For both de novos and prediction market, it's how you read the law

The blurring line between banks and cryptos
The seventh de novo to open its doors this year did so in New Orleans in September. And it does feel like bank regulators have taken a very Big Easy approach to banking charters, handing them out as if they were tossing beads from balconies in the French Quarter.

De novos are indeed up from years' past. From 1960 through 2006, 185 a year were chartered on average. That subsequently fell off a cliff; from 2010 through 2024, less than seven a year were chartered on average. There have been at least seven this year, more are in the pipeline, and while it's a smallish trend, it is a trend that's expected to grow.

But not if the Independent Community Bankers of America association has anything to say about it. As our Claire Williams reported in an exclusive story, the ICBA filed a lawsuit against the Office of the Comptroller of the Currency, arguing that the OCC has been overstepping its authority under the National Bank Act.

Essentially, the ICBA is arguing the rule is based on a bad reading of the law, and therefore it should be repealed.

The rule at the heart of the suit goes back to the first Trump administration. Jonathan Gould, who is the current OCC comptroller, wrote an interpretive letter in the first Trump administration, when he was the OCC's chief counsel, that gave the agency a much wider berth to grant trust charters. That letter was the basis for a rule the OCC finalized earlier this year, and the spate of charters it has handed out, especially to crypto firms, including one connected directly to the president.

The crypto firms are a particular sore spot. Thirteen of the 21 charters handed out in the second Trump administration have gone to crypto companies, which the ICBA argues do not meet the kinds of statutory safeguards that should be required of a chartered bank.

"American consumers reasonably expect a federally chartered bank to carry federal protections. Digital assets held at a crypto firm operating under a national trust charter do not carry those important safeguards," said ICBA President and CEO Rebeca Romero Rainey in a statement.

The trade group wants the OCC's rule and interpretive letter vacated, in essence closing the proverbial barn door. It also asks specifically for one granted charter — given to a crypto firm called Protego — to be rescinded. It does not appear to ask for any others to get this treatment, even though it argues all of them were violations of the law.

The blurring line between investing and gambling
I'm not sure why the Commodities Futures Trading Commission is so keen on having gambling sites Kalshi and Polymarket fall under its remit, but the agency is working hard to get them. 

Last week, the CFTC proposed two new rules, as our Melinda Lucy reported, one of which would expand the definition of a swap to include the kinds of "contracts" used on Kalshi and Polymarket. 

The hair they are trying to split is to have these sites defined not by the kind of business they do, but how they do it. There is no doubt that betting on sports is the driving force behind these markets. But unlike a casino, they are not the house. Gamblers on the site are betting with and against other gamblers. In that sense, the argument goes, these sites are more like the CME or other derivatives markets than they are like traditional casinos.

So the question is, which is the more defining feature, the platform or the market it relies upon?

But for our purposes, an even more interesting question is this: if gambling online via a contract/derivatives type platform falls under the broad regulatory umbrella of financial services, will other financial services firms offer it as a product? Will they be tempted? The lines between gambling and investing have gotten more blurred over the years. The fate of gambling/derivatives outfits such as Kalshi and Polymarket may determine whether the lines are further blurred, or erased completely.