Stephen Diehl

Crypto in 2026: Oh, This is the Bad Place

Open your favourite Doom News App any morning in 2026 over your morning coffee, and the only honest phrase that should come out of your mouth is, "Oh, this is the Bad Place." Because the world has gone truly mad. The president of the United States is running a memecoin out of the White House, and the top two hundred and twenty holders were flown to his golf club for a private dinner with the seating chart arranged by purchase volume. A federally licensed commodity exchange is taking retail bets on whether the U.S. military will assassinate a foreign head of state, and reporting suggests the heaviest order flow is coming from accounts sitting inside the kill chain. A shadow dollar system, newly blessed by federal statute, is quietly migrating the savings of the global poor onto the balance sheets of a handful of opaque private companies. Each one, taken alone, would have been a bleak, dystopian fever dream ripped from the pages of a William Gibson cyberpunk novel. Together they now appear as the new normal, and the vocabulary we use to do policy analysis is going to have to update to match the interesting times, in the proverbial sense, that we now inhabit.

A short note on the title before we begin. In the first season finale of The Good Place, a whimsical and philosophical sitcom about the afterlife, the protagonist Eleanor realizes that the meticulously designed paradise she has been living in is in fact an engineered torture chamber. The Bad Place is the show's name for hell. The afterlife she occupies will not let her swear, so her line on the discovery comes out in the show's comedic substitutions. "Holy motherforking shirtballs," she says, "this is the Bad Place." The implied joke of the show is that hell is not a fire pit. It is a world so relentlessly, hilariously awful in its absurdities that you cannot help laughing, and the laughing is what eventually clues you in that you are in hell. Like a world full of prediction market contracts on whether our government will extrajudicially assassinate the head of state of another country, traded by insiders sitting inside the kill chain, that is not worth reporting on anymore because it's barely the craziest thing this week and it's only Tuesday. We now live in this particular form of hell. This is the Bad Place.

But before any of that, let's go back to first principles. Wind back to your Econ 101 class in the halcyon years of undergraduate naivety. You are nineteen, hungover, half-asleep in the back of the lecture hall, and the professor at the chalkboard is explaining what a market is. A market, she says, is a price discovery mechanism for goods and services whose value comes from outside the market itself. The price of wheat reflects something about the world. The price of a share in a public company reflects expectations about real cash flows. The price of an interest rate future reflects collective views about real monetary conditions. In every case the market is a measuring instrument for an underlying reality, and the participants take positions on that reality. That is what makes markets epistemically valuable, and that is the property the crypto industry has spent fifteen years obscuring in our discourse.

The instruments that now constitute the so-called crypto market lack the property entirely. The price of Bitcoin measures only the price of Bitcoin. The price of a meme coin reflects only the collective belief of meme coin holders that they will be able to sell to a greater fool. The price of an Iran-strike contract reflects only the trading activity of accounts with access to classified planning. The price of a TRUMP coin reflects only the willingness of access seekers to pay for presidential time. A defender will say that gold is no different, a price that refers only to itself, and that we do not call gold a fraud; but gold carries a floor of industrial demand and a monetary role thousands of years old, and Bitcoin has neither. These are self-referential games whose prices contain no information about the world that anyone who lacks privileged access could find useful. They have nevertheless been given the regulatory rail, the institutional dignity, and the legal vocabulary of markets. The public's trust in markets is finite. Every dollar lost on a self-referential game labeled a market consumes a small piece of that finite trust, and the consumption over fifteen years has been considerable.

One legitimate use deserves acknowledgment before it is set aside. A dissident under a hostile regime, a citizen of a country whose banking system has been turned into an instrument of political coercion, a saver fleeing capital controls aimed at the government's enemies, these are real people for whom a censorship-resistant payment rail is a genuine good, and the strongest case for crypto has always lived here. But this case justifies almost none of what follows. It argues for a narrow tool available at the margins to people in extremity, not for routing leveraged speculation and event-contract gambling to American retail through federally blessed channels. The industry invokes the dissident and sells to the freshman. This essay is about the second transaction, and the first does not redeem it.

The policy correlate of the vocabulary theft is equally clean. American finance has always carried high-risk instruments at its margins, and the regulatory tradition has handled them by keeping them inside institutional perimeters where the participants are ostensibly capitalized and sophisticated enough to absorb the risk. The defining feature of the crypto industry, the feature that distinguishes it from every previous wave of financial complexity, is its single-minded focus on bringing those high-risk instruments to the retail customer who has no business in any of them. The institutional channels for sophisticated counterparty trading already exist under U.S. law and have existed for decades. The industry has chosen to operate outside them.

That choice, made over and over, is the single fact that organizes the rest of this piece. The supervised channels are open and unprofitable, so the industry took the retail one. Aggregation forecasting for sophisticated counterparties already runs under the existing eligible-contract-participant rules; the industry chose not to compete there. Dollar-denominated saving already runs through U.S. money market funds and offshore deposit products; the industry chose not to compete there. Hedging on real commodity outcomes already runs under the derivatives frameworks the CFTC was built to administer; the industry chose not to compete there. Every time, it chose the version of the product with no sophisticated counterparty on the other side of the trade, because that is where the money is. The business was never aggregation, or saving, or hedging. The business is sucker farming: manufacturing a product whose counterparty is a retail customer who does not understand that he is the one being farmed. It could have played by the existing rules. It has decisively chosen not to.

The choice is the argument.

What follows is an inventory, then a politics. The casino and the financial nihilism that feeds it. The so-called prediction markets. The dollar-denominated stablecoins and the monetary sovereignty they quietly transfer. The political-economic machine that defends all three. And finally, what a serious policy response would do, and what can be done to stop it.

The Casino Pipeline

Just as I warned years ago, the crypto economy now functions as a high-throughput onboarding ramp for retail gambling. The pipeline operates in stages, each of which feels like a small step from the one before. Meet Mike. Mike is a college freshman who is exposed to crypto through social media. He downloads Coinbase, buys ten dollars of CumRocket because his friend group is in on it, watches the price move, and feels for the first time the dopamine rush of gambling on non-economic random walks. By his sophomore year he is onto harder drugs: 0DTE options on triple-leveraged single-stock ETFs he does not understand, traded on a gamified brokerage built to look like a video game. By twenty-two he has a Kalshi account, because betting on the outcome of a presidential primary or a reality television show winner has been reframed as participation in financial markets. By twenty-four he has hit rock bottom in the sportsbook, firing off ten-leg parlays on Tibetan ping-pong and third-division water polo at two in the morning because the games he has actually heard of no longer move fast enough to feel like anything. Mike believes he is investing. Mike is gambling. Mike is on the express train to a gambling addiction, and he is meaningfully poorer at every stop along the way.

At no point in this pipeline does Mike's capital touch productive enterprise. He has financed no factory. He has funded no research program. He owns no share of a business that employs people and produces goods. He has spent five years rehearsing the cognitive habits of a degenerate gambler under the steady impression that he was learning finance. The novelty in 2026 is not gambling, which has always existed. The novelty is that the cognitive architecture of gambling has been imported into the basic infrastructure of American household finance and is now functionally indistinguishable from it.

The behavioral mechanism is variable-ratio reinforcement, an effect well established in laboratory psychology and well known to every product manager in the industry. Unpredictable rewards produce the strongest habit formation. Two decades of behavioral data have taught the industry how often to deliver the green candle to keep the user pressing. The mechanism itself is decades old. The novelty is that crypto is the first product class to apply it at the scale of an entire generation's introduction to financial markets.

Financial Nihilism

The pipeline does not work on its own. It works because the conditions of young economic life in 2026 make it work. The cohort being onboarded into the casino is the same cohort that cannot afford a starter home in any major metropolitan area, that is carrying historically high student debt loads, that watches the cost of groceries climb faster than wages, and that has been told for fifteen years that the traditional path of patient accumulation through index funds is a fool's game compared with the asymmetric upside of speculation. The economic precarity that crypto purports to solve is the same precarity that makes the customer base receptive to crypto. The industry harvests the anxiety, refines it into a speculative token, and sells the token back to the anxious as the solution to the anxiety.

The technical name for the resulting disposition is financial nihilism. The worker does not believe the system will reward patience, the saver does not believe the savings will retain value, and the investor does not believe that the traditional measures of fundamental worth are operative anymore. Under those conditions the casino reads as the rational expression of a coherent disbelief in the alternatives rather than as a departure from rationality. The industry understands this perfectly well. Its marketing is calibrated to it. Its product surface is designed for it. Every onboarding flow is an implicit argument that the conventional financial system has failed the user and that the only remaining route to dignity is speculative.

Alienation, the residue that two centuries of industrial reorganization have deposited in every working life and that no political project of left or right has managed to dissolve, has been packaged, priced, and sold back to the alienated as a financial instrument. And maybe sit with that for a second, because it's bleak.

Where Prediction Markets Fail

The prediction-markets case is the cleanest test of the structural thesis above, and it is the section in which the analytical argument of this piece carries most of its weight.

The industry's strongest defense of these products is that markets aggregate dispersed information that polling and expert panels cannot. Grant the claim its most favorable form, and it still does not get the industry where it needs to go. Whatever information a prediction market produces is a byproduct of the betting, not a good anyone set out to make. The trading builds nothing, finances nothing, and employs no one. It is zero-sum by construction, a transfer from the traders who are wrong to the traders who are right, and after the platform takes its cut it is negative-sum, a transfer from everyone at the table to the house. The claimed public benefit, a marginally sharper probability on a question a pollster could have asked, is speculative and theoretical. The fee skimmed off every dollar of losing flow is concrete and guaranteed. Strip away the language of price discovery and the actual product is a predatory rake on zero-sum speculation.

The deeper point matters more. Where prediction markets do outperform other methods, the outperformance is concentrated in exactly the cases where the marginal trader has non-public information. The Iran strike trades are not an aberration but the predictable equilibrium. Wherever the underlying has a material insider population and no genuine institutional hedging demand on the other side of the book, aggregation collapses into insider rent extraction. That describes sports outcomes, election outcomes, and the timing of military operations alike, and in each the resulting price discovery reduces to a tax on uninformed counterparties. That tax is sucker farming, the business this industry was built to run, now showing itself on the order book. The aggregation defense and the insider-trading scandal describe the same phenomenon in two registers.

The standard welfare defense of any speculative instrument depends on an accounting that the prediction-market case cannot pass. The Pigovian accounting requires that the social benefits of an activity be weighed against the externalities it imposes on parties who never chose to participate. Applied here the accounting collapses. The benefits, modest and theoretical, accrue to a small set of sophisticated counterparties who could equally well be served by closed institutional markets that already exist under ECP rules. The costs, concrete and growing, fall on third parties who never traded the contract. The retail customer sucker-farmed on the wrong side of an asymmetric bet. The election integrity of a state whose results are traded as a derivatives position by accounts in two foreign jurisdictions. The foreign head of state whose continued breathing is the underlying. The serving soldiers whose operational planning is the alpha. The polity whose information environment is corrupted by the publication of market-implied probabilities that are in fact reflections of insider position. These are textbook negative externalities, of the kind the regulatory state was built to internalize, and they are categorically excluded from any honest welfare defense of the product class. If the entire prediction-market sector were closed tomorrow, no serious accounting of aggregate U.S. welfare would register a loss.

Consider a single contract that actually ran on Polymarket through the end of last year. It was titled "Will Jesus Christ return to Earth in 2025?" Settlement was scheduled for December 31. The implied probability hovered around three percent for much of the year. The market drew roughly three million dollars in volume before settling no. A platform that the federal regulatory apparatus has agreed to treat as adjacent to a derivatives market listed, ran, settled, and paid out a binary contract on the eschatological return of the Christian messiah. The same agency that supervises price discovery in corn, soybeans, oil, and interest rates considers this product an item in its regulatory family. What happened on that order book is sucker farming in its purest form. The platform manufactured a binary proposition cheap enough for retail to take a flier on and absurd enough that the operator carried no real risk, dressed up the oldest casino mechanic in finance in the institutional vocabulary of derivatives, and skimmed a fee on every dollar of the resulting flow. The operator will keep doing this for as long as the regulator continues to treat each new absurdity as a marginal extension of a legitimate category.

The deadly serious version of the same phenomenon played out earlier this year on Polymarket in the weeks surrounding the U.S. strikes on Iranian nuclear facilities. The standard of evidence here matters and deserves to be stated explicitly. What follows has been reported by CBS News and the New York Times rather than charged in an indictment, and the legal characterization remains pending. The reported pattern is that nine anonymous wallets, created in the days immediately before the first American strike, went on to win an extraordinary fraction of bets placed on the precise sequence of events that followed. They allegedly called the date of the first strike. They allegedly called the killing of Iran's supreme leader. They allegedly called the timing of the ceasefire announcement. Their combined reported winnings approached two and a half million dollars. The pattern is one that no plausible model of public information can explain.

A separate matter is in the criminal record. A federal grand jury has indicted Army Master Sergeant Gannon Ken Van Dyke for allegedly using classified information about a U.S. operation targeting the Venezuelan government to net more than four hundred thousand dollars in Polymarket profits. Sit with the sentence for a moment. A serving non-commissioned officer of the United States Army, holding an active security clearance, in a position of trust above any rank most Americans will ever hold, allegedly used the operational planning of a U.S. military action against a foreign government to place winning bets on a CFTC-regulated platform whose retail counterparties had no idea they were trading against the kill chain. The platform took its fee on every dollar of that flow. The federal regulator that has agreed to call the platform a derivatives exchange has not, to date, suspended the contract class. The charge is on the docket. The product is still listed.

The hedging defense, in the face of this record, fails in the simplest possible terms. Nobody runs a household business whose cash flows depend on whether the U.S. extrajudicially assassinates a head of state in an illegal war. Nobody hedges their retirement portfolio against whether the centerpieces at Taylor Swift's wedding are white or cream.

At a recent Senate hearing the industry's own witness was unable to articulate a coherent hedging use case for an event contract on whether a baseball pitcher would throw a ball or a strike.

The hedging argument is a fig leaf invented to justify carrying these products under CFTC derivatives jurisdiction rather than under state gaming regulators.

The CFTC itself has a statutory rule against event contracts that constitute gaming. It is choosing not to enforce it. The agency has instead positioned itself as the cheerleader for an industry it was never built to regulate, signing an MOU with the NHL about the impact of prediction markets on the integrity of professional hockey, and floating, in public remarks by its leadership, the prospect of similar agreements with other sports leagues. The federal agency whose statutory purpose is the supervision of real derivatives for sophisticated counterparties with genuine hedging needs is now drafting partnership documents with sports leagues about game integrity.

This mission creep is happening at exactly the moment the agency has been hollowed out. According to public testimony and reporting on the agency's headcount, the CFTC has shed roughly a quarter of its workforce since 2024, from more than seven hundred employees to about five hundred and thirty-five by early 2026, with the enforcement division contracting from one hundred and forty to roughly one hundred and five over the same period. The agency oversees an over-the-counter derivatives market the BIS pegged at eight hundred and forty-six trillion dollars in notional outstanding as of mid-2025, the price discovery layer that determines what Americans pay for food, gasoline, and electricity. This is institutional dereliction at the level of the worst SEC failures of the 2000s, the ones the modern compliance state was supposedly built to prevent from recurring. Every hour its enforcement staff spends on a Polymarket subpoena is an hour not spent on the markets that actually matter to American households.

There is also the question of whose son sits where. Donald Trump Jr. sits on Polymarket's advisory board and his venture fund, 1789 Capital, holds an undisclosed equity stake in the platform. The president's son is a beneficial owner of a company whose customers include serving military personnel betting on the timing of presidential military operations. Senators Merkley and Klobuchar have introduced the End Prediction Market Corruption Act to bar the president, vice president, and members of Congress from trading on these platforms and to require their immediate families to disclose such trades. House Oversight Chair Comer has opened an investigation. Neither effort has yet cleared committee. Which will come as a shock to no one under this administration, obviously.

The line worth drawing is bright. Sophisticated institutions already trade instruments like these among themselves. I am not going to litigate here whether they should; there are systemic-risk concerns, but no worse than the ones derivatives trading already carries. An event or weather or rate contract traded between counterparties who can absorb the loss is no more exotic than any other derivative, and it is not where the harm lives. The harm is the retail product, and retail has no business in any of it. Sports betting, election betting, and military operation betting are gambling and should be regulated by the state gaming authorities who have spent a century building exactly the consumer-protection expertise required. The CFTC should be returned to its mission of regulating real derivatives on real commodities markets for institutional investors. The "genuine hedging interest" that is supposed to gate all this is, in derivatives land, mostly a joke, and I am not shy about saying as much directly.

Stablecoins and Outsourced Dollarization

The second front in the 2026 crypto landscape is the formal integration of dollar-denominated stablecoins into the global monetary system through the GENIUS Act passed last year. I wrote about the risks of digital dollarization two years ago and the intervening period has confirmed the pessimistic version of that analysis. The shadow Eurodollar system is no longer shadow. It is federally blessed. The administration is pressing the Fed to extend payment-account access to the private companies that issue these instruments. A slice of monetary policy has been privatized and outsourced to a small number of corporations chosen for their willingness to operate in regulatory gray zones.

The industry's pitch leans on a sympathetic figure. A worker in Lagos, Buenos Aires, or Istanbul, watching her local currency lose purchasing power year after year, saves in a U.S.-denominated stablecoin because the dollar is unavailable to her under any other route. The story is built to be unanswerable. It is also wrong on the facts. The worker is not saving in dollars. She is saving in a claim against an offshore issuer whose reserve composition and audit history fall well short of what any domestic regulator would tolerate, and whose dollar off-ramps in her country are intermittent at best. The argument that stablecoins solve a real problem for foreign retail savers assumes a counterfactual in which she would otherwise have no dollar exposure at all. The actual counterfactual is the informal dollar economy that has existed in every soft-currency country for half a century. Physical USD changing hands in the souk. Hawala networks settling cross-border balances on trust. Dollar deposits held at correspondent banks through diaspora relatives. Dollar-denominated remittance products run by Western Union and its competitors. Stablecoins did not invent dollar access for the global poor. They inserted an opaque counterparty into a route that already existed, and they market the substitution as if it were the dollar itself. The conflation of stablecoin and dollar is the industry's most successful piece of marketing. It is also the basis on which the rest of the policy debate has been mis-framed.

The collective consequences of the substitution land harder than the individual case. This is the fallacy of composition projected onto monetary geography, and a Pigovian externality on a planetary scale. The private interest is genuine, a global market's appetite for a frictionless way to hold dollars, captured by the saver who holds the token and the issuer who books the reserves. The cost is paid by everyone outside that transaction. What looks rational for the individual Nigerian saver is corrosive for Nigeria. When the Federal Reserve adjusts interest rates to manage U.S. domestic conditions, those decisions now propagate into the savings accounts of people in countries whose economies may require the opposite policy. The local central bank loses its tools. The local government loses the ability to respond to local shocks. The local economy becomes a procyclical amplifier of decisions made by an institution that has no obligation to consider its welfare. The mechanism is outsourced dollarization, carried out one wallet at a time, without a treaty and without the consent of the affected sovereign. No coercion is required. Only the slow erosion of alternatives.

The asymmetry runs back the other way. The reserves backing the largest stablecoins consist primarily of U.S. Treasury bills. As stablecoin issuance has scaled into the hundreds of billions, these private companies have become structurally important holders of U.S. government debt. As of the most recent public disclosures, the combined Treasury holdings of the two largest issuers exceed those of most sovereign holders outside the top tier. A run on a major stablecoin would force a fire sale of those Treasuries, the contagion channel I take up in detail below. The American financial system is now exposed to the operational risks of two private companies whose internal risk-management practices remain opaque, whose executives have repeatedly demonstrated cavalier attitudes toward reserve disclosure, and whose business model depends on continued growth of speculative crypto trading. This is a new transmission mechanism for financial contagion, dressed up in the language of efficiency.

The contagion mechanism is not hypothetical. In March 2023 the largest U.S.-domiciled stablecoin, USDC, broke its dollar peg and traded as low as eighty-seven cents after Silicon Valley Bank's failure exposed Circle's uninsured reserve concentration there, and the peg was restored only when Treasury and the FDIC invoked the systemic risk exception to guarantee SVB deposits in full, an action that was, in operational substance, a federal rescue of a nominally uninsured private stablecoin. The precedent now sits in the policy record. Any issuer of comparable scale under run pressure knows the systemic risk exception is available to it, and any future Treasury Secretary knows the cost of allowing a major stablecoin to fail in disorder. The federal backstop for stablecoins is, in effect, already in place.

The OCC has spent the year since the GENIUS Act extending the formal bank perimeter further around the same firms. National trust charters have been granted or conditionally approved for the operating entities of a growing list of major U.S. crypto exchanges, custodians, and stablecoin issuers, a charter application from World Liberty Financial was filed in January 2026, and a May 2026 executive order directed the OCC to accelerate crypto-firm chartering and instructed the Federal Reserve to reconsider payment-account access for uninsured institutions, with the Fed publishing a formal proposal substantially in line with that direction one day later. Each move brings crypto issuers deeper inside the federal bank chartering apparatus, which is to say deeper inside the implicit federal backstop the SVB episode already made operational, on the legal theory that the issuance of redeemable on-demand par-value claims is a fiduciary trust activity, which it plainly is not.

The honest policy position is that stablecoin issuance is not a business model the federal government should license as a separate category. A redeemable on-demand par-value claim against a Treasury and short-term-credit portfolio is, in substance, either a bank deposit or a money market fund. Both perimeters were built through hard experience, the banking framework over the better part of a century and the MMF framework through the 2008 crisis and the March 2020 dash for cash, and both work. There is no good reason to invent a new and weaker regime for an instrument that already has two well-tested ones available to it. A firm that wants to issue payment-rail money can apply for a national bank charter and accept the capital, liquidity, supervision, and consumer-protection obligations that come with one. A firm whose business model cannot survive ordinary supervision should not be tolerated as a going concern, and the appropriate response to its failure to meet the standard is an orderly unwind rather than a regulatory accommodation. The household demand the industry has tried to claim under the banner of financial inclusion is a real demand and deserves a real public answer, not the marketing of a speculative trading rail as the substitute.

The Sovereignty Question

The international policy literature has been clear-eyed about the stakes in a way the domestic debate has not. Staff papers from the IMF have flagged dollar stablecoin proliferation as a new vector for currency substitution in countries with weak local currencies, accelerating the cryptoization of household savings in ways that complicate both monetary policy transmission and balance-of-payments management, with the Fund's December 2025 departmental paper on stablecoins making the structural argument at length. Work at the BIS has tracked how stablecoin flows move the price of safe assets in terms the U.S. Treasury market should find sobering, with a parallel analysis of stablecoin runs drawing the obvious financial-stability conclusions, and has reached the further conclusion in its 2025 Annual Economic Report and in the BIS work on cryptoasset risks in emerging market economies that the financial-stability externalities of dollar stablecoin scale are inadequately addressed by the prudential frameworks under which the issuers currently operate. Both bodies of work are publicly available and neither has been seriously engaged by the U.S. policy community responsible for the GENIUS framework.

The two largest non-U.S. monetary authorities have reached compatible conclusions in different institutional languages. The ECB has framed the digital euro initiative as an explicit sovereignty response, naming dollar stablecoin proliferation in member-state retail payments as a strategic risk that justifies a public-sector alternative, and the ECB Financial Stability Review has made the corresponding point about cross-border spillovers in the language European supervisors use for these questions. The PBoC has reached the same diagnosis through the digital yuan program, and its governor has been explicit in naming stablecoins as a source of fragility in the global financial system and a threat to the monetary sovereignty of smaller jurisdictions, in domestic policy documents and BIS-hosted speeches more open about the framing than its European counterpart has been in English-language communications. The two largest non-U.S. monetary authorities both interpret what the GENIUS Act blessed as a vector for U.S. monetary projection that their citizens did not consent to. Their interpretation is correct, and the U.S. policy community would be well served by engaging it in those plain terms.

There is a closer comparison for what a stablecoin run would do to the Treasury market, and it is not a foreign government selling off its bonds. It is the money-market-fund panic of March 2020. Money funds promise to pay you a dollar on demand, so when everyone wanted cash at once they had to dump their short-term Treasuries fast, and the Fed had to step in to stop the slide. The two biggest stablecoin issuers now sit on a pile of short-term Treasuries about the size of the money-fund book that set off that scramble. They are opaque private companies whose revenue rides on crypto trading volume that can fall off a cliff in a single week. If either one faced a run, it would have to sell that pile in a hurry, into a market that researchers keep showing has less and less room to absorb a big, concentrated sale. We have watched that limit bite in the March 2023 bank failures and in the hedge-fund basis-trade buildup tracked through late 2024, and the government's own Treasury-market resilience report says the same. Drop a forced seller of that size into that market and you have a new way for a crypto panic to turn into a Treasury-market crisis, one nobody has stress-tested and the rulebook was never built to contain.

The Political Economy

The reason none of the above has been fixed is political. The crypto industry has built, over a decade, one of the most effective single-issue lobbying operations in modern American politics, comparable in dollar terms to the established giants of the field and arguably more concentrated in its targeting. The political vehicle is the Fairshake network of super PACs and affiliated entities. Fairshake and its affiliates raised more than two hundred and sixty million dollars for the 2024 cycle and deployed roughly one hundred and thirty-three million dollars in outside spending against and for candidates in House and Senate races. The targeting was openly transactional. In the March 2024 California Senate primary, Fairshake spent over ten million dollars attacking Representative Katie Porter, who had been a vocal critic of the industry on the House Financial Services Committee. Porter finished third. In House races across the cycle the PAC went after incumbents on the wrong side of digital-asset regulation and elevated friendly challengers, while the ads themselves almost never mentioned crypto, on the theory that what matters is the composition of the chamber rather than the public salience of the issue. The strategy worked. The chamber was composed. The GENIUS Act and the broader market-structure framework friendly to the industry's preferred regulatory perimeter followed.

The president's own crypto venture sits at the apex of the resulting system. The eponymous TRUMP token, launched days before the 2025 inauguration and traded on The Family's platform alongside the World Liberty Financial stablecoin and governance token, is the cleanest case in modern American history of a sitting president monetizing the office through an instrument that any wallet in the world can hold. (The Family, capitalized and singular, in the manner of gangster movies.) Three documented facts carry the argument. First, the token was structured around an explicit access mechanism. The largest holders were invited to a private dinner with the president at his Virginia golf club in May 2025, and the very top holders to a separate, more exclusive VIP reception, with the leaderboard published in real time on the project's website. The price chart for a presidential meme coin and the seating chart for presidential proximity were the same chart. Second, the buyers skewed heavily offshore. Bloomberg's analysis of the token's leaderboard found that all but six of the top twenty-five wallets at the dinner cutoff used offshore exchanges inaccessible to U.S. customers, which is the strongest available signal that the marginal buyer of presidential proximity was foreign. Wall Street Journal reporting, summarized in subsequent coverage, documented a separate five-hundred-million-dollar investment from an Aryam-branded Abu Dhabi vehicle backed by Sheikh Tahnoon bin Zayed Al Nahyan for a forty-nine percent stake in the affiliated World Liberty Financial entity, and a separate two-billion-dollar Abu Dhabi state-fund investment into Binance was later settled through World Liberty's USD1 stablecoin. Third, the scale is no longer ambiguous. The House Judiciary Democratic staff report published in late 2025 documented Trump-family crypto holdings that peaked above eleven billion dollars and crypto-attributable income to The Family and its principals exceeding eight hundred million dollars in the first half of 2025 alone. The TRUMP coin eliminated the intermediary that every previous influence-buying scheme has required. There is no shell company, no consulting contract, no offshore real-estate transaction in the chain. The price chart is the influence-buying market in real time, denominated in dollars, settled on a public ledger, open to any wallet in the world.

The pipeline runs in both directions. The industry extracts wealth from retail participants. A fraction of the extracted wealth is converted into campaign contributions through Fairshake and its affiliates. Those contributions buy a regulatory environment that allows the extraction to continue. The Overton window has been dragged so far that the basic proposition that gambling on the death of a foreign leader should be illegal now reads as a fringe position inside a Senate committee room. The loop has no internal correction mechanism. The only correction comes from outside, through legislation written by members who do not need crypto money to win their primaries and applied by regulators who have not been hollowed out by the same political machine. That path is narrow, and it is narrowing further every cycle.

A Crypto Policy for the Democrats

One caveat before the prescriptions and the political strategy that follow them. I am a software engineer, not a lawyer or political strategist, and what follows is just my personal opinion as a citizen. I am not going to dress it up as a brief or pretend I can draft the statute. What I can do, after a decade of watching this industry up close, is tell you where its soft points are: which products cannot survive real supervision, which business models exist only in the gap where some existing rule is going unenforced, and which threads a determined regulator can pull until it all implodes. So read this as a target map, not a memo. It is how you feed the crypto industry into the regulatory woodchipper, and I am not shy about saying as such.

Every item below uses a power the government already has against an industry that grew up in the space where that power went unused. None of it is novel. All of it is being ignored.

  • Use the anti-gaming power the CFTC already has, and get the agency out of the entertainment business. The law on the books already lets the CFTC refuse event contracts that amount to gaming. The agency is simply choosing not to use it. Draw the line where the hedging stops. A narrow set of contracts on economic outcomes, whether the Fed hikes at a given meeting, whether a data release clears a published number, are genuine hedges for sophisticated players and can stay. Everything else is gambling. Sports, elections, reality-television finales, and the timing of military strikes have no hedging story that survives a second question, and they belong with the state gaming regulators who have spent a century learning how to protect the customer. Tear up the MOU with the NHL, and bar the agency from ever signing another one with a sports league or an entertainment property. The federal commodities cop has no business certifying entertainment betting as a derivative, no business refereeing the integrity of professional hockey, and no business burning its scarce enforcement hours on either. And it cannot be done with a press release. It takes a real rulemaking to define what counts as gaming, backed by cases filed against the platforms whose contract slates already blew past anything the current posture can defend.

  • Repeal the GENIUS Act and refuse to license stablecoin issuance as its own business. Three things have to go: the brand-new, lighter-touch federal license GENIUS invented, the state-by-state chartering option that sets off a race to the bottom on the model of the worst pre-2008 insurance regulation, and the separate executive-branch drive, now advancing by order and a matching Fed proposal, to hand non-bank issuers access to the central bank's balance sheet through payment or master accounts. A stablecoin is a bank deposit or a money-market fund by another name. We already have two well-tested rulebooks for those, and there is no reason to write a third and weaker one. A firm that wants to issue payment money against reserves can go get a bank charter and take on the capital, liquidity, supervision, deposit-insurance bill, and consumer protections that come with it. A firm that cannot survive that should not be allowed to run the knockoff, and an eighteen-to-twenty-four-month wind-down gives the incumbents time to charter up or to leave the U.S. dollar system entirely. The unbanked-customer demand the industry waves around is real, and it deserves a real public answer: postal banking and a mandate-plus-subsidy that requires banks to offer free accounts to low-income customers with the government covering the carrying cost, on the same logic that built the public utilities a century ago. A speculative trading rail is not financial inclusion, and the statute should stop pretending it is.

  • Revoke the OCC trust charters handed to crypto firms. The current Comptroller has been granting national trust charters to the big crypto exchanges, custodians, and stablecoin issuers, with a charter for World Liberty Financial and its peers in the queue, on the fiction that issuing a stablecoin or holding tokens in custody is a "trust" activity. It is not. The next Comptroller can revoke every charter granted on that theory, and frame it not as a partisan reversal but as simply enforcing the law the current OCC stretched past breaking. This is the cheapest lever on the board: no trifecta, no Congress, no replacement statute. It is a stroke-of-the-pen action available on day one of the next administration.

  • Restore regulatory capacity and refocus the CFTC on its core mission. Congress should restore the staffing of the SEC and CFTC to pre-2024 levels and provide both agencies with additional resources sufficient to police the crypto market at its current scale. The CFTC's core mission is the supervision of an over-the-counter derivatives market now measured in the high hundreds of trillions of dollars, where the price discovery for food, energy, and interest rates actually happens. Enforcement headcount and budget should be reallocated accordingly, away from chasing event-contract novelty and toward the markets whose proper functioning American households depend on. A hollowed-out agency is a captured agency. The current resource imbalance between regulators and industry is the single most important enabler of the abuses described above.

  • Bring back the CFPB and point it at consumer crypto. Rehire the bureau to pre-2024 strength, reopen the consumer-complaints portal, and put the major retail crypto on-ramps under the same supervision the bureau already runs over mortgage servicers and payday lenders. Go after the deceptive marketing of retail yield products, the buried fees and redemption traps on stablecoins sold to Americans, and the consumer-lending wreckage of the Celsius, Voyager, and BlockFi family. There is nothing exotic here: a retail crypto on-ramp is a consumer financial product, and its pitch to retail customers is already squarely the bureau's business. The complaints database is the only real-time public read on how much retail harm is happening and where, and switching it back on is the precondition for measuring whether any of the rest is working.

  • Keep money issuance walled off from commerce and from elected office. Extend the old banking-and-commerce separation to digital money. No commercial company gets to issue payment money. No sitting elected official gets to issue or control a tradeable token. We built the wall between owning a bank and owning everything else in the last century for reasons that only bite harder when the money is programmable and global.

  • Unwind the TRUMP coin. Congress passes a law, applied going forward, that gives any sitting elected official who holds, sponsors, or takes royalties on a tradeable token ninety days to divest. Until they do, the assets go into a court-supervised escrow and get sold off in a structured sale that cannot quietly hand control to a relative, an affiliated shell, or one of the original insiders on the other side of the issuer.

  • Make crypto political money show its face. The FEC should require any contribution routed through crypto to come through a registered exchange or custodian that has run the same KYC check a bank runs on a wire of the same size. Money arriving from an unhosted wallet, a mixer, or anywhere outside that perimeter is ineligible and gets returned. The drafting trick matters: write it as a disclosure rule, not a ban. Courts strike down limits on who is allowed to give; they uphold rules about disclosing who gave, and disclosure gets you to the same place. Right now crypto-aligned PACs are taking in enormous sums whose real owners hide behind wallets, tumblers, and offshore exchanges, money that would never clear the disclosure bar the rest of campaign finance takes for granted.

  • Break up the vertically integrated crypto exchange. Every crypto exchange is a vertically integrated stack of conflicts of interest. On a normal exchange the jobs are split among separate firms, by law, so that none of them can trade against the customer: the exchange that matches the orders, the broker that represents the customer, the market maker that quotes the prices, the clearinghouse that settles the trades, the custodian that holds the assets, the issuer whose security is listed, and the auditor that checks the books are all different companies. No such separation exists in crypto. One firm is the exchange, the broker, the market maker, the clearinghouse, the custodian, the issuer of its own coin, and often its own auditor, all at once, listing tokens its insiders hold and quoting the prices on its own book while sitting on every customer's assets. Two rules begin to pull that apart. No venue may list a token its executives, owners, or their political patrons hold above a token amount, the listing discipline the SEC has run on the stock exchanges for ninety years. And the firms making markets on those venues must register like market makers everywhere else, with the capital, surveillance, and examiner that crypto market making has gotten rich avoiding. Every normal venue already lives under both. That crypto lives under neither is the clearest single tell that the oversight is theater.

  • Turn the OFAC sanctions machine on the offshore exchanges, and stop treating it as a tool of last resort. Every lever above presumes a firm the United States can reach. The largest venues are built precisely so that it cannot, incorporated in a jurisdiction that sells licenses to anyone, settling through a chain of shells whose only purpose is to keep a subpoena from ever arriving. Against a firm structured to be judgment-proof, a CFTC rulemaking or an OCC revocation is a letter to an address that does not exist. There is one power in the federal toolkit built for an adversary beyond the reach of ordinary process, the one Treasury has spent decades perfecting against terror financiers, cartels, and hostile regimes. OFAC, under the emergency authority Congress already granted in IEEPA, can designate an offshore exchange or opaque issuer as an SDN, freeze every dollar asset it touches, and make it a federal crime for any American to transact with it. Because the dollar is the rail these firms ultimately settle on, that is not a fine to be litigated for a decade. It is the end of the company. So let me put it as plainly as the language of financial regulation has been reluctant to. An offshore exchange that knowingly farms American retail, launders the proceeds of insider trading on the death of foreign heads of state, and converts a hostile sovereign wealth fund's capital into influence over a sitting president is not a regulated entity out of compliance. It is a hostile foreign actor operating against the United States and its citizens, and it should be treated as one. The instinct to hold the sanctions weapon in reserve for the gravest emergencies belongs to a world these firms have already left. They have declared, by their own corporate structure, that they intend to operate beyond the law's reach, and we should take them at their word. The objective is not to nudge their behavior or extract a settlement. It is to designate the worst offenders and surgically destroy them as going concerns, one SDN listing at a time, until the offshore model itself reads as a death sentence rather than an arbitrage. Treasury already does exactly this to entities it has named enemies of the state. The only thing missing is the decision to put these companies where they have long since earned their place. And the decision is the President's alone. Like the OCC revocation, this needs no trifecta and no new statute: a Democratic president can declare the national emergency that IEEPA requires, the same instrument that anchors the Iran, Russia, and cartel programs, and direct Treasury to begin designating on day one. That it does not wait on Congress does not mean it goes unchallenged. This is the most aggressive item on the list, and it would be fought hard, on First Amendment grounds, on due process, and under the major-questions doctrine. The Tornado Cash litigation, where the Fifth Circuit held that immutable smart-contract code was not "property" OFAC could block, is the precedent a challenger would build on, and the line between sanctioning a company and sanctioning software is exactly where that fight gets decided. None of this is disqualifying; it means the designations have to be drawn around entities and conduct rather than code, and the administration has to be prepared to litigate them. It is the rare item on this list that does not wait on Congress at all, even if it does wait on the courts.

The honest goal, stated or not, is the outcome that has followed every time a regulatory perimeter finally closes around an industry built on breaking the rules: most of it does not survive contact with real supervision, and that is the point, not a side effect. The last administration's mistake was to try and draw the perimeter so that some firms could survive inside it. Maybe we shouldn't do that next time.

What Can Be Done Soon

All of which presupposes the political conditions under which any of it can be enacted, and none of those conditions currently exist. The full platform would, in the end, take unified government. But that should not be the organizing assumption, because the trifecta is the least reliable thing to plan around and most of what matters does not wait on it. A Democratic House alone, a Democratic Senate alone, or either chamber's committees, opens a specific set of levers the current Congress is choosing not to touch. None of them substitutes for the comprehensive bill. Each compounds in the meantime, and each makes that bill easier to pass if the day for it ever comes.

Committee oversight is the most underused lever and the one with the shortest activation timeline. A Democratic House restores Financial Services, Oversight, and Judiciary jurisdiction over the TRUMP coin, The Family's stablecoin operations, the Binance USD1 settlement, and the chain of foreign-wallet purchasers identified in the public reporting. Subpoenas can compel the records the current majority has chosen not to request. Depositions can put Family members and counterparties under oath on questions of beneficial ownership, payment for access, and foreign-source funds. The investigative record built in 2027 and 2028 becomes the documentary base a future administration will draw on, and it exists whether or not this House chooses to act on it.

The House alone originates appropriations, and even a one-chamber majority gives Democrats real leverage over specific agency conduct. Riders denying funding for the CFTC's accommodation of event-contract platforms, conditioning the SEC's budget on the resumption of the crypto cases the current chair has dropped, and barring Treasury from spending appropriated funds on the worst pieces of GENIUS Act implementation are all available at the bill-origination stage and tend to survive conference negotiation, because the alternative is a continuing resolution or a shutdown the majority is not in a position to want.

Senate confirmation is the only check on personnel that does not require new legislation. A Democratic Senate, or even a Democratic minority capable of holding nominees in committee, denies the administration the people it needs to extend the regulatory accommodation further. The relevant Treasury, banking-regulator, and SEC and CFTC seats turn over on staggered schedules through the remainder of the term. A Senate that uses the role with the seriousness Senate Republicans showed against Obama-era nominees will produce a measurable slowdown in the rate at which crypto-friendly appointees clear the chamber.

A handful of pieces of the comprehensive agenda are, in theory, moveable through the current Congress on a bipartisan basis if narrowly drawn, although the political conditions for bipartisan action on anything that embarrasses the president are unlikely to materialize on the timeline anyone needs. A standalone bill prohibiting any sitting elected official from issuing, sponsoring, or receiving royalties on a tradeable token, paired with the divestiture requirement described in the platform plank, polls in the high seventies and would, in a healthier institutional environment, attract the handful of Republican senators who face competitive 2028 reelections and whose constituents do not personally benefit from defending The Family's products. The FEC disclosure rule on crypto contributions belongs in the same category. The conflict-of-interest rule on exchange self-dealing is harder. None of these need White House support if they can be attached to a must-pass vehicle, and the Defense Authorization Act and the year-end appropriations omnibus are the obvious candidates each cycle, but the realistic expectation is that the only bills that will actually move are the ones that survive the test of being unembarrassing to The Family.

A Democratic House or Senate alone is also sufficient to prevent the next round of GENIUS-style legislation from being enacted. The industry is preparing a 2027 push to extend the framework to additional digital-asset classes, and the existing GENIUS provisions are themselves a target for further expansion. Single-chamber control is sufficient to deny those vehicles the votes they require. Holding the line is itself a substantive policy victory.

The comprehensive bill is a different matter, and here I will be honest about the odds. Full repeal of the GENIUS Act and the rest of the platform takes unified government, but unified government is the easy part to imagine. The hard part is a Democratic Party that stays unified long enough to use it. Picture the idealized version: a trifecta in 2029, the whole party lined up behind a single coherent crypto plank, leadership willing to spend real capital on it in the first hundred days. I have watched this party long enough to doubt it can summon that kind of discipline. Its native condition is division, and a financial-regulation fight with serious money on the other side is exactly the sort of thing it talks itself out of. But I am not going to rule it out, because parties do occasionally find unity and leadership in the same decade, and when they do the agenda above is sitting there ready. Until then the honest path is partial: defund the worst of GENIUS through appropriations, build the record through the oversight committees, and use both to make the case the comprehensive bill will eventually need.

The work that does not need a trifecta holds the line and builds the constituency for the work that does. The political case is harder to assemble than the technical one, but the materials are present. Every voter in this country knows a Mike. He is the nephew who put his life savings into a meme coin on a friend's recommendation and watched it go to zero in a weekend, and who has since concluded that the conventional financial system is rigged against him and that the only remaining path to dignity is one more leveraged bet. The Mike of the opening pages was a composite; by now he sits in American families across every income bracket and every region, and the constituency for restoring the regulatory perimeter is correspondingly broader than the polling on crypto policy suggests, because the polling asks the wrong question. It asks about token regulation. The right question is what should be done about an industry that has converted the household financial system into a slot machine, and the answer to that question polls differently. A party that builds its political case from that constituency earns the institutional latitude required to do the technical work in the committee rooms and agency desks where consequential financial regulation gets written.

Each of these measures applies an existing regulatory principle to instruments that have escaped it for too long. They have not been enacted because the political economy of the crypto industry has, for the moment, made them politically impossible. That political economy can be unblocked, but only by a coalition willing to name what it sees and to make the case in the language of the values the industry has spent a decade stealing from us. Pro-markets. Pro-democracy. Anti-corruption. A coalition that supplies all three wins, and the casino closes.

A Democratic Party that retakes unified government, and stays unified long enough to use it, will find this platform already aligned with the constituency it needs to mobilize. That constituency has been told for too long that the financialization of every remaining corner of ordinary life is innovation, while groceries cost more under the president's tariffs, gasoline costs more under his wars, and sons' futures are lost on meme coins. We don't have to live an era of centrally-planned Soviet-style five-minute issued by Truth Social post. The answer to this madness from the Democratic Party should be quite clear: Close the casino. Restaff the regulatory agencies. Unwind the TRUMP coin. Differentiate markets from gambling. We don't have to live in the Bad Place anymore.