U.S. Attorney Jay Clayton Expects Cases Related to Trading in Prediction Markets

Wall Street’s Top Cop Expects Enforcement on Prediction Markets

Wall Street’s top cop expects regulators to take actions tied to prediction markets following a surge in trading on the platforms over the past year, saying that simply making bets outside of traditional spaces “doesn’t insulate you from fraud.”

Manhattan US Attorney Jay Clayton made the comments Thursday during a speech at the Securities Enforcement Forum in New York, telling the audience that prediction markets are “an area that I am looking at.”

“What is the applicable law? Let’s say I have a big stock position,” Clayton said. “The stock’s trading at $130, there’s a prediction market that pays if the stock goes below $100. Is that an out of the money put option? It sure looks like it. Right? You wouldn’t advise someone to sell that as a non-security.”

US attorney says office will not prosecute companies that cooperate in criminal probes

Federal prosecutors plan to increase incentives for companies that cooperate during criminal investigations, including promises not to prosecute them, the U.S. Attorney in Manhattan said on Thursday.

Jay Clayton’s remarks at an industry conference come as the Justice Department is scaling back corporate crime enforcement and refocusing on immigration and drug cases under the Trump administration.

Companies need to know there is a specific benefit to cooperating with U.S. prosecutors in rooting out wrongdoers, Clayton said at the Securities Enforcement Forum in New York.

Crypto Spurs SEC–CFTC Cooperation, But Regulatory Lines Remain Blurry

The two agencies have also sparred over jurisdiction of crypto derivatives.
The SEC and CFTC “didn’t really get into specifics on what [the collaboration] really means and what’s going to come from it,” Hendricks said.

Both agencies have different regulatory frameworks for the markets they oversee and it remains unclear which framework is more appropriate for crypto, said former SEC Division of Enforcement senior counsel Rebecca Fike.

“Making something new is hard; making something new by committee is even harder,” she said. “I know what the problem is. I don’t know what the solution is.”

In Fike’s view, any jurisdictional conflict between the market regulators arose out of a genuine belief they were the right agency to handle any particular issue.
Hartman, however, said she has experienced instances in which the agencies jockey for position on certain enforcement issues and open inconsistent parallel investigations that became onerous, which was a problem in previous administrations.

The commissions may now be getting direction from the Trump White House in how they should approach operating together, since this administration does not believe that an executive agency can be independent of the president, said former CFTC general counsel Rob Schwartz.

SEC v. Musk: Federal Court Addresses Constitutionality of Section 13(d)

The D.C. federal district court recently addressed Elon Musk’s motion to dismiss the highly anticipated SEC lawsuit regarding Musk’s publicly scrutinized Twitter stock beneficial ownership reporting back in 2022. Musk had disclosed his ownership stake in Twitter on a Schedule 13G, more than 20 days after crossing the 5% threshold, and one day before filing a 13D reporting that he’d accepted a seat on Twitter’s Board.

In the motion to dismiss, Musk argued:
– Section 13(d) unconstitutionally forces speech
– Rule 13d-1 is unconstitutionally vague
– The SEC is selectively enforcing Section 13(d)
– SEC Commissioners are unconstitutionally protected from removal

The court found that “the balance Congress struck in Section 13(d) does not violate the First Amendment” and Rule 13d-1 is not unconstitutionally vague. It also found that Musk hadn’t presented enough evidence (for now) for a “selective enforcement” defense….