This week brought significant developments concerning prediction markets, offshore exchanges, digital-asset taxation and international crypto fraud. The United Kingdom advanced two tax reforms intended to treat certain digital-asset transactions according to their economic substance, while U.S. authorities escalated efforts against both state prediction-market enforcement and overseas scam operations.
CFTC Sues Utah as Prediction-Market Dispute Escalates
On October 27, the Commodity Futures Trading Commission announced that it had filed suit against Utah, seeking to prevent the state from using its gambling laws to restrict CFTC-registered prediction markets. The lawsuit followed Utah’s October 20 civil enforcement action against Kalshi and related entities.
The CFTC argues that the Commodity Exchange Act gives it exclusive jurisdiction over derivatives traded on federally registered contract markets and preempts conflicting state regulation. Utah maintains that event contracts involving sports and other subjects constitute gambling that it may prohibit within the state.
The conflict escalated further on October 28, when Utah filed criminal charges against Kalshi and co-founders Tarek Mansour and Luana Lopes Lara. The charges include alleged violations of the state’s gambling prohibitions and an alleged pattern of unlawful activity. Kalshi disputes the allegations and has characterized the prosecution as regulatory overreach. No defendant has been convicted.
Kelman PLLC has previously covered the broader federal-state dispute over prediction markets. The material new development is the CFTC’s decision to become a plaintiff against Utah at the same time Utah has shifted from civil enforcement to felony allegations against company executives.
For prediction-market operators, federal registration should not presently be treated as eliminating all state-law risk. Product availability, geolocation, marketing and executive exposure require state-specific analysis while courts continue to disagree about preemption. Businesses should also preserve the factual record concerning customer location controls and their responses to state enforcement notices.
FCA Secures Court Undertakings Restricting HTX’s UK Activities
On October 29, the Financial Conduct Authority announced a settlement resolving its High Court proceedings against global crypto exchange HTX, formerly Huobi. Under the court undertakings obtained by the FCA, Huobi Global may not knowingly communicate unlawful cryptoasset financial promotions to UK consumers, directly or indirectly. The restrictions cover websites, applications and social-media platforms.
The FCA began the proceedings in October 2025 after alleging that HTX violated the United Kingdom’s financial-promotion rules and repeatedly failed to engage with the regulator. The firm subsequently took steps to exit the UK. According to the FCA, new UK users can no longer register, deposits are unavailable and HTX may not target, solicit or actively seek UK consumers.
The confidential settlement does not constitute an admission of liability or wrongdoing. This distinguishes the result from a judgment finding that HTX violated the law.
Kelman previously discussed the FCA’s initiation of proceedings against HTX. This week’s development is the court-backed resolution and the resulting restrictions on HTX’s UK-facing activities. It demonstrates that an offshore location does not necessarily insulate an exchange whose online promotions reach UK consumers.
Global platforms should review whether websites, applications, affiliate arrangements, social accounts and paid advertising remain accessible or directed to jurisdictions they have purportedly exited. A geographic disclaimer may be inadequate if the platform continues accepting local customers or actively encouraging their participation.
UK Proposes Money-Like Tax Treatment for Eligible Stablecoins
As part of its October 28 Budget, the UK government confirmed that it will introduce legislation in Finance Bill 2026–27 to treat certain stablecoins more like money for tax purposes. The proposal is not yet enacted and is expected to take effect in April 2027 if approved.
Under the government’s stablecoin tax proposal, eligible stablecoins would generally need to maintain their value by reference to a fiat currency, be supported by fiat or other backing assets, be widely available and be designed for payment use.
For individuals and trustees, disposals of eligible stablecoins would be exempt from Capital Gains Tax, although transitional gains and losses could arise when the new regime begins. Interest-like returns from qualifying stablecoin lending would instead be treated as savings income. Companies would generally account for eligible stablecoins and related lending through the corporation-tax loan-relationship rules.
The proposal could materially simplify frequent payments and settlements that currently create disposal records. However, businesses should not assume that every token marketed as a stablecoin will qualify. Algorithmic tokens, narrowly distributed instruments and tokens not intended for payment may fall outside the proposed definition. Issuers, exchanges and payment companies will also need to consider how token eligibility is identified and communicated to customers.
UK Also Proposes Tax Deferral for Crypto Loans and Liquidity Pools
The same Budget confirmed a separate proposal addressing cryptoasset lending and liquidity-pool arrangements. The government intends to place certain transfers by individuals and trustees into and out of qualifying arrangements on a “no gain, no loss” basis beginning April 6, 2027.
Under the proposed crypto lending and liquidity-pool rules, Capital Gains Tax would generally be deferred until the participant makes an economic disposal of the cryptoasset. The reform responds to concerns that existing rules can treat the initial transfer into a lending or liquidity arrangement as a taxable disposal even though the participant retains continuing economic exposure.
The proposal applies to defined qualifying arrangements, not every transfer into a DeFi protocol. Documentation, token rights, withdrawal mechanics and whether the user receives a replacement asset may affect the analysis. It also addresses individual and trustee Capital Gains Tax; it does not establish a comprehensive tax or regulatory exemption for protocols, platforms or corporate participants.
DeFi businesses serving UK users should review whether their transaction records will allow customers to identify entry, exit and later economic disposal events. Tax simplification for users will still depend on accurate wallet and transaction data.
DOJ Charges Six in Alleged NFT Investment Scam Network
On October 27, the Justice Department announced charges against six individuals allegedly involved in an NFT investment-fraud operation based in Madagascar and connected to actors in Southeast Asia and China. The charges are allegations, and the defendants are presumed innocent unless proven guilty.
According to the Justice Department’s announcement, participants allegedly used dating platforms and fictitious personas to build relationships with victims before directing them to fraudulent NFT-investment websites. Victims were persuaded to connect and fund cryptocurrency wallets, after which assets were allegedly removed without their knowledge.
Investigators identified approximately 74 wallets associated with roughly 800 reported victims. The government also unsealed an earlier warrant used to seize websites allegedly associated with the operation. DOJ reported that its Scam Center Strike Force has cumulatively restrained more than $1 billion connected to cryptocurrency fraud and seized 700 fraudulent investment websites.
For victims, prompt evidence preservation remains essential. Relevant materials can include wallet addresses, transaction hashes, website domains, account statements, messages, device data and communications with exchanges. Early tracing may also identify opportunities to notify custodial platforms or coordinate with law enforcement before assets move beyond recoverable accounts.
Businesses and individuals needing assistance with digital-asset regulation, litigation, compliance or asset recovery may contact Kelman PLLC to discuss their circumstances.
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