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The cryptocurrency industry has been waging a battle in the courts for the freedom to grow, and so far, it’s not going well.Our Declan Harty reports that the Securities and Exchange Commission has secured a string of legal victories backing its authority to police crypto markets, posing a threat to the industry.“We’ve been accused of picking winners and losers, stifling innovation and driving crypto businesses to more favorable, foreign jurisdictions, wherever they may be,” SEC Enforcement Director Gurbir Grewal said in a recent speech. But, Grewal added, “as court after court has confirmed, the federal securities laws apply equally to everyone. You don’t get your own rules.”Still, these legal fights are poised to last years, Declan notes. Coinbase has moved to appeal a central part of its case and has vowed to bring it to the Supreme Court if need be. Others like Consensys are suing the SEC before they get sued themselves.Crypto lawyers also point out that the industry has won its own victories: the SEC saw part of its case against Coinbase dismissed after it alleged that the company operated as an unregistered broker through its Wallet application.But momentum is on the agency’s side.Speaking of legal battles and crypto, the Federal Reserve is also now in the middle of one of its own. The Fed notched a win in late March when a district judge found that the central bank had the discretion to reject an application by Wyoming-chartered Custodia for direct access to the payment system.Custodia wants to operate as an uninsured bank issuing a stablecoin backed by cash and other assets. But the Fed rejected both its bid for a deposit account — often called a “master account” — and its application for membership in the Fed system, signaling the central bank wants to insulate the payment rails from crypto assets. (Fed accounts allow the holder to transfer reserves directly to another financial institution without another intermediary.)Now, Custodia is pulling out some big guns to fire back. MM has learned that the firm plans to file a notice of appearance Monday, saying it has hired two high-profile names to represent it in its appeal: Jenner & Block’s Ian Gershengorn, who served as acting solicitor general under President Barack Obama, and Michelle Kallen, the former solicitor general of Virginia, both of whom have represented Democrats in highly publicized cases. Kallen represented the Select Committee to Investigate the January 6th Attack on the United States Capitol.“This team brings a deep understanding of federalism issues and extensive experience in federal regulation of the digital asset industry,” Custodia CEO Caitlin Long said in a statement to MM. “They also have a stellar appellate track record in government controversy cases.”
The move is notable in that it conveys how seriously Custodia is taking this case, but it also serves as a political message that their cause is bipartisan, since Custodia has thus far gotten more noticeable support from Republican politicians than Democratic ones. Sen. Cynthia Lummis (R-Wyo.) has particularly criticized the Fed for its master account policy that has affected Custodia and Kraken, both firms in her state.Former Sen. Pat Toomey (R-Pa.), pushed for a new law when he was in office requiring the Fed to publish the databases of firms that have master accounts at the central bank in a bid to bring more transparency to the process.But he was frustrated when the judge in Custodia’s case, Scott Skavdahl, referenced that amendment in March as evidence that the Fed had discretion to do what it did.“To be clear: there is nothing in my amendment that supports the notion that the Fed has authority to reject the application of a qualified applicant,” he told MM the weekend that the decision was issued, arguing that the judge had even shown that he understood the amendment’s language when he rejected the Fed’s move to dismiss the case.“It’s nonsensical,” he added.HAPPY MONDAY — Hope everyone had a good weekend celebrating Star Wars, Mexico or whatever else. Stay tuned to MM for coverage of this week’s Milken conference by Zach, and subscribe to Global Playbook for even more news from the event.Send tips to Zach at and reach Victoria at .
Tuesday … Minneapolis Fed President Neel Kashkari, former House Speaker Kevin McCarthy, and Treasury Assistant Secretary for Financial Markets Josh Frost speak at Milken … House Financial Services holds a hearing on SEC enforcement actions at 10 a.m. …Wednesday … Former President Bill Clinton, SBA Administrator Isabel Casillas Guzman, Kerry Washington and John Fogerty appear at Milken … Fed Governor Lisa Cook speaks on financial stability at the Brookings Institution at 1:30 p.m. …Friday … Fed Governor Michelle Bowman speaks on financial stability risks at the Texas Bankers Association Annual Convention at 9 a.m. … The CFTC votes on rules for event contracts at 10 a.m. … Fed Vice Chair for Supervision Michael Barr gives a commencement speech at American University School of Public Affairs … The Financial Stability Oversight Council holds a closed session on market developments related to corporate credit and a public session on a report on nonbank mortgage servicing at 2:45 p.m. …
Inside the stablecoin talks — Jasper Goodman and Eleanor Mueller have a dive into the policy and political tensions in the discussions between the Hill, the Biden administration and key regulators over stablecoin legislation.House Financial Services Chair Patrick McHenry and ranking member Maxine Waters are circulating tentative text among Treasury, the Federal Reserve and the White House National Economic Council but have yet to produce a final draft. While Treasury Secretary Janet Yellen has urged Congress to act, it’s still unclear whether the White House would sign off on a deal.The talks have major implications not just for crypto but for the banking industry as well.“Crypto here is acting as sort of a Trojan horse for a broader abrogation of the separation of banking and commerce,” said Hilary Allen, an American University law professor and crypto skeptic.First in MM: Private credit’s room to grow — A new report on the private credit market from the American Investment Council and PitchBook finds that there’s a near-record $340.8 billion in “dry powder” capital yet to be deployed. Private credit managers raised $135.7 billion last year.Stay tuned for more this week on the private credit market state of play and regulatory debate, which are expected to be covered in a series of Milken conference panels. Industry leaders including Carlyle CEO Harvey Schwartz are scheduled to speak.“It hasn’t been a big topic here at Milken before,” American Investment Council President and CEO Drew Maloney told Zach on the sidelines of the Milken conference Sunday. “As the marketplace grows and the need for private credit grows, there’s an opportunity for more education. That’s what a lot of these panels are doing and I think that’s what our report does. It’s educating policymakers about what private credit’s positive attributes are and its contributions to the economy.”The cost of political risk — The Budget Lab’s Ernie Tedeschi has a look at the economic threats from eroding the U.S. “safe harbor” investment premium – the value that investors place on the safety, soundness and stability of this country. Tedeschi, previously with the White House Council of Economic Advisers, says markets may be underpricing U.S. political risk.Time for Ukraine to pay? — The WSJ reports that foreign bondholders including BlackRock and PIMCO plan to urge Ukraine to resume paying interest on its debt as soon as next year. The lenders hold around a fifth of Ukraine’s $20 billion of outstanding Eurobonds.First in MM: Crypto super PACs face scrutiny — A new report from the progressive financial watchdog group Public Citizen is taking aim at super PACs backed by the crypto industry, our Jasper Goodman reports. The report focuses on a network of three affiliated super PACs — Fairshake, Protect Progress and Defend American Jobs — that are backed by top crypto industry players including Coinbase, Ripple and Andreessen Horowitz. It finds that the group, which is threatening to spend in a pair of key Senate races in Ohio and Montana that could determine control of the chamber, ranks as one of the top-raising super PACs so far this cycle.“The cryptocurrency sector is the latest in a long line of corporate interests seeking to distort our democracy by converting their financial power into political power,” the report says. The PAC group declined to comment.
Nonprofits balk at new GOP spending rule — Our Katy O’Donnell digs in: Charities are racing to reverse a new GOP spending bill rule that could cost nonprofits over $1 billion in funding over the next year. It would bar nonprofits from receiving money through the Department of Housing and Urban Development’s Economic Development Initiative grant program, and they have just this week to try to reverse it.Biden goes small — Our Adam Cancryn reports that President Joe Biden is shifting his economic message, “highlighting specific areas where the administration has made strides in easing costs for some voters, regardless of the broader conditions affecting the electorate as a whole.”SEC hits Truth Social’s accounting firm — Declan reports that the SEC has barred the accounting firm for former President Donald Trump’s social media venture from practice for “deliberate and systemic failures” to comply with U.S. audit standards on more than 1,500 filings by hundreds of firms.Republican Rep. Lance Gooden urged Congress to crack down on credit card swipe fees, in the Washington Examiner … The Electronic Payments Coalition, which is fighting the credit card legislation, has a new report on how consumers use card rewards.
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The cryptocurrency industry has been waging a battle in the courts for the freedom to grow, and so far, it’s not going well.Our Declan Harty reports that the Securities and Exchange Commission has secured a string of legal victories backing its authority to police crypto markets, posing a threat to the industry.“We’ve been accused of picking winners and losers, stifling innovation and driving crypto businesses to more favorable, foreign jurisdictions, wherever they may be,” SEC Enforcement Director Gurbir Grewal said in a recent speech. But, Grewal added, “as court after court has confirmed, the federal securities laws apply equally to everyone. You don’t get your own rules.”Still, these legal fights are poised to last years, Declan notes. Coinbase has moved to appeal a central part of its case and has vowed to bring it to the Supreme Court if need be. Others like Consensys are suing the SEC before they get sued themselves.Crypto lawyers also point out that the industry has won its own victories: the SEC saw part of its case against Coinbase dismissed after it alleged that the company operated as an unregistered broker through its Wallet application.But momentum is on the agency’s side.Speaking of legal battles and crypto, the Federal Reserve is also now in the middle of one of its own. The Fed notched a win in late March when a district judge found that the central bank had the discretion to reject an application by Wyoming-chartered Custodia for direct access to the payment system.Custodia wants to operate as an uninsured bank issuing a stablecoin backed by cash and other assets. But the Fed rejected both its bid for a deposit account — often called a “master account” — and its application for membership in the Fed system, signaling the central bank wants to insulate the payment rails from crypto assets. (Fed accounts allow the holder to transfer reserves directly to another financial institution without another intermediary.)Now, Custodia is pulling out some big guns to fire back. MM has learned that the firm plans to file a notice of appearance Monday, saying it has hired two high-profile names to represent it in its appeal: Jenner & Block’s Ian Gershengorn, who served as acting solicitor general under President Barack Obama, and Michelle Kallen, the former solicitor general of Virginia, both of whom have represented Democrats in highly publicized cases. Kallen represented the Select Committee to Investigate the January 6th Attack on the United States Capitol.“This team brings a deep understanding of federalism issues and extensive experience in federal regulation of the digital asset industry,” Custodia CEO Caitlin Long said in a statement to MM. “They also have a stellar appellate track record in government controversy cases.”
The move is notable in that it conveys how seriously Custodia is taking this case, but it also serves as a political message that their cause is bipartisan, since Custodia has thus far gotten more noticeable support from Republican politicians than Democratic ones. Sen. Cynthia Lummis (R-Wyo.) has particularly criticized the Fed for its master account policy that has affected Custodia and Kraken, both firms in her state.Former Sen. Pat Toomey (R-Pa.), pushed for a new law when he was in office requiring the Fed to publish the databases of firms that have master accounts at the central bank in a bid to bring more transparency to the process.But he was frustrated when the judge in Custodia’s case, Scott Skavdahl, referenced that amendment in March as evidence that the Fed had discretion to do what it did.“To be clear: there is nothing in my amendment that supports the notion that the Fed has authority to reject the application of a qualified applicant,” he told MM the weekend that the decision was issued, arguing that the judge had even shown that he understood the amendment’s language when he rejected the Fed’s move to dismiss the case.“It’s nonsensical,” he added.HAPPY MONDAY — Hope everyone had a good weekend celebrating Star Wars, Mexico or whatever else. Stay tuned to MM for coverage of this week’s Milken conference by Zach, and subscribe to Global Playbook for even more news from the event.Send tips to Zach at and reach Victoria at .
Tuesday … Minneapolis Fed President Neel Kashkari, former House Speaker Kevin McCarthy, and Treasury Assistant Secretary for Financial Markets Josh Frost speak at Milken … House Financial Services holds a hearing on SEC enforcement actions at 10 a.m. …Wednesday … Former President Bill Clinton, SBA Administrator Isabel Casillas Guzman, Kerry Washington and John Fogerty appear at Milken … Fed Governor Lisa Cook speaks on financial stability at the Brookings Institution at 1:30 p.m. …Friday … Fed Governor Michelle Bowman speaks on financial stability risks at the Texas Bankers Association Annual Convention at 9 a.m. … The CFTC votes on rules for event contracts at 10 a.m. … Fed Vice Chair for Supervision Michael Barr gives a commencement speech at American University School of Public Affairs … The Financial Stability Oversight Council holds a closed session on market developments related to corporate credit and a public session on a report on nonbank mortgage servicing at 2:45 p.m. …
Inside the stablecoin talks — Jasper Goodman and Eleanor Mueller have a dive into the policy and political tensions in the discussions between the Hill, the Biden administration and key regulators over stablecoin legislation.House Financial Services Chair Patrick McHenry and ranking member Maxine Waters are circulating tentative text among Treasury, the Federal Reserve and the White House National Economic Council but have yet to produce a final draft. While Treasury Secretary Janet Yellen has urged Congress to act, it’s still unclear whether the White House would sign off on a deal.The talks have major implications not just for crypto but for the banking industry as well.“Crypto here is acting as sort of a Trojan horse for a broader abrogation of the separation of banking and commerce,” said Hilary Allen, an American University law professor and crypto skeptic.First in MM: Private credit’s room to grow — A new report on the private credit market from the American Investment Council and PitchBook finds that there’s a near-record $340.8 billion in “dry powder” capital yet to be deployed. Private credit managers raised $135.7 billion last year.Stay tuned for more this week on the private credit market state of play and regulatory debate, which are expected to be covered in a series of Milken conference panels. Industry leaders including Carlyle CEO Harvey Schwartz are scheduled to speak.“It hasn’t been a big topic here at Milken before,” American Investment Council President and CEO Drew Maloney told Zach on the sidelines of the Milken conference Sunday. “As the marketplace grows and the need for private credit grows, there’s an opportunity for more education. That’s what a lot of these panels are doing and I think that’s what our report does. It’s educating policymakers about what private credit’s positive attributes are and its contributions to the economy.”The cost of political risk — The Budget Lab’s Ernie Tedeschi has a look at the economic threats from eroding the U.S. “safe harbor” investment premium – the value that investors place on the safety, soundness and stability of this country. Tedeschi, previously with the White House Council of Economic Advisers, says markets may be underpricing U.S. political risk.Time for Ukraine to pay? — The WSJ reports that foreign bondholders including BlackRock and PIMCO plan to urge Ukraine to resume paying interest on its debt as soon as next year. The lenders hold around a fifth of Ukraine’s $20 billion of outstanding Eurobonds.First in MM: Crypto super PACs face scrutiny — A new report from the progressive financial watchdog group Public Citizen is taking aim at super PACs backed by the crypto industry, our Jasper Goodman reports. The report focuses on a network of three affiliated super PACs — Fairshake, Protect Progress and Defend American Jobs — that are backed by top crypto industry players including Coinbase, Ripple and Andreessen Horowitz. It finds that the group, which is threatening to spend in a pair of key Senate races in Ohio and Montana that could determine control of the chamber, ranks as one of the top-raising super PACs so far this cycle.“The cryptocurrency sector is the latest in a long line of corporate interests seeking to distort our democracy by converting their financial power into political power,” the report says. The PAC group declined to comment.
Nonprofits balk at new GOP spending rule — Our Katy O’Donnell digs in: Charities are racing to reverse a new GOP spending bill rule that could cost nonprofits over $1 billion in funding over the next year. It would bar nonprofits from receiving money through the Department of Housing and Urban Development’s Economic Development Initiative grant program, and they have just this week to try to reverse it.Biden goes small — Our Adam Cancryn reports that President Joe Biden is shifting his economic message, “highlighting specific areas where the administration has made strides in easing costs for some voters, regardless of the broader conditions affecting the electorate as a whole.”SEC hits Truth Social’s accounting firm — Declan reports that the SEC has barred the accounting firm for former President Donald Trump’s social media venture from practice for “deliberate and systemic failures” to comply with U.S. audit standards on more than 1,500 filings by hundreds of firms.Republican Rep. Lance Gooden urged Congress to crack down on credit card swipe fees, in the Washington Examiner … The Electronic Payments Coalition, which is fighting the credit card legislation, has a new report on how consumers use card rewards.
