chief content officer SINGAPORE — Industry leaders have launched a non-profit organization called the Decentralized AI Society (DAIS), dedicated to tackling the probability of the monopolization of the artificial intelligence (AI) industry.

The group is headed by Michael Casey, formerly CoinDesk’s chief content officer and chair of Consensus, the crypto media company's annual conference.

"The decentralized AI society is acknowledging the fact that centralized platforms in the AI era have a massive head start," Casey told CoinDesk in an interview on the sidelines of the Token2049 blockchain conference in Singapore on Tuesday. "They own all the data, they own all the compute, and I would say they own the regulators."

The eight founding members of DAIS include CETI AI, Filecoin Foundation, Bloq, Hypercycle, Morpheus, Hemi, Odyssey and Lumerin.

According to the new organization, DAIS aims to tackle four problems:

• Bringing capital to the decentralized AI world in what has already become an arms race for resources like graphical processing units (GPUs) and the data centers that compute together.
• Shaping policy to craft AI regulations.
• Education and promotion of decentralized AI.
• Engineering to create new algorithms for learning models in a distributed way. "What choice do we have," Casey said, but to fight for a decentralized form of AI, given the power of tech giants like OpenAI, Google, Microsoft and Apple?

"I never accept the idea that this is too difficult," he said. "Somebody has to resolve the challenge."

Read More: The Future of AI Is Decentralized

Edited by Bradley Keoun.