SEC's Hester Peirce’s Parting Advice for Crypto

**Hester Peirce** (0:00)
The thing I'd like to leave with industry is just that there is real joy in being able to make something that other people can use and that can make their lives better.

**Rebecca Rettig** (0:15)
Introducing ReelFi, a smarter stable coin that's backed by real world assets. Launching August, 2026 Join the testnet now at realfi.co. Welcome to The Policy Protocol, your weekly shot of the latest in fintech law and policy.
Everything that happened distilled down to what actually matters. How are you, Renato? Good to see you.

**Renato Mariotti** (0:35)
Good to see you back again, Rebecca.

**Rebecca Rettig** (0:38)
Good to be back. Definitely a very interesting time in crypto. We were talking before we hopped on that the timeline on X feels very Dumer-esque. I was saying this feels in some ways as existential as it did during FTX, where everyone's like, where is the industry going?
At the same time, there was an article in the FT today called Wall Street Loves Blockchain. I think seeing the adoption versus token prices and sentiment in the industry is a little disorienting, I guess. What are you seeing? What do you think?

**Renato Mariotti** (1:14)
Yeah. I actually think it's part of the evolution of the industry. I think evolutions are painful at times.
Some body parts get discarded, new ones form, perhaps, and evolution and maybe we're evolving to a new phase where crypto is going to be more hand-in-hand with TradFi and more integrated into TradFi, and that's okay.

**Rebecca Rettig** (1:41)
Yeah. I just wrote something about this and used the word maturation, so maybe that's where we're at.

**Renato Mariotti** (1:51)
Yeah. Well, we're going to have to talk more about that once that's out. I'm interested in reading that for sure.

**Rebecca Rettig** (1:57)
Okay. That sounds good.
Okay. Hot topics of the week. Renato, do you want to kick us off?

**Renato Mariotti** (2:02)
Absolutely. I cannot resist making George Santos my hot topic of the week. George Santos, former congressman, convicted fraudster, has agreed to a settlement with the CFTC, in which the CFTC has ordered the disgorgement of $17,000 in profit, fined him an additional $17,500 for, essentially, insider trading on the State of the Union market. Essentially, he indicated he would be there at the State of the Union publicly, then he traded on himself, effectively not being there. I know it's going to surprise you to learn, Rebecca, he does have control, at least over his physical presence, although not always on what he says.
He was trading, of course, on Kalshi, and now is publicly blasting Kalshi, which I think perhaps is a feather in the mark of that and other prediction markets who are now being bashed by George Santos after he made money off of them.

**Rebecca Rettig** (3:08)
Well, what I will say about this, actually, is to say that this is actually very consistent with how the CFTC has been asserting its jurisdiction over prediction markets. It has other insider trading cases that it is working on, it has been very clear that these prediction markets are within its exclusive jurisdiction. We just saw this come up at the end of last week too, after the New York Attorney General sued Kalshi for a $36 billion saying that Kalshi has violated the New York gambling laws. This is one in a long line of cases going on all around the country where states are contesting the rights of prediction markets to operate in the state because they said what's going on in prediction markets is gambling. I think much of that is tied to the fact that a lot of what we're seeing on Kalshi and Polymarket is I think well over 90 percent relating to sports. Interestingly enough, especially because we just saw the World Cup happen, the combined volume on Kalshi and Polymarket was the highest ever in a month.
I think we're seeing a lot on prediction markets and to tie it back to the CFTC, we saw Chair Selig make a statement that he already has asserted his jurisdiction and he will be pushing back on the New York case against Kalshi as well.
Definitely a lot to watch there. We will be continuing to see everything about prediction markets and what is going on. My hot topic of the week is the ColdCard hack, which is much less lighthearted in terms of its interest. This was a hack of Bitcoin hardware wallets. We've seen a lot of software hacks going on in the space.
It's also been reported about a lot of software hacks, but this is very difficult because it is a hardware self-custody wallet. As you can see on the screen, I think hundreds of millions of dollars in Bitcoin have been lost. I think this hit about 1,000 wallets. The company behind the ColdCard wallets has been asking customers to do upgrades and things like that. But I think this is really telling because the question now, especially with your point about the integration of Wall Street and the maturation is, well, the original premise behind Bitcoin and crypto and the cypherpunk ethos was about self-custody, not having intermediaries, not having to rely on anybody separate that you needed to trust for your economic transactions. This looks like we may be turning things around. I saw something on X over the weekend that people are voting to say that they'd rather custody in centralized exchanges than do self-custody. There is definitely some evolution going on. What's your take, Renato?