Cryptocurrency and Blockchain

The Blockchain Association and Crypto Council for Innovation sued Illinois on August 21 to block a 0.2% digital asset tax scheduled to take effect January 1, 2027, alleging violations of the U.S. Constitution, Illinois Constitution, and the federal Internet Tax Freedom Act. The tax applies to the full value of digital assets whenever a covered broker exchanges, transfers, or stores them for a customer—meaning a user could owe tax without selling, transferring ownership, or earning a profit. The complaint, filed in Sangamon County Circuit Court against Illinois Department of Revenue Director David Harris, Attorney General Kwame Raoul, and State's Attorney John Milhiser, sets out six counts. The groups argue the law is unconstitutionally vague because brokers and customers cannot determine with certainty which activities trigger the tax or who must collect it, yet statutory violations expose brokers to Class 3 felony charges. The plaintiffs also claim the tax violates the Commerce Clause by creating the risk of double taxation: a customer with an Illinois address completing a transaction while visiting another state could face competing tax claims from both jurisdictions, since Illinois lacks a credit for comparable tax paid elsewhere. The filing notes that association members are already spending money on outside legal and tax advice and changing systems to calculate and record the levy. This is the second lawsuit challenging the tax; the Digital Chamber filed a separate case in July. The groups seek declaratory and injunctive relief to block enforcement before January 1, 2027.

A US Army Special Forces master sergeant traded more than $400,000 in Polymarket event contracts using classified information about a military operation targeting Venezuelan President Nicolás Maduro in January, and now the CFTC and the soldier's defense are locked in a jurisdictional fight that will define how US law treats prediction markets. Gannon Ken Van Dyke opened a Polymarket account on December 26, 2025, and spent roughly $33,934 on contracts tied to Venezuela and Maduro through January 2. When US special forces captured Maduro on January 3, Van Dyke's positions paid out, netting him more than $400,000 in profit. Prosecutors charged him in April with fraud, alleging he used nonpublic information from his role in Operation Absolute Resolve—a mission he had signed nondisclosure agreements to keep confidential. The legal dispute now centers on whether Polymarket's event contracts are "swaps" under federal commodities law. Van Dyke's lawyers argue they are not, which would strip the CFTC of authority over his conduct. The CFTC disagrees and is seeking to file an amicus brief in the criminal case to argue that Congress defined swaps broadly enough to capture these contracts. In a Monday filing, Van Dyke's defense team opposed the CFTC's intervention, calling it a "regulatory wolf" trying to advance its own civil case against him through the back door rather than litigating it directly. A federal judge has already stayed the CFTC's civil case pending the criminal trial, which could begin in late 2026 or early 2027. Van Dyke pleaded not guilty to five counts covering confidential government information, commodities and swap fraud, wire fraud, and unlawful monetary transaction. The CFTC argues in its brief that accepting Van Dyke's interpretation would undermine federal oversight of prediction markets whose notional volume totals into the tens of billions of dollars. The case has become a focal point for lawmakers examining manipulation risks on platforms like Polymarket and Kalshi.

Bitcoin surged past $79,000 this week, gaining 23.6% in its second-strongest week since early 2021, after the U.S. Treasury announced it would expand its buyback operations on long-dated government bonds. Treasury Secretary Scott Bessent's move to expand purchases pushed yields lower, making interest-free bitcoin more attractive relative to yield-bearing Treasuries. The catalyst triggered a liquidation of roughly $4 billion in bearish crypto positions. Spot Bitcoin ETFs captured $1.92 billion in net inflows for the week—their largest weekly haul in nearly 10 months—with BlackRock's IBIT fund accounting for $1.33 billion of that. The rally also benefited from a weaker dollar, which fell below its 200-day average, and from President Trump's renewed push for the CLARITY Act on the same day the Treasury announced its buyback expansion. Bitcoin's move above its 200-day moving average has raised the prospect of a "golden cross" technical pattern. Analysts cautioned that the buyback program, while modest in size, functioned as a signal rather than quantitative easing, but the move underscored how sensitive crypto remains to shifts in long-term yields and dollar strength. Despite the week's strength, spot Bitcoin ETFs remain down $2.91 billion year-to-date, having suffered $4.51 billion in outflows during June alone.