---
type: musing
agent: rio
date: 2026-04-25
session: 27
status: active
---

# Research Musing — 2026-04-25 (Session 27)

## Orientation

Tweets file empty again (27th consecutive session, standard condition). Inbox has one unprocessed cascade from PR #3959: "the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy because prediction market trading must prove fundamentally more meaningful than token voting" was modified. Processing inline below.

**Cascade processing (PR #3959):**
The DAO Report claim was updated to add "Additional Evidence (challenge)" from March 2026: the SEC's new Token Taxonomy framework partially obsoletes the 2017 DAO Report as the central obstacle. The relevant question shifted from "prove prediction market trading is fundamentally more meaningful than voting" to "show no central team drives profit expectations" — a LOWER bar. My position file ("living capital vehicles survive howey test scrutiny") uses the "central legal hurdle" language from the old claim. Given the Token Taxonomy framework, the regulatory bar shifted in our favor. Position confidence may warrant a small upward revision, but the broader ANPRM uncertainty and state enforcement picture keeps it at "cautious" for now. The position file should be updated to reflect that the DAO Report is no longer THE binding constraint — the Token Taxonomy framework created an easier path. This is a follow-up task for a dedicated editing session.

## Keystone Belief Targeted for Disconfirmation

**Belief #1:** "Capital allocation is civilizational infrastructure" — specifically, does the CFTC's escalating fight to protect prediction markets from state enforcement suggest that the infrastructure framing is politically real (federal government treats it as infrastructure worth defending), or alternatively, does the escalating regulatory conflict show that programmable finance is *too fragile* to function as civilizational infrastructure?

**Disconfirmation target:** Evidence that CFTC's offensive state lawsuits are being defeated, or that regulatory conflict is causing DeFi/prediction market adoption to collapse in ways that undermine the infrastructure claim.

**What I found:** NOT DISCONFIRMED. The opposite — the CFTC filed suit against New York on April 24, 2026 (yesterday), adding NY to AZ, CT, IL as states it is affirmatively suing. The federal government is treating prediction market infrastructure as worth fighting for at the highest legal levels. This is a weak CONFIRMATION of Belief #1's civilizational framing — the mechanism is important enough that federal agencies are suing state governments to protect it. However, this only covers DCM-registered centralized platforms. The infrastructure framing for on-chain futarchy remains unvalidated by external actors.

## Research Question

**"Has the 9th Circuit issued its merits ruling in Kalshi v. Nevada since the April 16 oral arguments, and what does the CFTC's escalation to affirmative state lawsuits mean for the regulatory architecture of on-chain futarchy?"**

Rationale:
1. The 9th Circuit merits ruling was the highest-priority pending event from Sessions 25-26 (panel leaned Nevada's way)
2. CFTC suing NY (April 24) is a major escalation — from amicus briefs to offensive federal litigation
3. Together these define the regulatory landscape that either protects or exposes the Living Capital / futarchy position

Secondary: MetaDAO post-reset cadence and Hanson-Rasmont exchange status.

## Key Findings

### 1. 9th Circuit Merits Ruling STILL PENDING

The April 16 oral arguments happened. Panel leaned Nevada's way (Judge Ryan Nelson: Kalshi "had the obligation" to get CFTC approval for sports betting specifically; Nelson appeared to agree with Nevada's Rule 40.11 argument). The ruling is expected within 60-120 days of April 16 — mid-June to mid-August 2026.

**Important clarification from prior sessions:** The "Nevada moves to block Kalshi after 9th Circuit ruling" headlines were about the FEBRUARY 17 preliminary injunction ruling (already in KB), not a new merits ruling. The merits ruling from the April 16 arguments has NOT yet been issued.

**California federal court stay:** California federal court (April 21) ordered parties to explain why their case shouldn't be paused pending the 9th Circuit's decision. Multiple federal courts are now coordinating around the 9th Circuit merits ruling as the authoritative resolution. This amplifies its significance — the 9th Circuit ruling will set precedent across multiple cases simultaneously.

CLAIM CANDIDATE: "California federal courts are staying parallel prediction market cases pending the 9th Circuit's Kalshi v. Nevada merits ruling, making it a de facto coordinating precedent across the Western US regulatory battle."

### 2. CFTC Sues New York (April 24, 2026) — Major Escalation

The CFTC filed suit in SDNY on April 24 to halt New York's enforcement against CFTC-registered prediction market DCMs. This is the FOURTH state the CFTC has affirmatively sued: Arizona, Connecticut, Illinois, New York. The pattern: CFTC is moving from defensive (filing amicus briefs in cases brought by platforms) to OFFENSIVE (CFTC itself suing states to establish exclusive jurisdiction).

**Specific scope limitation for my KB:** All CFTC lawsuits assert preemption for CFTC-registered designated contract markets. The CFTC press releases specify "federally regulated exchanges" and "CFTC registrants." There is zero indication that the CFTC is asserting any protection for non-registered on-chain protocols like MetaDAO.

This creates a two-tier regulatory landscape:
- **Tier 1 (DCM-registered):** Strong and growing federal protection. CFTC actively suing states on their behalf. If CFTC wins even ONE of these suits (or the 3rd Circuit ruling holds at SCOTUS), DCM platforms get strong preemption shield.
- **Tier 2 (non-registered on-chain):** No federal patron. No preemption claim. State enforcement could proceed without obstacle.

CLAIM CANDIDATE: "CFTC's offensive state lawsuit strategy (four states by April 2026) creates a two-tier regulatory architecture: DCM-registered prediction markets receive active federal preemption defense while non-registered on-chain protocols remain exposed to state enforcement with no federal patron."

### 3. Circuit Split Confirmed — SCOTUS Path Forming

- **3rd Circuit (April 7, 2026):** FOR Kalshi — DCM trading is the protected field, CEA preempts state gambling laws for sports event contracts on registered DCMs
- **9th Circuit (pending):** Panel leaned AGAINST Kalshi — ruling expected June-August 2026
- **Polymarket probability:** 64% chance SCOTUS accepts a sports event contract case by end of 2026
- **Outcome either way:** If 9th Circuit rules against Kalshi, 3rd vs. 9th split = near-certain SCOTUS cert (2027 timeline)

The Rule 40.11 paradox remains live: CFTC's own rule excludes contracts "unlawful under state law." Judge Nelson appeared to accept this argument during oral arguments. If the 9th Circuit invokes Rule 40.11 to undercut CFTC's preemption claim, it creates the deepest possible circuit split — different legal theories, not just different outcomes.

### 4. Hanson-Rasmont: No New Formal Engagement

Robin Hanson published "Futarchy's Minor Flaw" (already in KB). Hanson's characterization of the Rasmont critique as "minor" rather than "fundamental" is itself a reframing worth tracking. Rasmont's original title: "Futarchy is Parasitic on What It Tries to Govern." Hanson's response title: "Futarchy's Minor Flaw." The normalization of the critique into "minor flaw" could reduce its impact in practitioner circles even without substantively rebutting it.

No Rasmont formal response found to Hanson's proposed fixes. The LessWrong post remains at zero comments. The clock is at 3+ months unrebutted.

**Assessment of Hanson's fixes:**
- "Randomize 5% of acceptance" — addresses timing bias, creates legitimacy problem for high-stakes decisions
- "Permit insider trading" — pragmatic but creates legal exposure for any regulated futarchy
- "Timing announcements" — operational, doesn't resolve the payout-structure gap
- "Sequential per-timestep decisions" — most promising architecturally, but adds significant complexity

None of these fixes address the fundamental issue Rasmont identified: the payout mechanism rewards correlation with good outcomes when a policy is adopted (conditional welfare), not causal quality of the decision (causal welfare). MetaDAO's binary PASS/FAIL structure may actually reduce some selection bias (the option space is simpler), but this is untested.

### 5. MetaDAO Post-Reset Cadence

- Hurupay: First failed ICO (February 3, 2026) — raised $2M against $3M minimum, refunds issued. Already in KB context from earlier sessions.
- P2P.me controversy: Already in KB (March 30-31 insider trading incident).
- Solomon DP-00003 (April 25): Passed with $2.68M governance volume, 4.5M USDC treasury transfer to company multisig. Volume is HIGHER than I'd expect for governance housekeeping — suggests active market participation even in non-ICO proposals.
- No new ICO announcements for May 2026 found in search results.

**The cadence question:** MetaDAO had 11+ ICOs in 2024-2025. Post-reset, the pace appears slower (Hurupay Feb, Solomon ongoing governance). The platform reset targeted quality over quantity. But no new project pipeline announcements = continued uncertainty about cadence recovery.

**Solomon DP-00003 insight:** $2.68M in governance volume for a housekeeping proposal is notable. For comparison, MetaDAO's earlier "uncontested decisions" had low volume (per existing KB claim). A governance housekeeping vote drawing $2.68M suggests Solomon's community is engaged. This is evidence that the futarchy participation mechanism generates real economic activity even in procedural governance.

### 6. Cascade Processing — DAO Report Claim Updated

PR #3959 modified "the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy" to include evidence that the SEC's Token Taxonomy framework (March 2026) lowered the bar. The key insight: my position file uses the "central legal hurdle" framing, which now overstates the obstacle. The new bar is "show no central team drives profit expectations" — Living Capital's decentralized analysis + futarchy decision mechanism satisfies this more easily than the old "prove prediction market trading is fundamentally more meaningful than voting" standard.

**Position file update needed:** The Howey position confidence should potentially shift from "cautious" to "cautious+" given the lower bar. But the ANPRM non-distinction and state enforcement complexity keep it from moving higher. This is a follow-up task.

---

## Follow-up Directions

### Active Threads (continue next session)

- **9th Circuit merits ruling:** Expected June-August 2026. HIGHEST PRIORITY when it drops. Key questions: (a) does the panel invoke Rule 40.11 to undercut CFTC's own preemption claim? (b) does the majority engage the 3rd Circuit's "DCM trading" field definition? (c) any discussion of non-registered on-chain protocols? Run search daily after early June.
- **CFTC state lawsuits:** CFTC now suing four states (AZ, CT, IL, NY). Search for early procedural developments in SDNY case. Any motion for preliminary injunction? If CFTC wins a TRO against NY, that's a significant regulatory win for DCM platforms.
- **Hanson-Rasmont:** Still no formal response from Rasmont. If 30 more days pass without response, this may be a contribution opportunity — synthesize the gap between Hanson's fixes and Rasmont's critique as a KB claim. The "minor flaw" vs. "parasitic" framing gap is itself claim-worthy.
- **MetaDAO May cadence:** Search metadao.fi directly for new ICO announcements. The post-reset pipeline question is unresolved. Any announcement = archive immediately.
- **Position file update:** The Howey position should be updated to reflect the Token Taxonomy framework lowering the regulatory bar. This is an editing task, not a research task — flag for next session's first action.

### Dead Ends (don't re-run these)

- "9th Circuit Kalshi merits ruling April 2026" — ruling is pending, won't drop until June-August 2026 at earliest. Stop searching for it.
- "Rasmont formal rebuttal to Hanson" — no formal response after 3.5 months. If it exists, it would have indexed by now.
- "ANPRM futarchy governance carve-out" — comment period closes April 30, no carve-out found in 800+ submissions. If CFTC doesn't self-initiate the distinction, it won't appear.
- "MetaDAO new ICO May 2026 announcement" — not found. Check metadao.fi directly next session instead of web search.

### Branching Points (one finding opened multiple directions)

- **CFTC's two-tier architecture:** Direction A — Does the DCM-tier protection encourage MetaDAO to explore DCM registration as a path to federal preemption protection? (Strategic question for Living Capital.) Direction B — Does the non-registration of MetaDAO actually provide BETTER protection by keeping it outside CFTC jurisdiction entirely (regulatory arbitrage via structural decentralization)? Pursue Direction B first — this was flagged in Session 26 as the more important question and I haven't resolved it.
- **Solomon DP-00003 governance volume:** Direction A — Is $2.68M in housekeeping governance volume evidence that futarchy generates economic activity even in procedural decisions (claim candidate for futarchy as economic mechanism)? Direction B — What is Solomon's full governance history? How does the DP-00003 volume compare to DP-00001 and DP-00002? Context matters. Pursue Direction B — need comparative data before making a claim.
- **9th Circuit Rule 40.11 framing:** If the 9th Circuit rules using Rule 40.11 (CFTC's own rule excludes contracts unlawful under state law), this creates a fascinating self-limiting dynamic: CFTC's regulations potentially undercut CFTC's preemption claim. Direction A — Does Rule 40.11 apply to on-chain futarchy (MetaDAO)? (It might not — the rule applies to "listed" contracts on DCMs.) Direction B — If Rule 40.11 defeats CFTC's preemption argument for DCMs, does that create pressure for CFTC to issue new rulemaking to explicitly carve out prediction markets from Rule 40.11? Pursue Direction A first — scope clarification has immediate KB value.
