The current regulatory front surrounding crypto payments and prediction markets is tightening from three directions simultaneously: on one end is the United States, where SEC Commissioner Hester Peirce emphasizes the need to “seek a balance between regulation and innovation,” while on the other end, the CFTC and SEC have taken rare synchronized action in investigating abnormal trading related to the Iran conflict (according to a single source), signaling to prediction market platforms “unified regulation and increased scrutiny.” The other end is London, where on May 8, 2026, Bank of England Governor Andrew Bailey publicly stated that any crypto-pegged currency wishing to truly enter the global payment system must comply with unified international regulatory standards, specifically naming some U.S. crypto-pegged currencies that present liquidity risks, suggesting that the UK and even the European Central Bank camp is attempting to bind the U.S. dollar-denominated crypto payment network with a set of global rules, which stands in natural tension with the current Trump administration's view of promoting crypto-pegged currencies and related payment innovations, accelerating “crypto-dollarization.” The third clue comes from Washington's legislative front: a key Senate committee has officially launched a milestone digital asset bill review process, with Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks reaching a compromise on the crypto-pegged currency revenue issue earlier this month. The banking industry has also submitted “final amendment proposals” on the revenue clause during the review stage (according to a single source), attempting to incorporate the boundaries of traditional deposits and wealth management interests into the new regulations. Under the intertwining of these three forces, the institutions responsible for issuing and clearing crypto payment instruments, the U.S. banking system surrounded by pressures from new dollar alternatives, the prediction market platforms struggling for survival within compliance layers, and ordinary users relying on this entire suite of tools for cross-border transfers and hedging will be directly swept into the rewriting of rules, facing not only product choice questions but also the need to reposition their legal identities and risk costs between the regulatory logics of the U.S. and the U.K.

Prediction Market ETF: The Tug of War between SEC and CFTC

In Washington, signals regarding prediction markets are not uniform. SEC Commissioner Hester Peirce’s statement of “seeking a balance between regulation and innovation” was quickly interpreted by Nate Geraci, president of The ETF Store, as a possibility for prediction market ETFs to be approved soon—although this is merely market speculation and not an official commitment from the SEC. For the ETF industry, this is a moment of “a crack in the door”: once event contracts are packaged into ETF shells, the prediction tools, which originally wandered in regulatory gray areas, can potentially enter mainstream portfolios as compliant financial products. However, at almost the same time, collaboration between the CFTC and SEC in the prediction market sphere has notably tightened, with both agencies maintaining a consistent position in their investigation of abnormal trading related to the Iran conflict (according to a single source), conveying an additional meaning: innovation can be discussed, but it must be under the premise of accepting the magnifying glass of dual regulation.

This dual-line tugging presents a higher compliance threshold for product designers and platforms than in the past. If prediction market ETFs are ultimately released, underwriting institutions and platforms carrying the underlying contracts will find it difficult to regard themselves as “experimental products”: in terms of anti-money laundering, there needs to be a more systematic identification of participant identities and tracking of fund sources and flows to prevent event contracts from being used as tools for cross-border transfer and fund splitting; regarding information disclosure, it is necessary not only to explain contract rules but also to disclose event selection logic, data sources, pricing, and settlement mechanisms, allowing investors to judge whether the probability curves have embedded structural biases; in terms of market manipulation identification, the cross-jurisdictional authority of the SEC and CFTC means that the boundaries of “influencing prices” and “influencing event outcomes” will be redefined. Distorting predictive probabilities through false information or abnormal trading patterns could easily be seen as manipulation at the securities level and improper intervention at the derivatives level simultaneously. For platforms and participants, the real question to answer is no longer “Can prediction markets enter ETFs?”, but rather “Under the premise of overlapping rules from the SEC and CFTC, who has the capability to bear the compliance responsibilities and enforcement risks that come with it?”

London Issues Liquidity Warning: The Bank of England Wants to Write the Rules for Crypto Payments

While Washington is pulling on “who takes responsibility,” London has shifted its focus to “Will the money suddenly disappear?” On May 8, 2026, Bank of England Governor Andrew Bailey set a precondition for crypto-pegged currencies, stating that if these assets wish to enter the global payment system, they must operate under unified international regulatory standards. The term “unified” does not refer to polite coordination but rather aims to incorporate domestic experiments from various countries into a framework of rules that can be mutually recognized and reconciled. Whoever writes these rules essentially issues licenses for the future crypto payment system. Bailey’s public proposal of this issue is itself a declaration—London hopes to sit in the main position at the standard setting table from the start, rather than passively accepting alignment after experiments are conducted by the U.S. Congress or regulatory bodies.

Following this, Bailey explicitly reminded that some U.S.-issued crypto-pegged currencies carry liquidity risks (according to a single source). In the context of European and U.K. regulators, “liquidity risk” is not a technical term but a direct concern regarding cross-border runs and risk spillover—once dollar-pegged tokens are widely used among European users but cannot be swiftly redeemed in extreme situations, the gap often has to be filled by the local financial system. This is why European and U.K. regulators have long set higher reserve and liquidity regulatory thresholds for payment-related crypto assets, while the current Trump administration in the U.S. is viewed as a supporter for promoting crypto-pegged currencies and related payment innovations, leading to an almost inevitable “struggle” (as Bailey put it) between the two positions. In the future, if the international standards led by London are significantly higher than U.S. domestic requirements in terms of reserve asset composition, minimum liquidity requirements, and cross-border mutual recognition conditions, U.S. issuers will have to choose between “reshaping asset structures according to U.K./European standards” and “accepting restrictions on their tokens' use in key overseas markets.” Currently, the international standard remains in the stage of public statements from central banks and regulatory bodies, and has not yet formed a binding multilateral treaty or unified regulatory text. However, whoever can manage to write their rules into that text in the upcoming rounds of negotiations and legislation will have the opportunity to price the global liquidity for crypto-pegged currencies.

Senate Bill Review: The Banking Sector Courts the Revenue Clause

While the international standards are still at the level of “speeches,” the U.S. has already pen down a coded version. A key Senate committee has officially started reviewing a digital asset bill considered a milestone, indicating that regulation of crypto-pegged currencies will move from individual regulatory agency statements to written rules drafted by Congress. The first round of offensive and defensive strategies has almost entirely focused on a technically but highly lethal question: who owns the revenue generated behind these tokens, how is it distributed, and legally should it be regarded as similar to bank deposits, money market funds, or purely “non-interest bearing” payment tools? Different wording not only determines who is qualified to issue and custody but also determines whether future cross-border usage scenarios between the U.S., U.K., and Europe are mutually recognized or limited.

To set the tone for this most sensitive clause, Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks earlier this month reached a compromise, providing a foundational text for the committee's review. However, as the hearing period neared its end, U.S. banking industry groups took collective action, submitting final modification proposals on this revenue compromise, attempting to embed their understanding into the bill: if the revenue is written too closely to “user interest,” crypto-pegged currencies may be more strongly compared to bank deposits in regulation, forcing banks either to fully enter and accept the same prudent regulations or be squeezed out of the payment space by high-yield tokens; if revenue is defined more like investment returns in funds, issuers will then face heavier securities or asset management rules; and once the legislation adopts language that “de-yields” it, locking it in as a purely payment tool, traditional banks' accounts and payment businesses will face a new round of price competition. For issuers, this clause will directly determine whether the business model can still rely on the logic of “earning interest on deposited funds”; for users, how revenue is defined—as interest, investment returns, or other income—will reshape tax reporting standards and compliance costs. In the coming months, whether this revenue clause can survive amidst banking lobbying and bipartisan compromise will determine whether the U.S. version of crypto payment new order extends along the banking account logic, or is shaped into a completely different payment vehicle with totally different tax and regulatory attributes.

Who Gets Hurt the Most After the Redrawing of Regulatory Boundaries

When the Bank of England sends the signal on May 8 that “crypto-pegged currencies must have unified international regulatory standards,” while explicitly naming liquidity risks in some U.S. products, and the U.S. Senate repeatedly refines the revenue clause with the CFTC and SEC tightening prediction markets, these various lines are converging into a reconstruction of rules: one side is the U.K. fighting for the narrative power of international standards, while the other side is the U.S. engaging in detailed gaming about revenue, licenses, and product boundaries. Together, they redraw the compliance boundaries for crypto payments and prediction markets. Who can withstand this reshaping the most? Generally, “the larger the institution, the safer it is”: large issuers and banks with compliance teams and cross-jurisdictional resources can adjust their asset structures according to the unified standards advocated by the Bank of England, and they are also capable of securing licenses and filings in a context where the U.S. Senate bill is still not finalized, and the revenue clause could be adjusted at any moment. In contrast, smaller crypto-pegged currency projects relying on high yields to attract users, prediction market platforms that have yet to connect with any regulatory framework, and individual users frequently engaging in cross-border currency arbitrage will face two simultaneous pressures—first, rising compliance costs, making it no longer easy to operate in the “unlicensed middle ground”; second, as the CFTC and SEC form a joint law enforcement posture in prediction market cases and the U.K. seeks to take the lead in international rules, while the U.S. solidifies the revenue recognition logic through the Senate bill, the previously available regulatory arbitrage space will be significantly compressed. If in the future, the CFTC and SEC establish stable divisions of labor in prediction markets, the U.K. incorporates the “unified standards” into multilateral agendas, and the U.S. digital asset bill ultimately locks the revenue clause in a banking-friendly direction, the industry may face a new map of “license barriers + inconsistent cross-border standards”: leading institutions moving through it while small projects and ordinary users are forced to queue in limited compliant channels. The problem is that all of this remains highly uncertain—discussions at the International Bank for Settlements and G20 levels are still confined to public statements from central banks and regulators, without forming binding texts; the U.S. bill is only at the stage of key committee review, and banking industry groups are still pressuring the compromise proposals. What market participants truly need to focus on is how the timelines for hearings, regulatory drafts, and multilateral mechanisms will unfold, which clauses will be set in stone, and which gaps can still be left for product designers and cross-border users.

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