NYT: CFTC Has Launched Investigation Into Polymarket

U.S. Begins Investigating Polymarket, a Test of a Key Regulator

A federal financial agency has begun investigating Polymarket, reigniting longstanding questions about whether a leading prediction market company tied to Donald Trump Jr. is operating within the law.

The inquiry is a test of whether the Commodity Futures Trading Commission, a little-known but powerful regulator, will hold to account a company with connections to President Trump. A year ago, over the strong objections of its enforcement attorneys and under a different agency head, the C.F.T.C. killed a separate investigation into whether Polymarket was illegally serving U.S. customers.

Two people familiar with the new investigation, who spoke on condition of anonymity to discuss a confidential matter, said it began earlier this year and was extensive in scope. Few other details have been made public.

by NYT

Adani prosecutors must justify dropping criminal case, US judge rules

A U.S. judge ​ordered the Justice Department on Friday to justify its decision to drop criminal charges against Indian billionaire Gautam Adani, ‌declining to rule immediately on Adani's lawyers' request to dismiss the case.

Brooklyn-based U.S. District Judge Nicholas Garaufis said federal prosecutors' May 18 announcement that they would no longer pursue the case, which charged Adani with securities fraud and wire fraud stemming from an alleged bribery scheme, did not sufficiently explain their decision.

"The Government's terse, ​bland and conclusory statement affords the court neither a sufficient basis to reach any conclusion, nor the opportunity to conduct ​any analysis of the Government's request for dismissal," wrote Garaufis, who gave the Justice Department until July ⁠13 to submit more information.

by Reuters

Exclusive | Lawmakers Call for Federal Probe of Polymarket Over Deceptive Advertising

Two senators are calling for a federal investigation into Polymarket’s social-media promotion of fake bets following The Wall Street Journal’s reporting on the prediction market’s deceptive marketing practices.

In a letter sent Thursday to Commodity Futures Trading Commission Chairman Michael Selig, senators John Curtis (R., Utah) and Adam Schiff (D., Calif.) said the allegations in the Journal’s reporting “are deeply troubling and demand immediate scrutiny.”

“The public-facing behavior alleged here does not resemble a sober financial market designed for hedging or price discovery,” the senators wrote. “We remain concerned that the Commission is neither enforcing the law appropriately, nor is equipped to serve as a federal gambling regulator.”

The letter asked Selig to disclose whether the CFTC is investigating Polymarket and whether the practices described in the Journal’s investigation violate CFTC rules or federal law.

by WSJ.com: US Business

Opting Out of Court? Reputation and Informal Norms in Private Equity

Private equity sits at the heart of global finance. This $13 trillion industry thrives on contracts that lock in billions of dollars over decades, and on relationships between investors—the limited partners (“LPs”)—and the general partners (“GPs”) who manage their money. In an arena where LPs hand over vast sums, have limited say during a fund’s life, and have few exit options, one would expect courts to play a central role in policing the relationship. Yet they do not. In stark contrast to public markets, where shareholder litigation helps deter misconduct and shape corporate norms, private equity operates in a near-litigation-free zone. Lawsuits against GPs are rare, and when they happen, they are reserved for the most egregious breaches, such as outright fraud.

This presents a genuine puzzle. In an industry where fiduciary conflicts and misaligned incentives are not uncommon, why do LPs almost never turn to the courts to enforce their rights? And if litigation is largely off the table, how does the industry resolve disputes and discipline misconduct?

by Harvard Law School Forum on Corporate Governance

Strategy Says It May Sell Up to $1.25 Billion of Bitcoin

Michael Saylor’s Strategy Inc. said it may sell up to $1.25 billion of Bitcoin to bolster its cash reserve and established two repurchase programs of up to $1 billion each for common and preferred shares.

The fresh funds will be used to finance preferred stock dividends and interest expense, Strategy said in a statement Monday. The company boosted its reserve to $2.55 billion in the past week by selling common stock. The board has also established a policy of maintaining a minimum reserve equal to at least 12 months of current expected annual preferred stock dividend payments and interest expense. The dividend on the STRC preferred was raised to 12%.

by Bloomberg

Financial regulators scramble to counter AI rise with own tools

Banks and financial sector watchdogs must move quickly to adopt new technology to plug system vulnerabilities as AI ​supercharges cybersecurity risks, a top Swiss financial regulator said ‌in an interview.

Marlene Amstad, president of Swiss market regulator FINMA and chair of an international forum on supervisory technology, spoke ​to Reuters following an initial hackathon to build new ​tools with market supervisors.

Models that detect software vulnerabilities have ⁠recently pointed to surging cyberattack and national security risks, with ​AI raising safety and accountability questions in financial institutions.

"As hackers move ​faster, banks must adapt by patching vulnerabilities more rapidly," Amstad said in an interview.

FINMA helped create a forum within the International Organization of Securities Commissions, ​a standard setter for market regulation, to promote adoption of ​AI by watchdogs that cover around 95% of global financial markets.

by Reuters