This latest U.S. appeals court ruling sets up a rift between federal courts on event contracts, suggesting the U.S. Supreme Court may need to settle the matter.
Wife of former FTX executive seeks to preclude her husband’s guilty plea
In a Friday filing with the US District Court for the Southern District of New York (SDNY) over campaign finance charges, Michelle Bond’s legal team asked the court to consider precluding evidence related to former FTX Digital Markets co-CEO Ryan Salame, her husband who is currently serving a 90-month sentence after he pleaded guilty in 2023.
Bond faces campaign finance charges alleging that her unsuccessful 2022 congressional run in New York was partially funded by contributions from FTX facilitated by Salame. As part of the filings this week, Bond asked the court to exclude evidence of her husband’s guilty plea and “related plea materials,” in which the former executive admitted to making “political contributions in [his] name that were funded by transfers from the bank accounts” of an entity tied to FTX.
“The Court should preclude the government from introducing or referring to Mr. Salame’s guilty plea or any related plea materials, because their minimal probative value is substantially outweighed by the risk of unfair prejudice to Ms. Bond,” said the filing.
Bond’s lawyers added:
“[…] Mr. Salame’s plea materials lack any probative value as to Ms. Bond’s guilt, knowledge, or intent. Mr. Salame’s plea is an admission of his own guilt, not evidence of Ms. Bond’s state of mind or participation in any charged offense.”
The motion also requested the court include information related to Bond’s “contemporaneous divorce and custody proceedings,” arguing that though she and Salame were not married at the time of the alleged crime, the former FTX executive was not an “ordinary ‘individual’ donor” contributing to her campaign.
Related: US Senate unanimously adopts resolution opposing clemency for SBF
The criminal case is one of the last involving individuals tied to the defunct crypto exchange following its 2022 collapse. Salame, former FTX CEO Sam Bankman-Fried and former Alameda Research CEO Caroline Ellison were all sentenced to prison for their role in the misuse of customer funds and related charges.
Former congressman ordered to pay $35,000 over Kalshi bet
George Santos, a former New York House representative who was expelled from Congress in 2023, was ordered to pay a $17,500 civil monetary penalty and $17,570 in disgorgement from profits earned over bets placed on prediction markets platform Kalshi. The order from the US Commodity Futures Trading Commission (CFTC) stemmed from Santos trading on event contracts betting on his appearance at the 2026 State of the Union address in Washington, DC.
“While buying and selling positions in this market, Santos posted on social media about his plans to attend or not attend the SOTU,” said the CFTC. “In his social media posts, Santos made a series of material misrepresentations and omissions about whether he would attend the SOTU. After these posts, the SOTU contract prices moved in a direction that was favorable to Santos’ positions which allowed him to make over $17,500.”
February X post about his State of the Union attendance. Source: George Santos
Santos is barred from trading on prediction market platforms for three years as part of the order. He was also previously sentenced to 87 months in prison for wire fraud and aggravated identity theft in 2025, but served only three months before his sentence was commuted by US President Donald Trump.
US solider accused of making $400,000 Polymarket bet seeks to dismiss charges
Gannon Ken Van Dyke is a US soldier who faces charges for allegedly making more than $400,000 on Polymarket event contracts using nonpublic information tied to a military operation involving the removal of Venezuelan President Nicolás Maduro in January. He was involved in the operation removing Maduro, according to the US Justice Department, and allegedly used insider information to bet whether the Venezuelan president would be removed from power, leading to criminal charges in April.
In a Friday SDNY filing, Van Dyke’s legal team filed a 51-page memo in support of a motion to dismiss the indictment based on different legal theories, including that the Commodity Exchange Act (CEA) at the center of three of the charges was “ambiguous” in treating event contracts as “swaps.”
Although the CFTC under Chair Michael Selig has claimed that the agency has “exclusive jurisdiction” over prediction markets on the basis that event contracts are treated as “swaps,” Van Dyke’s lawyers said the lack of clarity was sufficient to dismiss some of the charges.
“If Congress, executive branch agencies, and courts all find the ‘swap’ definition ambiguous, how can ordinary citizens have fair notice that prediction market wagers are covered by the CEA?” said the filing. “They cannot.”
The case is expected to have significant implications for lawmakers and government officials using prediction markets. Trump’s teleprompter operator reportedly made more than $100,000 using Kalshi event contracts related to the president’s speeches.
Based on a schedule filed in June, Van Dyke is potentially looking at a trial beginning in late 2026 or early 2027. He has pleaded not guilty to all charges.
Magazine: Here’s why the CLARITY Act’s ethics deal may be so hard to reach
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure
The Ripple case is no longer in its earliest, most explosive phase, but it still has the market’s attention because the ending matters. A remedies timeline brings the dispute closer to final judgment, and XRP watchers are paying attention to what that final shape looks like.
At this stage, the market is less focused on whether the case exists and more focused on what the court ultimately requires Ripple to pay or change.
For more details, visit the official Ripple platform.
TL;DR
- A new remedies timeline keeps the Ripple case moving toward final judgment.
- The remaining dispute centres on penalties, injunctions, and how the court frames the final outcome.
- For XRP, the market is watching whether the case ends with clarity or more legal ambiguity.
Why Remedies Still Matter
Remedies can sound like a technical legal afterthought, but they are often where the practical consequences of a case become clear. Penalties, injunctions, and conduct restrictions all shape how a company operates after the headline ruling.
Ripple has argued for a much lower civil penalty than the SEC sought, and that gap remains central to how the market reads the outcome.
The XRP Market Angle
XRP has already lived through years of legal uncertainty. That means each procedural step carries emotional weight for holders, even when the filing itself is not dramatic.
A final judgment could help reduce uncertainty, but only if it is clear enough for exchanges, institutions, and counterparties to interpret confidently.
What Comes Next
The next phase will be watched for timing, penalty language, and any restrictions that could affect Ripple’s institutional sales or market activity. Traders will also look for whether the result has read-through to other token cases.
For now, the remedies timeline keeps the case in the final stretch. It is not over yet, but the market is getting closer to the point where speculation gives way to a concrete outcome.
Why Readers Should Care
The useful way to read this story is not as a standalone headline about Judge Torres, but as part of the wider pressure building around Ripple coverage this week. Markets have been jumping quickly from one catalyst to the next, so the cleaner value for readers is in separating the actual development from the instant reaction around it. In this case, the source material gives us a concrete event to work from, rather than a loose rumour or a recycled social-media talking point.
That distinction matters because crypto readers are being asked to process a lot at once: ETF flows, regulatory actions, exchange listings, protocol upgrades, wallet movements, and political signals. A story like this is most useful when it helps them understand where SEC v Ripple fits into that broader map. It does not need to be inflated into a guaranteed price call to be worth covering. It simply needs to explain what changed, who is affected, and why the market is paying attention today.
The caveat is also important. Even clean source-backed developments can be overinterpreted when traders are hunting for a fast narrative. A listing does not automatically create lasting demand, a regulatory update does not immediately settle every legal question, and an on-chain movement does not always translate into a finished sale. The better read is to treat the development as a fresh data point and then watch whether follow-up activity confirms the direction of travel.
For Bitcoinist readers, that means keeping the focus on what can actually be verified from the source and avoiding the temptation to turn every update into a sweeping market verdict. The story is strong enough on its own terms: it gives investors and traders another piece of context around Ripple, while leaving room for the next filing, dashboard update, wallet movement, governance vote, or exchange notice to decide whether the angle grows into something bigger.
This article is based on information from Ripple.
This article was written by the News Desk and edited by Samuel Rae.
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
SEC makes huge U-turn, declares crypto tokens are ‘digital commodities’ after years of legal battles
The SEC just made its biggest crypto classification move in years, placing major tokens such as Ethereum, Solana, Cardano, Dogecoin, Avalanche, XRP, and Chainlink into a “digital commodities” bucket while saying some token sales can stop being treated as securities-law cases once the issuer’s core promises are fulfilled.
Paired with a new SEC-CFTC coordination framework, the March 17 interpretation is less a narrow staking memo than a broad attempt to replace years of crypto-by-enforcement with a clearer split between assets, contracts, and regulator turf.
Until Gary Gensler left the SEC, crypto in the US has lived under a legal cloud. Tokens were launched, traded, staked, wrapped, and airdropped while builders and users were left guessing about the boundary between securities law and commodity law.
The long-awaited interpretation explaining how federal securities laws apply to certain crypto assets and common crypto transactions, and the CFTC joined it, saying it will administer the Commodity Exchange Act consistently with that view.
The Mar. 17 release provides interpretive guidance while preserving existing fraud liability and registration requirements. Additionally, it draws clearer lines.
The SEC’s fact sheet says the agency had spent more than a decade engaging with crypto, mostly through Howey-based analysis, and, before 2025, failed to build a tailored framework, instead “regulating by enforcement.”
The Mar. 11 SEC-CFTC memorandum of understanding then established a Joint Harmonization Initiative to clarify product definitions, reduce friction for dually registered venues and intermediaries, and coordinate policymaking, exams, and enforcement.
In the MOU itself, the agencies also commit to consult on overlapping enforcement matters, including, where appropriate, before a Wells notice or similar step.
That makes this week’s interpretation bigger than staking or airdrops.
In plain English, the SEC is now saying that many major crypto tokens are not themselves securities.
It then goes further to confirm that some ordinary crypto activities, such as covered staking, mining, wrapping, and certain airdrops, can fall outside securities-sale treatment in some circumstances, and that a token sale does not necessarily remain a live securities-law relationship forever if the issuer’s essential promises have been fulfilled.
That does not erase fraud liability, excuse unlawful original sales, or settle every edge case, but it does give exchanges, issuers, builders, and users a much clearer answer to the question that has hung over the market for years: what is the asset, what is the contract around it, and when does that contract end?
A federal labeling system
The government is finally saying, in plainer terms, what people are buying: a commodity-like token, a collectible, a practical tool, a payment stablecoin, or a tokenized security.
The SEC fact sheet states that digital commodities, digital collectibles, digital tools, and GENIUS Act payment stablecoins fall outside securities classification, whereas tokenized securities remain securities.
That means that a stablecoin such as USDC falls outside the securities classification, while the tokenized stocks xStocks issued by Kraken and Backed Finance would be classified as securities.
It also says covered protocol mining, covered protocol staking, and wrapping of a non-security crypto asset fall outside the offer-and-sale requirement, and that certain airdrops fail Howey’s investment-of-money prong.
It also reduces one of crypto’s biggest structural drags in the US: uncertainty over ordinary token activity being considered an illegal securities transaction after its conclusion.
The interpretation says that added clarity could reduce legal costs, increase competition, and encourage more activity to remain in the US.
| Category | SEC/CFTC treatment in the release | What it means in plain English |
|---|---|---|
| Digital commodities | Not themselves securities | Commodity-like tokens do not start inside securities law |
| Digital collectibles | Not themselves securities | Collectible-style assets are outside the securities bucket |
| Digital tools | Not themselves securities | Utility-like tokens are not automatically securities |
| GENIUS Act payment stablecoins | Not themselves securities | Some payment stablecoins begin outside securities status |
| Tokenized securities | Remain securities | Tokenized stocks, bonds, and similar assets stay inside securities law |
| Covered mining | Not an offer/sale of securities in described cases | Core protocol participation may sit outside securities treatment |
| Covered staking | Not an offer/sale of securities in described cases | Some staking activity is clearer for users |
| Wrapping non-security assets | Not an offer/sale of securities in described cases | Technical asset transformations are not automatically securities transactions |
| Certain airdrops | Fail Howey’s investment-of-money prong | Some free token distributions may fall outside securities law |
The separation concept
The most important shift may be conceptual. The SEC says a non-security crypto asset can be sold subject to an investment contract and later, separate from that contract, once the issuer’s essential promises are fulfilled, or, in some cases, if those promises clearly fail.
In plain English: a token can exit securities status when the underlying investment contract ends.
That directly addresses the long-running fear that tokens are permanently stained by the way they were first sold. The release explains that when buyers cease to reasonably expect the issuer’s essential managerial efforts to remain connected to the asset, the token can separate and exit that contractual relationship.
Separation still requires that the original token sale was registered or exempt when the investment contract was created, and fraud liability can survive even after the token later separates.
The release also says the common-enterprise element of Howey must be satisfied, and it explains that if the issuer’s promises remain connected to a token, secondary market trades in that token can still be securities transactions until separation occurs.
The agencies are saying the answer depends on whether the underlying issuer-driven investment contract is still alive.
That is a much more structured framework than the old blanket fog.
| Question | If yes | If no |
|---|---|---|
| Is the asset itself a tokenized security? | Securities law applies | Go to next question |
| Was it sold with an investment contract? | Go to next question | Asset begins outside securities status |
| Are issuer promises still central? | Securities obligations may continue | Separation becomes possible |
| Was the original sale registered or exempt? | Separation may occur if contract ends | Liability can survive |
What changed for ordinary users
For users, the practical shift is that the SEC has defined core behaviors more precisely.
Covered protocol mining, protocol staking, and wrapping are outside securities-sale treatment in the circumstances described, and certain no-consideration airdrops fail Howey’s investment-of-money prong.
The government has said that some ordinary crypto activities may fall outside the securities bucket in the described circumstances, while other configurations may still trigger securities obligations.
For platforms, the new rulebook reduces the category problem.
Digital commodities, collectibles, tools, and permitted payment stablecoins begin with the assumption that securities laws apply to the contractual relationships surrounding them, if any, rather than to the assets themselves. Tokenized stocks, bonds, and similar instruments remain subject to securities law.
Non-security tokens still tied to issuer promises carry securities obligations until separation.
The release provides exchanges and wallet providers with clearer listing and feature logic while Congress continues work on the permanent statute.
The bull case holds that this will serve as the interim US operating manual. Exchanges, wallets, and issuers use the taxonomy and separation framework to lower legal friction, while the SEC and CFTC use the MOU to reduce overlap in exams and enforcement.
Congress codifies most of the framework, the agencies jointly formalize more definitions, and onshore token issuance, staking, and secondary trading expand because firms can finally structure products around clearer lines.
The SEC’s own economic section points to better pricing efficiency, more capital formation, and more competition if clarity holds.
The bear case holds that the interpretation proves helpful within a narrower scope. Litigation tests the boundaries of “separation,” later commissions revisit parts of the framework, and firms still avoid aggressive launches because past failures to register and anti-fraud exposure remain enforceable.
In this scenario, legal uncertainty diminishes but persists in edge cases.
The next phase
The SEC says the Crypto Task Force has already received more than 300 written submissions and held multiple roundtables, including a Mar. 21, 2025, session specifically on security status.
On Jan. 29, CFTC Chairman Michael Selig publicly called for clear, unambiguous safe harbors for software developers, onshoring of perpetuals, and a harmonized crypto taxonomy with the SEC.
Taken together with the Mar. 11 MOU and the Mar. 17 interpretation, the move appears to be a sequenced regulatory project.
This also puts the US closer to other major jurisdictions. The EU says MiCA is a comprehensive legislative framework covering crypto-assets and related services. The UK FCA is rolling out a staged crypto regime, with its roadmap pointing to final rules in 2026 and the new regime expected to come into force in October 2027.
The US is taking an interpretation-heavy approach, grounded in existing securities and commodity statutes. At the same time, this release moves it closer to the category-based regulatory style that other major jurisdictions are already adopting.
The real significance of this release is that the two main US market regulators are trying to move crypto from a regime of case-by-case enforcement toward a more coherent market structure.
The interpretation is paired with the Mar. 11 SEC-CFTC memorandum of understanding aimed at harmonizing oversight, and both agencies framed this week’s action as a bridge to broader market structure legislation in Congress.
Once assets are sorted into buckets and the agencies coordinate on overlaps, the next big battles shift to exchange registration, custody, tokenized securities plumbing, stablecoin competition, and the extent to which Congress codifies this framework.
The press release itself says the interpretation complements congressional efforts.
The agencies published a category-based taxonomy, explicitly addressed when non-security tokens become subject to an investment contract and when they stop being subject to one, and clarified several common crypto activities that had lived in gray areas.
That represents a materially more structured approach to enforcement.
If market participants can better predict which rules apply to which assets and activities, compliance costs should fall, pricing distortions from uncertainty should ease, and more activity can plausibly stay onshore.
Whether this becomes a true turning point, however, will depend on whether courts accept the framework, future SEC leaders keep it in place, and Congress locks it into statute.
The U.S. Department of Justice has seized over $400 million in crypto, cash, and real estate connected to the Helix Bitcoin Mixer.
The U.S. Department of Justice (DOJ) has officially seized more than $400 million in cryptocurrencies, real estate, and cash linked to the Helix Bitcoin Mixer.
The forfeiture was finalized in late January 2026, concluding years of litigation against Helix’s operator, Larry Dean Harmon.
Helix’s Illegal Activity and Harmon’s Case
Helix, which operated from 2014 to 2017, was marketed as a tumbling service designed to anonymize Bitcoin transactions. Investigators found that it had become a major hub for laundering funds connected to drug trafficking, hacking, and other illegal activities. Court filings show that Helix processed more than 354,468 Bitcoin, valued at approximately $300 million at the time, for its users.
Harmon, who also created the darknet search engine Grams, made the platform to integrate directly with major darknet markets. Its Application Programming Interface (API) allowed them to connect the service to their Bitcoin withdrawal systems, earning them a percentage of each transaction as commission and fees. Investigators also traced tens of millions of dollars in illicit proceeds from several darknet markets through the mixing service.
The Ohio-based operator of Helix was first charged in 2020 with money laundering conspiracy and operating an unlicensed money transmitting business. In August 2021, he pleaded guilty to conspiracy to commit money laundering and was sentenced in November 2024 to 36 months in prison, three years of supervised release, a monetary forfeiture judgment, and seized assets.
On January 21, 2026, Judge Beryl A. Howell of the U.S. District Court for the District of Columbia issued a final forfeiture order, officially transferring the assets to the government.
Regulators Ease Crackdown on Crypto Mixers
The Helix case is part of a broader regulatory crackdown on cryptocurrency mixers and privacy tools. Platforms such as Tornado Cash have also faced sanctions and enforcement actions in recent years. While crypto advocates maintain that these services can offer legitimate privacy protections, authorities continue to focus on their potential use in criminal activity.
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In a related development, blockchain entrepreneur and Coin Center fellow Michael Lewellen filed a lawsuit last year challenging the DOJ, seeking a ruling that his non-custodial crypto crowdfunding platform, Pharos, does not violate money transmission laws. The legal action argues that software developers creating non-custodial privacy tools are being unfairly targeted.
The Justice Department later announced it would no longer pursue criminal cases against crypto exchanges, developers, or users for regulatory violations. This development follows the disbanding of the National Cryptocurrency Enforcement Team (NCET), the specialized unit responsible for investigating crypto-related criminal activity.
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A judge delayed implementing injunction barring sports event contracts in light of Kalshi’s emergency motion filing
Kalshi asked a Massachusetts state court to pause enforcement of a newly issued preliminary injunction on Friday as the company prepares to appeal, escalating a high-stakes legal fight over whether state gaming regulators can enforce action against a federally regulated prediction market platform.
The emergency motion follows a preliminary injunction issued earlier this week by the Suffolk County Superior Court, which sided with the Massachusetts Attorney General’s office, finding that Kalshi’s sports event contracts likely violate state gaming law and therefore the platform must stop offering them.
During a scheduled hearing later in the day, Superior Court Judge Christopher Barry-Smith was initially planning to address implementation of the injunction and next steps. But in light of Kalshi’s appeal plans and emergency motion, after hearing from both parties, the judge said he would hold a later hearing to address the injunction implementation and Kalshi’s stay request.
According to gaming lawyer Daniel Wallach, who was covering today’s hearing in real time, Barry-Smith asked for Massachusetts’ response to the emergency motion to be delivered to the court by Jan. 30. Kalshi’s reply to the state’s opposition would be due Feb. 2. Wallach said that even if the judge denies the stay request, subsequent stay motions filed with other courts could delay forced geoblocking of sports contracts until April.
The injunction delay allows Kalshi to continue offering sports event contracts in Massachusetts for the time being, including markets for the Super Bowl on Feb. 8. Sports prediction markets via Kalshi remain accessible in all 50 states, as similar legal battles with other states currently remain tied up in federal district courts.
Kalshi must stop listing sports contracts in MA if injunction implemented
In the emergency motion filed this morning, Kalshi urged the court to stay its injunction while the company pursues review in Massachusetts appellate courts. The filing makes clear that Kalshi intends to challenge the injunction through the state appellate process, beginning with the Massachusetts Appeals Court or possibly the Supreme Judicial Court.
If the injunction is implemented, Kalshi would be required to block Massachusetts users from accessing sports event contracts, most likely by geofencing the state. In its emergency motion, Kalshi argued that complying with such restrictions would require significant technical changes and suggested that the process would be costly and could take months to put in place.
Notably, other prediction platforms have already taken a state-by-state approach with their sports markets. Crypto.com, for example, has geofenced sports event contracts in multiple states, including Massachusetts. Likewise, newer prediction market platforms from DraftKings, FanDuel, and others only allow sports trades in select states.
During today’s hearing, the AG’s office said it is seeking to stop Kalshi from listing new sports markets, but is not asking the platform to cancel trades that have already been placed. As a result, existing sports contracts that have not yet been resolved would likely be allowed to run to completion.
Judge says Kalshi likely violates state law, rejects federal preemption claim
In the decision issued Tuesday, Barry-Smith granted the Commonwealth’s request for a preliminary injunction, finding that Kalshi is likely operating an unlicensed sports wagering platform in violation of Massachusetts law. Barry-Smith concluded that Kalshi’s sports event contracts fall within the state’s definition of sports wagering and that the company has so far failed to show that federal law preempts state regulation.
The judge rejected Kalshi’s argument that the Commodity Exchange Act (CEA) and the Commodity Futures Trading Commission’s federal oversight strip Massachusetts of enforcement authority. Barry-Smith wrote that Congress did not clearly intend to preempt state sports wagering laws and that the CEA’s “exclusive jurisdiction” language does not void traditional state powers over gambling.
“The Sports Wagering Law is an exercise of traditional state police power,” he wrote, adding that requiring Kalshi to obtain a state license does not conflict with federal regulation of derivatives markets.
Barry-Smith also dismissed Kalshi’s claims of irreparable harm, finding that any disruption to its business stemmed from its own decision to offer sports contracts in Massachusetts without seeking licensure. The court noted that Kalshi proceeded despite regulatory uncertainty and a CFTC advisory memo cautioning exchanges about sports event contracts and advising them to devise contingency plans. Concluding that the public interest is better served by enforcement of the state’s sports betting framework, the judge denied Kalshi’s motion to dismiss.
Massachusetts case could provide blueprint for other state actions
Massachusetts’ efforts to stop Kalshi from offering sports event contracts in the state are already shaping up to be a template for other states on how to confront the prediction market platforms. Until now, most state-level enforcement has been limited to cease-and-desist orders, many of which Kalshi has answered by filing lawsuits challenging the states’ authority. Recent legal filings suggest the Massachusetts approach is already producing ripple effects across the country.
Within days of Barry-Smith’s ruling, other jurisdictions moved to incorporate the Massachusetts developments into their own cases.
- The Nevada Attorney General’s Office and Nevada Gaming Control Board filed the Massachusetts ruling as supplemental authority in the Ninth Circuit appeal of its Kalshi case, arguing it supports state enforcement and undercuts Kalshi’s claims of irreparable harm and preemption.
- In the Southern District of New York, the New York State Gaming Commission also included the Massachusetts decision as supplemental authority in its case against Kalshi, urging the court to consider a state judge’s reasoning that Massachusetts is likely to succeed on the merits of its unlicensed wagering claim.
- Tennessee regulators also cited the Massachusetts order in their opposition to Kalshi’s motion for a preliminary injunction, arguing that the state should deny federal relief because of how Massachusetts framed preemption and enforcement.
- Today it was reported that New Jersey regulators have now also cited the Massachusetts ruling, filing it as supplemental authority in the Third Circuit as they seek to overturn a federal injunction blocking state enforcement against Kalshi.
Legal analysts expect states like Ohio, Connecticut, and others to also lean on the Massachusetts ruling as they defend their own gaming authority in ongoing or future suits.
A few days before Nevada’ supplemental authority filing, the state announced a civil lawsuit against Polymarket, in which Nevada moved for a temporary restraining order and preliminary injunction to shut down that platform’s sports contracts on similar grounds. Nevada’s action against Polymarket mirrors Massachusetts’ approach against Kalshi, marking one of the first instances of a state pursuing a prediction market platform through a lawsuit filed in state court rather than administrative action alone.
Massachusetts’ early success in state court could push more states to follow its lead, turning to litigation rather than administrative warnings to test the limits of prediction market regulation.
The digital transformation of the traditional legal systems is accelerating. Well, it is driven by the introduction of blockchain or Web3, the same technology that has revolutionized some major industries like finance and healthcare. And at the core of this transformation lies smart legal contracts blockchain. Smart legal contracts are the agreements that execute automatically when the mentioned conditions are fulfilled.
These are not just digital formats of conventional paper agreements; they are contributing toward a shift in how legal obligations are created and enforced. Furthermore, it has also introduced the Lex Cryptographia, the law of this cryptographically powered world.
This blog explores more about blockchain smart contracts and their impact. We will also analyze whether the new shift will eliminate the traditional legal system.
Smart Legal Contracts- A Short Brief
Smart legal contracts blockchain are self-executing agreements, and they are digitally encoded. These contracts execute automatically when all the predefined conditions are met. Developed on blockchain platforms, smart legal contracts can remove the need for third-party oversight and manual enforcement, providing users with a more efficient as well as secure way to manage their legal obligations.
These contracts utilise code to perform actions, like updating records, transferring assets, initiating payments, and more. With this automation, it is possible to reduce delays, ensure consistency, and minimize the chances of disputes. Some key features of these contracts are:
- Better Security: Terms, identities, and execution are verified by cryptographic protocols, avoiding unauthorized changes and fraudulent transactions.
- Automation: All the transactions and agreements can be executed by software agents, lowering administrative expenses and simplifying workflows.
- Improved Efficiency: As these contracts remove paperwork and intermediaries, they can accelerate processes while keeping the operational costs low.
- Enhanced Transparency: All the transactions are recorded on a blockchain ledger, which is auditable and tamper-proof.
Multiple industries are gradually adopting these smart legal contracts blockchain, supporting the growth of blockchain smart contracts in various areas, such as insurance claims, DeFi or Decentralized Finance, supply chain logistics, and more. After all, these contracts combine technical precision with legal enforceability.
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Lex Cryptographia: Law Powered by Code
Lex Cryptographia is a legal system where all the rules are encoded in software and they are enforced by blockchain-based protocols, DAOs – Decentralized Autonomous Organizations, and smart contracts.
As the use of blockchain is growing, it promises to offer a system of law where code can shape accountability, interactions, and human judgment. In this model:
- Enforcement and jurisdiction are embedded in the blockchain protocol
- Execution is trustless and autonomous
- Code replaces conventional legal language
As per experts, Lex Cryptographia can significantly influence three elements of traditional law, i.e., human interpretation, territory, and language. It may shift the balance of power, leading to a more transparent and participatory regulation.
Will Smart Contracts Replace Lawyers? A Critical Debt
As smart legal contracts and blockchain technology continue to change the legal landscape, a common question frequently arises: “Will smart contracts replace lawyers?”
As mentioned above, these contracts are self-executing contracts powered by blockchain. They can perform certain actions automatically, but these are not a complete replacement for lawyers. The current trends show two possibilities:
Smart legal contracts blockchain lack the contextual understanding, ethical validation, or judgment, and interpretive flexibility that legal professionals bring to legal matters. Legal practices require dispute resolution, negotiation, and strategic advice. No digital systems or code can replace these human-centric aspects of law.
Lawyers will remain vital for ensuring regulatory compliance, drafting contracts, and adapting contracts to changing laws.
In the future, we may see hybrid models, where smart contract automation would be paired with traditional legal systems. Some legal tasks, like verifying compliance, drafting standardized legal agreements, and initiating payments, can be automated using smart legal contracts blockchain. These contracts can bring natural language and code together, ensuring compliance, flexibility, and enforceability.
To remain relevant, legal professionals need to evolve with time and become legal technologists- who understand smart contracts’ technical architecture and legal principles. And this can be possible through collaboration with the blockchain developers. A hybrid model can help businesses enjoy more transparent, fairer, and faster legal outcomes.
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Legal Issues with Smart Contracts
By removing intermediaries and automating execution, smart legal contracts blockchain offer trust, efficiency, and transparency. However, these contracts also introduce various legal complexities. Let’s have a look at those legal risks.
Traditional legal contracts are governed by a specific country or state’s laws. However, when it comes to smart legal contracts, they exist on blockchain’s distributed ledgers. Those ledgers are not bound by the laws of any state or country. And this raises a question- Where is the smart legal contract located? This can make resolving disputes and enforcing rights challenging.
-
Acceptance By Existing Laws
In many jurisdictions, smart legal contracts blockchain are not legally binding. Well, some contracts may justify the basic requirements of consideration and acceptance, but they may lack the intent or clarity required for enforceability. On the other hand, courts may not consider code as a legal language.
-
Consumer Protection and Data Privacy
Smart contracts store personal information, and they should comply with various global privacy regulations and Acts, like CCPA, GDPR, and more. However, these laws often conflict with the transparency and immutability of blockchain.
Courts may need the help of experts who can carry out comprehensive technical audits in order to validate the integrity and reliability of smart contract code. This can take time.
-
Dispute Resolution in Blockchain
Traditional legal systems depend on arbitration and courts to resolve legal disputes. However, in a decentralized system, controls are distributed instead of being managed by a central authority. Users may take the help of blockchain-based dispute resolution platforms, but their enforceability and legitimacy are uncertain, making it challenging to resolve conflicts efficiently.
For Lex Cryptographia to flourish, legal systems need to evolve, and courts should become proficient in interpreting code. For now, the focus should be on using hybrid models to ensure enforceability and clarity in this new digital transformation.
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The Rise of Smart Contracts and Computable Law
Undoubtedly, Lex Cryptographia and smart legal contracts blockchain are showing a new phase of the traditional legal system in this digital age. While the potential is immense, it requires careful consideration of societal, ethical, and legal implications.
Developers, regulators, users, and lawyers need to collaborate to create systems that are inclusive, efficient, fair as well as accountable. It is important to understand that law is no longer just limited to paper and courtroom, it is expanding to code, moves through networks, and is also evolving with time, taking us toward the new era of computable law. To prepare for this transformation, enrolling in a Smart Contracts Development Course can empower individuals to bridge the gap between legal systems and emerging technologies, fostering innovation and accountability in the digital age.
India has taken a big step in crypto law. The Madras High Court has ruled that digital assets like XRP count as legal property. This means crypto is now treated like something you can own and protect under the law.
The case began after a user on WazirX, a crypto exchange, filed a complaint. Her account held over 3,500 XRP, worth about $9,400. After a major hack at the exchange in 2024, WazirX froze many accounts and planned to spread the loss across users. She argued this was unfair and violated her rights as an owner.
“Madras High Court recognized cryptocurrencies as legally protectable property, upheld Indian jurisdiction over assets held by Indian investors”https://t.co/NUAqUeZI7w pic.twitter.com/behzyK1Hxc
— Vijay Shekhar Sharma (@vijayshekhar) October 25, 2025
Court Rules Crypto Is Property
The court agreed that the user’s XRP was her property. It ordered WazirX to protect the funds and provide a bank guarantee while the case continues. The judge made it clear that crypto is something you can hold, control, and trust, even though it is digital.
This is a major first for India. The ruling gives crypto owners legal protection. In simple terms, if you own crypto on an exchange, the exchange cannot use your assets to cover its losses without legal grounds.
What It Means for Indian Investors
This ruling brings clarity for crypto users in India. For the first time, a court recognized digital coins as personal property. It gives investors more confidence and may push lawmakers to build clearer rules for crypto trading and protection.
The decision also puts India in line with places like the United States and the United Kingdom, where crypto is also treated as property in certain cases.
🚨 Urgent: Indian Exchange Hacked 🚨@WazirXIndia India’s Safe Multisig wallet on the $ETH network has been compromised.
A total of $234.9M has been moved to a new address. Each transaction’s caller is funded by @TornadoCash. pic.twitter.com/13NrHkQTaZ
— Cointelegraph (@Cointelegraph) July 18, 2024
Impact on XRP and Crypto Market
Legal certainty is good news for XRP in India. More trust may bring more users and trading activity. Exchanges may also update their rules to protect user assets better.
India is still shaping its crypto policy. But this court ruling is a key moment. It shows that digital assets like XRP are not just tokens online, they are real property with legal rights.
Disclaimer
The information provided by Altcoin Buzz is not financial advice. It is intended solely for educational, entertainment, and informational purposes. Any opinions or strategies shared are those of the writer/reviewers, and their risk tolerance may differ from yours. We are not liable for any losses you may incur from investments related to the information given. Bitcoin and other cryptocurrencies are high-risk assets; therefore, conduct thorough due diligence. Copyright Altcoin Buzz Pte Ltd.
A lawyer for US Senator Elizabeth Warren has hit back at allegations that she defamed Binance founder Changpeng Zhao in a social media post following US President Donald Trump’s pardon of him.
The New York Post reported on Tuesday that Zhao’s lawyer, Teresa Goody Guillén, threatened to sue Warren for “defamatory statements that impugn his reputation” unless she removed an Oct. 23 X post that cited “corruption” in Trump’s pardon of Zhao that same day.
Warren’s lawyer Ben Stafford said in a letter to Goody Guillén on Sunday obtained by Punchbowl News that “any threatened defamation claim would be without merit,” as the law Zhao “pled guilty to violating is an anti-money laundering law.”
Warren said in her X post that Zhao “pleaded guilty to a criminal money laundering charge and was sentenced to prison,” which Zhao rebuffed online days later, saying “there were NO money laundering [charges].“
Statement needs “actual malice,” lawyer argues
Zhao pleaded guilty in November 2023 to failing to maintain an effective Anti-Money Laundering program at Binance in violation of the Bank Secrecy Act, and a Seattle federal court sentenced him to four months in prison in April 2024.
Warren’s X post added that Zhao “financed President Trump’s stablecoin and lobbied for a pardon,” adding to criticism of Trump’s pardon due to ties between Binance and his family’s crypto venture, World Liberty Financial.
The Wall Street Journal and Bloomberg have reported that Binance helped create World Liberty’s stablecoin USD1. The stablecoin was also used in a $2 billion deal for the Emirati state-owned investment firm MGX to buy a stake in Binance in March.
Politico reported on Oct. 25 that Zhao’s pardon came after Binance and its legal team undertook an expensive, months-long effort to win over key figures in Trump’s orbit.
Stafford, Warren’s lawyer, argued in the letter that Warren’s X post “is true in all respects and therefore cannot be defamatory,” and it “accurately represented publicly available and widely reported facts.”
“A public figure such as Mr. Zhao cannot prevail on a defamation claim without presenting evidence that the defendant published a false statement of fact with actual malice,” he added.
Zhao’s lawyer asks for retraction
Zhao’s lawyer, Goody Guillén, said in the letter seen by the New York Post that he “will not remain silent while a United States Senator seemingly misuses the office to repeatedly publish defamatory statements that impugn his reputation.”
Related: Trump’s crypto pardons raise ethics and corruption concerns
The letter asked Warren to retract statements in both her post on X and a Senate resolution seeking to denounce Trump’s pardon of Zhao, or Zhao could “pursue all legal remedies available to address these false statements.”
Stafford argued that Warren’s X post “simply references the fact that Mr. Zhao pled guilty to a violation of U.S. anti-money laundering law.”
“Her X Post does not state — and should not be construed to state — that he pled guilty to any other money laundering charge,” the letter added.
Magazine: Bitcoin OG Kyle Chassé is one strike away from a YouTube permaban
Kenya has passed a Virtual Asset Service Providers (VASP) law that fundamentally reshapes the regulatory landscape for digital assets in the country.
In plain English: it doesn’t regulate Bitcoin the protocol or your private self-custody. Instead, it regulates companies that touch customer assets — exchanges, custodians, token issuers, investment advisors, brokers, and trading platforms.
The law creates a licensing perimeter around commercial intermediaries and gives regulators enforcement teeth over that perimeter. Think of it as drawing a regulatory fence around businesses that handle other people’s bitcoin and crypto, whilst leaving individual users and peer-to-peer (P2P) transactions outside the gate.
This distinction is critical: the Act targets virtual asset services, not the underlying technology or private ownership. If you’re holding your own keys and transacting directly with another person, you’re outside the licensing regime. But the moment you start offering custody, brokerage, advisory, or platform services to the public, you’re inside the perimeter — and you need a license.
Key takeaway: The VASP Act concerns commercial intermediaries, not individual users. Self-custody and P2P transactions remain unregulated, but businesses touching customer assets face full licensing requirements.
What Parts of “Crypto” the Law Does Regulate: The Licensing Perimeter
Licensed VASPs are any Kenya-registered (or compliant foreign) companies that perform the activities listed in the Schedule to the Act. These activities map to specific regulators — primarily the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) — and trigger comprehensive compliance obligations.
Exchanges & Trading Platforms: Brokers, trading platforms, and services facilitating fiat-to-VA or VA-to-VA exchanges. Both centralized and certain decentralized platforms that hold custody or market-make against clients fall within scope.
Custody & Wallet Providers: Any service holding client coins on their behalf. If you control the keys to customer assets, you’re a custodian and need licensing, capital adequacy, segregation, and audit requirements.
Investment Advisors & Managers: Providing advice or discretionary management of virtual asset portfolios for clients. This captures both retail advisory and institutional asset management services.
Token Issuance & Tokenization: Initial virtual asset offerings (ICOs/STOs) and real-world asset (RWA) tokenization. These fall primarily under CMA oversight as they intersect with securities and capital-markets regulation.
Escrow & Platform Operators: Services providing escrow functions for virtual asset transactions and certain platform operators facilitating multi-party trades or settlements.
Each activity triggers specific obligations: licenses, capital and solvency requirements, fit-and-proper assessments, AML/CFT/CPF controls, conduct standards, cybersecurity measures, advertising rules, periodic audits, and ongoing reporting. The breadth is deliberate — regulators want bank-grade compliance from anyone touching customer assets.
Key Definitions for Terms in the Act
Virtual asset: A digital representation of value that can be traded, transferred, or used for payment or investment purposes. Explicitly excludes fiat currency, e-money, and securities (which have their own regulatory regimes).
Virtual Asset Trading Platform: A centralized or decentralized platform that facilitates exchange and either (i) holds custody of client assets, or (ii) market-makes against clients. Both limbs trigger licensing.
Virtual Service Token: Pure utility tokens that are non-transferable and used solely within a closed ecosystem. These fall outside the licensing perimeter — a narrow carve-out for genuine utility.
These definitions matter because they set the boundaries of regulatory jurisdiction. The Act uses functional language (“digital representation of value”) rather than technology-specific terms, meaning it’s designed to be technology-neutral and capture future innovations. However, this breadth also creates interpretive grey areas — expect subsidiary regulations and guidance to clarify edge cases.
Who’s in Charge? Dual Regulators and Subsidiary Powers
Central Bank of Kenya (CBK) + Capital Markets Authority (CMA)
These are the joint lead regulators for VASPs, with activity-based allocation. CBK typically oversees payments, custody, and exchange functions; CMA handles token offerings, investment advice, and tokenized securities. The Cabinet Secretary for National Treasury can designate additional regulators by Gazette notice — so watch for future expansions of the regulatory perimeter.
Subsidiary Regulations (The Real Power)
The Treasury CS has broad discretion to issue subsidiary regulations that flesh out critical details: stablecoin frameworks, tokenization standards, capital adequacy ratios, solvency tests, insurance requirements, conduct rules, advertising standards, cybersecurity mandates, and more.
Expect a lot of the actual policy to be decided here — the Act is a framework; the regs will be the teeth.
Practical implication: The act is deliberately high-level. Founders and compliance teams should track the gazetting of subsidiary regulations closely — those will determine capital thresholds, operational standards, and day-to-day compliance burdens. Early engagement with regulators during consultation periods is advisable if you’re planning a VASP business.
What the Law Doesn’t Regulate
Outside the licensed perimeter, the Act does not (on its face) outlaw or require licensing for:
- Owning Bitcoin in self-custody (your own keys, your own wallet) — this is private property, not a regulated service.
- Paying another person directly wallet-to-wallet (peer-to-peer) — private contractual settlement between two parties remains outside the scope.
- Running a non-custodial wallet app where users hold their own keys and you provide only software (absent other regulated activities like brokerage or custody).
The Act explicitly applies to “virtual asset services” (the Schedule list) offered in Kenya; it is not a general ban or license requirement on private use of bitcoin or other virtual assets.
That said, unlicensed businesses offering any Schedule activity can face enforcement, fines, and criminal penalties. The line between “private use” and “carrying on a business” will be tested in practice — habitually dealing for the public, even informally, could morph you into an unlicensed broker.
Pros & Cons (Gloves Off)
Potential Pros
Legal Clarity for Institutions: Pensions, banks, fintechs, and corporates now have a rulebook to engage with digital assets. Licensed on-ramps and custodians with proper compliance make institutional adoption feasible.
Consumer Safeguards: Fit-and-proper tests, capital adequacy, audits, asset segregation, cybersecurity standards, and conduct rules reduce “cowboy operator” risk. Retail users benefit from recourse mechanisms and dispute resolution.
Tax Clean-Up: The punitive 3% Digital Asset Tax on transaction value was repealed by Finance Act 2025. Kenya now pivots to excise duty on VASP fees — much friendlier for savers and long-term holders. Tax targets platforms’ charges, not the full notional trade value.
Pathway for Tokenization & RWAs: Clear CMA oversight for tokenized securities and real-world assets unlocks capital-markets pilots and enterprise use cases (land registries, trade finance, supply-chain tokenization).
Real Cons
Gatekeeping via Licenses: Dual regulators plus high capital, insurance, and AML burdens can lock out SMEs and open-source teams. Big banks and fintechs win by default; innovation may be stifled by compliance costs.
Subsidiary-Rules Risk: Broad discretion given to the Treasury CS can tighten rules on stablecoins, self-hosted wallet interfaces, P2P marketplaces, or Lightning gateways later. Policy can “narrow the pipe” after headlines fade and public attention wanes.
Surveillance Creep: Strict know-your-customer (KYC) laws and record-keeping across VASPs, plus mandatory data-sharing with AML bodies, raises privacy risks for ordinary users who rely on custodial rails. Expect financial surveillance to intensify.
Category Error: Bitcoin ≠ generic “virtual asset.” Lumping bearer digital cash with issuer-based tokens invites over-regulation of money as though it were a security or product. The Act doesn’t correct that fundamental conceptual flaw.
From a Bitcoin Lens: Acquiring, Saving & Spending
Acquiring BTC
Via VASPs (exchanges/brokers): Expect full KYC, fee-based excise duty, AML transaction monitoring, withdrawal policies, and proof-of-funds queries. Institutional-grade on-ramps should improve in quality and reliability — but at the cost of privacy and friction.
Peer-to-peer: Private purchases and sales between individuals remain outside the licensing perimeter, as long as you’re not carrying on a Schedule business. Be careful not to morph into an unlicensed broker or exchange by habitually dealing for the public (e.g., running a Telegram group offering regular buy/sell services).
Practical upshot: Retail users can still dollar-cost-average non-custodially via P2P or occasional licensed platform buys; businesses wanting routinized, high-volume flows will likely use licensed platforms to manage compliance and audit trails.
Saving in BTC (Self-Custody)
Keeping Bitcoin on your own wallet (hardware or software where you control the keys) is not prohibited by the Act. This is private property, akin to holding gold or foreign currency at home.
Corporate treasuries: Companies can hold BTC on balance sheet, but must follow IFRS accounting standards (usually classified as intangible asset at cost with impairment testing; or inventory if you’re a market-maker). Create a board-approved treasury policy covering allocation limits, custody arrangements, key management, and audit trails. Kenya applies IFRS; the IFRS Interpretations Committee 2019 guidance (IAS 38 treatment) is the usual reference.
Spending / Paying in BTC
Direct wallet-to-wallet payments between two parties (e.g., paying a supplier, settling an invoice, tipping a creator) are not regulated as a VASP activity. Freedom of contract applies; the state can tax income or gains, but doesn’t pre-approve the medium of settlement.
If you provide a payment service that sits in the flow of customer funds — custody, routing, conversion, settlement facilitation — you’re likely a VASP-type business and need licensing. Lightning gateways that take custody or provide fiat conversion will fall within scope; pure routing nodes operated by users themselves likely won’t.
Constitution, Tax & Company Compliance — Outside the VASP Fence
Constitutional Stakes
Property & Privacy: Self-custodied keys are a form of digital property and personal data. Any future subsidiary regulation that compels key disclosure or bulk monitoring must pass constitutional tests under Kenya’s 2010 Constitution: necessity, proportionality, and respect for fundamental rights (Articles 31, 40). The VASP Act doesn’t override these rights — it creates a licensing regime for intermediaries, not a surveillance charter for private wallets.
Freedom of Contract & Association: Two people agreeing to settle an obligation in Bitcoin exercise freedom of contract (Article 36). The state can tax the income or gains, but needn’t pre-approve the medium so long as no other law (e.g., money-laundering statutes) is violated. The VASP Act doesn’t prohibit private contractual settlement in virtual assets.
Tax (Post-Finance Act 2025)
No More 3% DAT
The punitive Digital Asset Tax on transaction value is repealed. Instead, Kenya now levies excise duty on VASP fees (the platform’s charge for service). This doesn’t tax peer-to-peer notional flows directly; it taxes the intermediary’s commission.
Income / Capital Gains
Individuals: Kenya taxes income; gains may be taxable if you’re trading as a business or receive BTC for services rendered. Passive long-term appreciation without a realization event isn’t typically taxed until disposal — but document your cost basis (date acquired, cost in Kenyan shillings (KES), transaction ID (txid)).
Companies: Realized gains/losses hit profit & loss under IFRS; taxable under corporate income tax when realized. If BTC is held as inventory (e.g., market-making), trading profits are ordinary income. If held as intangible asset, impairment losses are deductible but unrealized appreciation isn’t taxed until sale.
VAT
Generally no VAT on money or money-like instruments; but VASPs’ service fees can attract VAT or excise depending on classification. Confirm with your tax advisor once subsidiary regulations land. Excise on VASP fees is already indicated in Finance Act 2025.
Accounting & Audit (IFRS)
Classification: Most corporate treasuries treat Bitcoin as an intangible asset (IAS 38). Market-makers and traders may classify as inventory (IAS 2).
Measurement: Intangibles are typically carried at cost less impairment (no upward revaluation through P&L until disposal), which can significantly understate economic value on the balance sheet. Pair this with management metrics in notes: BTC units held, fair-value footnotes, value-at-risk (VaR) disclosures.
Controls: Dual-control of private keys, SOC-audited custody providers (if using external custody), board-approved treasury policies, segregation between treasury holdings vs operational float, and regular reconciliation of on-chain balances.
Company Law & General Compliance
If you offer any Schedule VASP activity (brokerage, custody, platform, advice, token issuance), you must: incorporate appropriately, apply to the relevant regulator(s), meet capital and solvency requirements, pass fit-and-proper assessments, implement AML/KYC/CFT controls, comply with cybersecurity and conduct standards, adhere to advertising rules, file periodic reports, and undergo audits.
If you only hold BTC on your balance sheet, pay suppliers in BTC by mutual agreement, or accept BTC as settlement (converted immediately or held) without acting as a custodian or exchange for the public, you’re not a VASP — standard Companies Act and tax rules apply, but no VASP license is required.
Actionable Playbooks: What You Should Do Now
For Ordinary Kenyans
Learn self-custody: Choose a reputable non-custodial wallet (hardware or mobile), back up your seed phrase properly (offline, multiple secure locations), and practice small sends to familiarize yourself with the process.
DCA with exits: Use licensed on-ramps for KES-to-BTC conversions when convenient, but immediately withdraw to your own wallet. Keep detailed records: date, KES cost basis, txid, and wallet address.
Peer-to-peer payments: You can pay or receive BTC directly wallet-to-wallet. If it’s income (e.g., freelance work), declare it for tax. If you dispose of BTC at a gain, track your cost basis to calculate taxable gain accurately.
For SMEs / Corporates
Board-approved BTC Treasury Policy: Document allocation limits (e.g., % of reserves), risk management (volatility, custody, counterparty), key management procedures (multi-sig, hardware security modules), and accounting treatment (IFRS classification, impairment testing).
Non-custodial acceptance: Accept BTC from customers directly into your own wallet, or via a payment processor that settles instantly to you in BTC or KES (minimising custodial exposure and regulatory risk).
Avoid “accidental VASP” risk: Don’t hold client BTC, don’t broker or exchange for the
public, don’t run a trading platform—unless you affirmatively intend to obtain a VASP license and bear the compliance costs.
Tax & audit ready: Maintain ledgers of BTC units held, adopt a consistent cost-basis method (FIFO, LIFO, or specific identification), and record KES functional-currency conversions at transaction dates for P&L and tax purposes.
For Builders & Founders
Decide your regulatory posture: Non-custodial software (safer, outside licensing perimeter) vs custodial/market-facing VASP (licensing roadmap, capital requirements, ongoing audits, and compliance overhead).
Design for self-custody first: Prioritize user control of keys, composability with Lightning and other open protocols, and clean data trails users can export for tax reporting and auditability.
Engage regulators early: If pursuing a VASP license, begin dialogue with CBK/CMA during the application drafting phase. Understand their expectations on capital, systems, AML controls, and governance before you’re too far down the build path.
Stay agile on subsidiary regs: Monitor Gazette notices and public consultations — subsidiary regulations will define day-to-day compliance burdens, stablecoin rules, and emerging areas like Lightning or DeFi interfaces.
Bottom Line: What This Really Means
This law licenses intermediaries; it does not outlaw Bitcoin self-custody or peer-to-peer use.
The VASP Act will make bank-grade, compliant on-ramps more available — institutional capital can now flow into licensed custodians and exchanges with regulatory certainty. That’s a win for legitimacy, consumer protection, and formalizing the industry.
But it also centralizes power in licensed platforms, with all the usual trade-offs: higher fees, mandatory KYC, financial surveillance, slower iteration due to compliance overhead, and a bias towards incumbents (banks, large fintechs) who can afford the capital and legal costs. Smaller, open-source teams and peer-to-peer marketplaces face an uphill battle.
For Citizens & SMEs
The winning strategy is simple: learn self-custody, document your flows meticulously (dates, amounts,cost basis, txids), and don’t become a VASP by accident. Keep your Bitcoin on your own keys, transact peer-to-peer where possible, and use licensed platforms only when necessary for fiat conversion or institutional compliance.
For Builders Choosing the VASP Route
Assume bank-like compliance from day one: capital adequacy, fit-and-proper directors, AML/KYC systems (transaction monitoring, sanctions screening, suspicious-activity reporting), cybersecurity frameworks (ISO 27001, penetration testing), segregated client assets, external audits, and ongoing regulatory reporting. Budget for legal and compliance personnel; this isn’t a lean startup play.
The VASP Act is a double-edged sword: it legitimizes the industry and invites institutional participation, but it also imposes gatekeeping and surveillance that can undermine the open, permissionless ethos of Bitcoin. Your move depends on your goals — freedom and sovereignty, or legitimacy and institutional access.
Sources & Further Reading
Official Bill Text
Virtual Asset Service Providers Act (Kenya): Definitions (Part II), scope of application (Part III), Schedule of regulated activities, regulator mapping (CBK/CMA allocation), licensing framework, capital and solvency requirements, fit-and-proper standards, AML/CFT/CPF obligations, conduct and advertising rules, and enforcement provisions.
Finance Act 2025 (Tax Changes)
Repeal of the 3% Digital Asset Tax on transaction value; introduction of excise duty on VASP service fees. Confirms shift from taxing notional trade value to taxing intermediary charges — much friendlier for long-term holders and peer-to-peer users.
Passage & Dual-Regulator Design
Reuters, Parliament of Kenya official records, and press coverage of the Bill’s passage and pending/reported presidential assent. Commentary on the CBK/CMA co-ordination mechanism and the Cabinet Secretary’s subsidiary regulation powers.
IFRS Accounting Guidance
IFRS Interpretations Committee (2019) guidance on holdings of cryptocurrencies: IAS 38 (intangible assets) treatment, cost-less-impairment model, disclosure requirements. Kenya applies IFRS for corporate financial reporting; this is the authoritative reference for balance-sheet classification of Bitcoin and other virtual assets.
Constitutional Framework
Constitution of Kenya 2010: Articles 31 (privacy), 36 (freedom of association), 40 (property rights), and 47 (fair administrative action). These provisions anchor individual rights against over-reach in subsidiary regulations (e.g., compelled key disclosure, bulk surveillance without judicial oversight).
This guide is for informational purposes and does not constitute legal, tax, or financial advice. Consult a qualified Kenyan lawyer, tax advisor, or accountant for your specific circumstances. Law and regulations evolve; verify current status before acting.
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