Category: Business

If regulators fail to set up clear policies and rules around prediction markets, there could be another FTX-like implosion, according to Commodity Futures Trading Commission Chairman Michael Selig.

“The failure of agencies to actually regulate, to do their job and set policy, is such a disservice to the builders and innovators and everyday Americans who want to access these products,” Selig said in an interview with Dastan President and Co-Founder Farokh Sarmad.

The CFTC, which claims complete jurisdiction over prediction markets and derivatives contracts, wants to make sure that’s not the case moving forward.

“We saw FTX and we saw all these implosions of crypto firms, I’m concerned we’ll see the same with prediction markets if we keep pushing it offshore into the unregulated space,” he said.

“We’ve got to make sure these exchanges come and register here in the United States and that our rules are set up to facilitate fair markets, markets that have investor protections, customer protections, and have real guardrails and rules,” Selig added.

Prediction markets like Kalshi and Polymarket have exploded in popularity over the last year, moving from niche homes to political markets to massive platforms facilitating event contracts for nearly anything you could imagine—sports, weather, geopolitical issues, and more.

(Disclaimer: Decrypt’s parent company, Dastan, operates Myriad, a prediction market).

The surge in volumes, which now stretches above $20 billion monthly, has led to rapidly rising valuations as well, with Kalshi reportedly doubling its valuation earlier this month when it raised $1 billion at a $22 billion valuation.

Prediction markets under the microscope

Those surging values have not come without scrutiny. Kalshi and Polymarket have recently faced accusations of insider trading on their platforms, as public officials like California Governor Gavin Newsom allege that individuals close to the Trump administration have profited from insider knowledge using prediction markets.

More specific examples have led to a fine and suspension against a video editor for MrBeast, who profited from inside information related to the YouTube personality’s videos. In February, two Israelis were arrested and charged with misusing classified information, having allegedly used military secrets to profit on Polymarket.

Recently, both offered new policies and procedures to try and address the insider trading concerns.

The platforms are also running into issues in the courts, where states are now pushing back on their offerings. For example, Arizona attorney general Kris Mayes filed 20 criminal charges against Kalshi, alleging the site is running an “illegal gambling operation.” 

Earlier this month, Nevada earned a victory in court over the platform, landing a temporary restraining order that banned it from offering its event contracts in the state. Other states, like Massachusetts, may not be far behind from doing the same.

Selig, who has previously condemned the behavior from states, didn’t expect it.

“I am surprised about it,” he told Sarmad about the state’s lawsuits against prediction markets, adding that, “I think the jurisdiction of the agency is very clear.”

The jurisdiction and regulation of prediction markets, as well as crypto and artificial intelligence and their relationship to derivative markets, is something that Selig said the agency is committed to getting right.

States “regulating by litigation”

“We’ve got to get the policy right, and we’re committed to working with every stakeholder who wants to work with us,” he said. “What we don’t want is states and others suing our registrants to assert their authority in the same way that the last administration did with crypto, where they’re regulating by litigation and enforcement actions.”

“We’d like to work together to get the policy right,” he added.

To do so, his agency has recently put out an Advanced Notice of Proposed Rulemaking to invite public comments and feedback about the rules necessary to properly regulate prediction markets.

Last week, the CFTC launched an Innovation Task Force to help create a clear regulatory framework for AI, crypto, and prediction markets as well, indicating it would coordinate with other federal agencies like the SEC and its Crypto Task Force on initiatives.

Global asset manager Franklin Templeton announced Wednesday it is forming a crypto unit—Frankling Crypto—following its acquisition of 250 Digital, a crypto investment firm and spinoff from CoinFund.

The acquisition, expected to close during Q2, brings the 250 Digital team and all its crypto strategies to Franklin Templeton, which will invest in those strategies as part of the deal. 

“Crypto’s institutional moment has arrived, and Franklin Crypto will help our global clients navigate this complex and rapidly evolving asset class by delivering the expertise, knowledge and digital asset products that meet their sophisticated investment needs,” Head of Franklin Crypto Christopher Perkins said in a statement.

Perkins, who will join the firm and serve as the division leader of Franklin Crypto, previously led 250 Digital alongside Seth Ginns, who will come on board and serve as the Chief Investment Officer of Franklin Crypto.

“This is an exciting addition for Franklin Templeton, and we’re pleased to welcome Chris, Seth and the 250 Digital team to our firm,” Franklin Templeton CEO Jenny Johnson in a statement.

“Together, their investment talent and differentiated strategies strengthen our capabilities in digital assets and position us among a small group of global asset managers with a dedicated, institutional-grade crypto investment management team, enhancing our ability to serve clients worldwide,” she added. 

While financial details of the acquisition were not disclosed, the firm noted that BENJI tokens—those representing its on-chain money market fund—will be used as payment considerations, “marking an important and innovative step toward conducting M&A transactions on chain.”

The firm first debuted the tokenized fund in 2021, before expanding its access to Ethereum in 2024. Since that time, it has also expanded to other popular blockchain networks like Solana, and Ethereum scaling networks like Base and Arbitrum. 

Its latest crypto initiative comes just one week after it announced a deal with Ondo Finance to launch tokenized versions of five of its exchange-traded funds (ETFs). 

A representative for Franklin Templeton did not immediately respond to Decrypt’s request for comment.

A security researcher discovered a critical vulnerability in Zcash nodes that could have allowed malicious miners to drain more than 25,000 ZEC from the network’s deprecated Sprout shielded pool—a sum worth about $6.5 million at writing.

Alex “Scalar” Sol disclosed the flaw on March 23, according to a disclosure report released Tuesday, revealing that zcashd nodes were skipping proof verification for transactions involving the legacy Sprout pool. The bug was not exploited and all users’ funds remain safe, according to the disclosure.

The vulnerability spanned releases from July 2020 through the present, with Zcash developers releasing v6.12.0 on Tuesday to contain the fix. Major mining pools moved quickly to patch their systems—Luxor mining pool confirmed deployment on March 25, while F2Pool, ViaBTC, and AntPool all deployed the fix by March 26, according to the same report.

The Zebra full node implementation was not affected by the vulnerability, the report said, and would have triggered a chain fork if exploitation had been attempted, providing an additional layer of network protection.

Sol, who discovered the vulnerability using AI assistance, reported it to Shielded Labs on March 23. The organization coordinated with the Zcash Open Development Lab (ZODL), whose engineer Jack “str4d” Grigg authored the patch.

For his disclosure, Sol will receive a 200 ZEC total bounty—valued above $51,000—with Shielded Labs, ZODL, the Zcash Foundation, and Bootstrap each contributing 50 ZEC.

The Sprout pool was closed to new deposits in November 2020, making it a deprecated but still-active component holding approximately 25,424 ZEC that users have not yet migrated to newer shielded pool versions.

While the vulnerability could have allowed draining these funds, the Zcash Open Development Team (ZODL) said that Zcash’s “turnstile” mechanism would have prevented broader supply inflation. The turnstile requires that any coins leaving the Sprout pool must have verifiably entered it, creating a safeguard against the creation of new tokens beyond the network’s total circulation of around 16.63 million ZEC.

This isn’t the first big vulnerability that the network has faced. Back in 2019, the network patched a bug described as an “infinite counterfeit” crypto generator, though it was patched out before becoming a major issue for the privacy coin network.

Zcash is the biggest gainer over the last 24 hours among the top 100 coins by market cap, per CoinGecko data, rising more than 14% to a recent price above $255. The price of the privacy coin skyrocketed last fall from a price of about $50 to a multi-year peak near $700, but has fallen alongside Bitcoin and other cryptocurrencies in recent months.

Latin America’s e-commerce giant quietly killed its ERC-20 loyalty token four years in—while Nubank’s Nucoin already died the same death.

Mercado Libre is shutting down Mercado Coin. The company—which is bigger than Amazon in Latin America—announced through its Mercado Pago wallet that the token will stop functioning on April 17.

Users holding the coin have three options: Sell it through the app, spend it as purchase credit on the platform, or do nothing and wait for it to be auto-converted to local fiat. Mercado Libre didn’t explain the decision in its customer notice. The company did not respond to Decrypt‘s request for comment.

Mercado Coin launched in August 2022 in Brazil as an ERC-20 token on Ethereum, built along with crypto exchange Ripio. The idea was simple: buy selected products on the marketplace, earn tokens, use them on future purchases, or cash out. It never really caught on.

The token expanded to other markets after its Brazilian debut, but it never built a meaningful base. It lived and died as a curiosity—a loyalty points system with extra steps and a dose of volatility.

That last part is likely why Mercado Libre isn’t abandoning crypto altogether—it’s just changing what kind of crypto it bets on.

In August 2024, the company launched MeliDolar (MUSD), a stablecoin pegged to the U.S. dollar. It’s also built with Ripio, and also accessible through Mercado Pago. The key difference is, of course, the price of MeliDolar doesn’t move. It’s backed by U.S. Treasury securities and dollar deposits, and its value sits exactly where users expect it to.

MeliDolar is also the backbone of the company’s Meli Plus loyalty program. Members get it as cashback on purchases. They can spend it back on the platform, sell it in the app with no fees, or just hold it as a dollar hedge—a genuinely useful feature for Brazilian and Mexican consumers watching their local currencies lose ground. This was the logical step after a brief experiment allowing users to experiment with Paxos’ Stablecoin.

Mercado Libre isn’t alone in learning this lesson the hard way. Nubank—Brazil’s largest bank, a fully digital neobank with over 100 million customers in Brazil alone—ran the same experiment at the same time. Nucoin launched in 2023 on Polygon, airdropped to its massive user base as a loyalty and rewards token.

It subsequently collapsed 97% in value. Nubank suspended trading in September 2024, gave holders 90 days to convert their coins to Bitcoin or USDC, and shut the whole thing down by December. Sixteen million users were left holding the bag, sweetened only by a prize campaign the bank ran to take the edge off.

Mercado Libre still holds more than $38 million in Bitcoin on its balance sheet and continues to offer crypto trading and stablecoin transfers through Mercado Pago. The infrastructure is staying—but not the coin nobody was really using anyway.