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. Introducing RealFi, a smarter stablecoin that's backed by RealWorldAssets. 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. Good to see you back again, Rebecca. 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...
Doomer-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? And at the same time, there was an article in the FT today called Wall Street Loves Blockchain. So, you know, 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? Yeah, I mean, I actually think it's part of the evolution of the industry. I think evolutions are painful at times. And, you know, some body parts get discarded, new ones form perhaps in evolution. And, you know, maybe we're evolving to...
you know, a new phase where crypto is going to be more hand in hand with TradFi and more integrated into TradFi. And that's OK. Yeah, I just wrote something about this and use the word maturation. So, you know, maybe maybe that's. where we're at. Yeah, we're gonna have to talk more about that once that's out. I'm interested in reading that for sure. Okay, that sounds good. Okay, so hot topics of the week. Renato, do you want to kick us off? 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. Find 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. And 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. And he was trading, of course, on Calci, and now is publicly blasting Calci, 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.
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 and 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, you know, 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% 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.
So I think we're seeing a lot of 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. So 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 cold card 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 a thousand wallets. The company behind the cold card wallet, cold card.
Wallets has been asking customers to do upgrades and things like that. But I think this is really, really telling because the question now, especially with your point about the integration of Wall Street and the maturation is, well, you know, 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. And this looks like we may be turning things around. I think 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. So there is definitely, you know, some sort of evolution going on. What's your take, Renato?
Yeah, really smart take, Rebecca. I think, look, to me, you hit the nail on the head. I mean, first of all, this is part of the design of self-custody. I mean, it's not clear what recourse there is for folks who are suffering a loss here. It's not like there's a broker-dealer out there who's got capital set aside and getting examined and things like that. This is a Canadian company. There's terms of use out there. It's not clear what you can do if you have suffered a loss here, which is unfortunate for people who are impacted. And really, more broadly, this really makes me think about...
you know, a third of the, you know, the third of Bitcoin holders out there, you know, the third of the Bitcoin supply that could be impacted by quantum when that rolls out. I mean, here in this particular, you know, hack exploit, there is effects, but it requires you to make a new wallet and transfer. to a new wallet, your Bitcoin to a new wallet. Well, of course, a lot of people aren't going to be on top of this. A lot of people aren't going to do that. And really that's the same issue with that portion of the Bitcoin supply that is vulnerable to quantum. I mean, there are proposals out there like BIP-361, but there's no centralized person to make those decisions. And really just, I think it's arguably part of the design there as well. So I think there's a lot of questions that people are asking right now. And I think that's part of that evolutionary process that we discussed at the beginning of the show.
That's right. And you're not alone in your quantum concerns. Jim Cramer said he's selling all of his Bitcoin because of quantum. So do with that recommendation as you like, of course, not financial advice from us. So now turning to our special guest of the week. This guest is top tier or S tier, most special guest. I am super honored that she is with us. Commissioner Hester Peirce is joining us. She has had a prolific career at the SEC being sworn in January 11, 2018. So nearly a decade in service this time around. Commissioner Peirce, thank you so much for joining us today. Rebecca, Renato, it's great to be with you. Of course, I got to start with my disclaimer, which is that my views are my own as a commissioner, not necessarily those of the SEC or my fellow commissioners.
You know, I was telling myself, oh, I should have teed up your disclaimer because I knew it was coming, but I let you take it on your own. I'm glad that my days are getting it more soon over. I know, but we'll all remember it very, very well. You know, you are leaving the SEC soon. So this is one of your, you know, before you head off into academia. But, you know, as I know, you have had a very prolific career at the SEC this time around. I know you were there previously as well. But, you know, you've left us with a lot of writing, a lot of thought pieces, a lot of great speeches. But if you have to pick one thing that you hope people take away, not just in crypto, but anyone, if there's one thing that you hope people take away from your tenure at the SEC, what would it be?
I think it's really the importance of letting people try things. This country is about letting people. make decisions for themselves, try things, sometimes fail, pick themselves up and try again. We are a very now risk averse nation. And I think that that's somewhat in conflict with our founding principles, which is really about people who want to take risks because they really want to embrace liberty. And so just reminding ourselves that even in financial markets, it really is important for people to have freedom to make decisions and sometimes to get things wrong. This episode is brought to you by RealFi. Most stable coins leave capital sitting still. RealFi is different.
It connects on-chain capital to real-world markets like U.S. treasuries, money market funds, and private credit, real transparency, real impact, RealFi. Launching August 2026, join the testnet now at realfi.co. Commissioner Persos, I enjoyed reading your farewell speech. And in that speech, you have warned the commission against aggressive statutory interpretation, that rushing to the edge of every statute risks tumbling into unauthorized territory. I wanted to ask you, there had been some action earlier this year where the commission declared by interpretation that I think four categories of assets aren't securities. So I want to understand, help us understand why is reading jurisdiction narrowly safer than reading properly.
Well, we have to be very careful because we only have authority that's granted to us by law. And so we need to really make sure that we're exercising only the authority that we have. And when we take steps to regulate stuff outside, we're perhaps treading on someone else's jurisdiction. And that someone else might just be individual Americans who are allowed to do things without having to ask the government for permission. So it's just, I think, as a matter of constitutional principle, we really need to stick within our jurisdiction.
So you left this admonishment or this thought for people on your way out on the regulatory and legislative side. But what would you like to leave industry with as you leave in terms of what we should be taking forward? Obviously, the experimentation point that you made as your point of legacy. And I think everyone will take that with them. And on a day like today, I found that especially inspiring. But what would you tell the industry as we move forward, especially without you at the commission?
Well, it's always going to be the same message, which I've been giving recently, which is build things that people want and need. I met with someone earlier today, not in the crypto space, but in another area. And it was just really fun to meet with this person, an entrepreneur who. clearly described what he was doing is trying to meet, you know, he said what made him, what brought him joy is, is going and seeing that people were actually using the thing that he had built and that it was actually making their, their lives better because it was meeting a need that they had. And so I think that the thing I'd like to leave with industry is just that there is real joy and being able to make something that other people can use and that can make their lives better.
If we could do those emojis that you get on Google Meet, I would do one of my heart emojis. I know. This is really something. I know. It's such a massive impact. It's crazy because I think the first time that I interviewed you, it was in the middle of, I think, the last administration. And we were in a much different place. So one thing we're all keeping our eyes on right now, Commissioner, is clarity. And I'm not going to ask you to opine or discuss what's going on in Capitol Hill because I know you're not a Capitol Hill passage expert. But I did want to talk about the SEC's role.
if clarity doesn't pass. In other words, you know, Chairman Atkins has talked about how the SEC is ready, willing and able to write rules if clarity dies. What I want to understand is what can't the commission do alone? Like what's on the list that only Congress can deliver and then needs to, you know, you need passage of the bill to carry forward. Yeah. And I mean, I'm still, I'm still optimistic that the bill will get finished and it will give, I think.
the industry and investors and regulators an easier path forward because there'll be very clear lines about who has authority over the crypto spot market, for example. But we can do a lot. And I think the chairman is absolutely right that we will work hard either way if the legislation passes without lots of rulemaking to do. But even if it doesn't pass, we can do a lot. We can develop a framework for people who are trying to do fundraising using crypto assets. As an example, we are taking steps to work on issues like custody, trading of tokenized securities.
all kinds of questions about how the existing rules interact with crypto. So I think those are things that will keep us busy and provide some helpful clarity as well. I think one area that becomes a little more difficult without legislation is if we have crypto assets that are not securities trading alongside assets that are securities on a platform, what is our authority over the transaction, over the part of the leg of the transaction that is the non-security leg? I think that's one area that additional clarity there would be helpful. Well, before we let you go, Commissioner, we know you have a busy schedule. I just wanted to say that you have had an immense impact on my career, and I am so grateful that you have always been somebody who's been willing to stand by their principles. It is not always easy, and I have found the same, and I have found a lot of inspiration in you doing that. After I was on the SEC's DeFi Roundtable, you and Samira sent a lovely note, and along with a picture of all of us who are on the roundtable, and it is actually framed in my office, and I can see it from my desk as a point of inspiration. So thank you for always being willing to stand by what you believe, even when it has not been easy, and thank you for all you have done to contribute thought and growth to the industry.
Well, right back at both of you. I mean, I think that you both have been so deeply involved in this space for a long time. And one of the things that I really take away as a gift from my time at the SEC and dealing with these issues is that people have been so generous with their time, with their willingness to walk me through and painstaking detail things that I maybe should have understood without having that help. But people have just been really gracious. And it's been encouraging to see people who really are working to try to get to a better regulatory place. And I think there's sometimes a real misconception about this, that this is a group of people who just want to live in this world of ambiguity. And I think that.
What I've seen is people who really want to just have a sense of what the law is so they can put their heads down and work on building stuff. And I think both of you have had a role in making that, you know, really, really hammering home that message. Well, thank you. And I don't know if you remember, but the first time I interviewed you was during COVID on DeFi. Yes, was during this weird, like this very strange, large conference. And in the green room, the two of us beforehand, we were like, there's this thing called DeFi. And we did get into like, what is it? And stuff like that. So it was very long time ago. But thank you again for everything and for being with us today.
Thank you so much. Wow. I will say before we get to person of the week, I will just say that in many ways, I think that Commissioner Peirce is going to have a legacy that really is much larger than a typical SEC commissioner. I mean, to me, what I admire the most about her is her intellectual honesty, coming out and putting some missives out there like tokenized securities or securities, things like that, where she's... you know, putting a marker down and saying like, hey, I'm intellectually consistent here and everyone needs to take the law seriously and actually, you know, try to comply within sort of the lines here that we have as regulators. Yeah. And she has always been, as I said, she has always been principled, even when it was hard. And even when it was like, oh, I thought you were totally with us to your point on the tokenized securities. Like, yeah, she is with us within the bounds of the law. I have to say, I almost choked up a little bit when I was thanking her. So like I knew, you know, she really had an impact, but I think we will all feel it immeasurably when she is gone. So what a treat to be able to have her today as she exits the SEC in the coming weeks, months.
Before her. For sure. All right, Renato, tell us. People of the Week. Yeah, we have our People of the Week. It's actually a bipartisan appointment here of two senators. This is Tom Tellis, a Republican in North Carolina, and Ruben Gallego, a Democrat from Arizona, who are working very hard to try to put together an ethics compromise that they delivered to the White House to try to get the votes over the line for the Clarity Act. You know, Rebecca, I've said many times that I don't think that the Clarity Act and just having market structure legislation passed should be a partisan issue. Obviously, there's a lot of politics involved.
But, you know, this is the final sticking point that's needed to get us past 60 votes. And this is exactly what you expect legislators to do, which is to roll up their sleeves, work together in a bipartisan way, come up with a compromise and try to get it done. And so I give a lot of credit, even though the White House hasn't responded to this compromise yet. To me, this is exactly what we need in Washington. And so kudos to both of these gentlemen for being real statesmen and working in a bipartisan way.
Totally agree. And Senator Tillis has been out front in terms of coming up with a yield compromise too with Senator Ulsterbrook. So he has really been the Republican reaching across the aisle to try to get this done. I will say you can see both from new ads that are coming out on streaming services and from letters that are coming out, there are definitely wins that are wins, W-I-N-D, not W-I-N-S, of teams and groups. We're pushing against the bill behind the scenes. And to your point about this, you know, we should not be having this be politics. This really should be about good policy. I think that really that needs to be set aside, especially when you see things like hacks and you said, oh, we don't know what the recourse is. Or when we see, should we be self-custodying or should we be on centralized exchanges? This bill will answer a lot of those questions, including on the cybersecurity side. And, you know, I don't know how open and vocal people have been, although I've started being pretty vocal. Like this isn't a super industry friendly bill. We're not all going to be dancing around and not having any obligations. These are serious obligations at the same level that you would see traditional financial regulation, robust.
I mean, I said this two times ago, but. A lot of robust disclosures from people who are associated with tokens. And the centralized exchanges and brokers and all of them are going to have a lot of serious compliance obligations outside of what they have to do as money transmitters now. So a lot, a lot of kudos goes to all the senators who are working really hard behind the scenes. I think we also need to thank the Senate staffers who have been doing a ton of work, those in the industry who have been going office to office, I know including you, Renato, to really try to explain what this bill does, including to senators off committee who may not have had as much time with this bill. So really hopeful that we can move this forward in a very productive way so it meets the maturation of where the industry is today to try to bring it all full circle.
Absolutely. My view is that if there are dangers out there, if we're concerned about criminal activity, for example, the answer is more regulation, not less. And having legislation, having rules promulgated, that's what you should be doing as technology advances, as the financial services industry evolves. We need to be on top of this. And if the answer is that there's other things that we want to add or improve, we can do that on top of this. But we need to get started because having no regulation, having no legislation in place, that's much more dangerous.
Yeah, and there are 40 rulemakings in here. So we'll be able to add all sorts of robust things as this all moves forward with the SEC and the CFTC. Well, it's so good to be back. Missed you last week, Renato. What a great episode. Very spicy episode that you guys had. I don't have trash talking as one of my hobbies, but we can start talking about our own hobbies next week. And for any listeners out there, give us feedback. Tell us what you want to hear. And looking forward to another great policy protocol next week. All right. See you soon.