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Welcome to the On the Margin newsletter, hosted by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:
- Casey details the latest news on Donald Trump’s family DeFi business.
- Another market update after this morning’s retail sales data and ahead of the impending Fed rate decision.
- Why a club set to open in downtown Manhattan has to pay $750,000 to the SEC.
Trump Family Launches New Cryptocurrency Venture
After weeks of ominous teases and vague promises, we finally have some details about World Liberty Financial, Donald Trump’s family-owned DeFi business.
If you doesn’t I spent two and a half hours on the Mar-a-Lago livestream last night, here are the highlights:
- The team behind the project includes some of Trump’s children (Donald Jr., Eric, and Barron), as well as two serial founders: Chase Herro and Zachary Folkman. You may know Herro by his self-proclaimed alter ego: the “Internet Shitbag.” The duo has sold everything from marijuana to get-rich-quick courses to pick-up lines.
- There will be a token. Sure, we could have assumed that, and reports have confirmed those rumors. But for the first time last night, the team behind World Liberty Financial acknowledged that WLFI would be coming to market. (When exactly, remains a mystery.)
- WLFI distribution will be 20% to the founding team/Trump family, 17% to “user rewards,” and 63% to public purchase. (A leaked draft of World Liberty’s plans previously indicated that 70% of the tokens would be reserved for project leaders.)
After about 90 minutes, the host (Farokh Sarmad of Rug Radio) addressed Barron, or at least tried to. The NYU freshman had apparently left the room.
“He talks about his wallet, he’s got four or something,” Trump said of his youngest son. “It’s almost like the younger guys know it a lot better than the older guys.”
No one has said how a sitting president’s involvement in a cryptocurrency business would be perceived by the public and regulators, should Trump win in November. The leaked white paper (originally reported by CoinDesk) includes a disclaimer that Trump and his family do not own or operate World Liberty Financial, but could receive compensation.
Trump mentioned that the SEC “has been very hostile and really gone after people” in the cryptocurrency space. He also claimed that the agency recently pulled out of the industry, which Trump attributes to his presidential bid.
“People who were under serious investigation even though they had done nothing wrong are suddenly being released,” he said.
“If for some reason bad things happen and we don’t win the election, those people who were investigated and are out there right now, and the people who weren’t being monitored in the crypto world, they’re going to go through hell,” Trump added. “Because it starts the day after the election if they win.”
He didn’t mention any specific projects or individuals that might have “escaped” SEC scrutiny. (I’ll add that the livestream took place hours after the SEC dropped its latest enforcement action against Flyfish Club for an alleged unregistered securities offering. More on that later.)
Speaking of an unregistered securities offering…
While we don’t have all the details on WLFI yet, I imagine the SEC’s interest is significantly piqued. The commissioners will be looking for evidence that the project leaders gave buyers a reasonable expectation of profit (which I wouldn’t say we had last night) and signs that the token was promoted (which I would say we certainly had last night), among other things.
Hopefully the World Liberty team will check in on Howey.
— Casey Wagner
63%
The probability (as of 2 p.m. ET Tuesday) that the Federal Reserve will cut rates by 50 basis points tomorrow, according to CME Group’s FedWatch tool.
This probability of a 50bp cut has fluctuated in recent days after surging late last week. Before that, markets considered a 25bp cut as more likely.
Fed Chairman Jerome Powell’s press conference will begin tomorrow at 2:30 p.m. ET. To read Blockworks’ FOMC interest rate decision preview, click here.
Is a 25 basis point rate cut more likely now?
We wrote yesterday about the much-anticipated Fed rate cut, which is currently between 5.25% and 5.50%. We are now one day away from the decision.
As noted above, the question remains whether we will see a 25 or 50 bps cut. One of the last data points to look at before the Fed decision was US retail sales for August.
The Census Bureau’s report released this morning showed that those sales rose slightly (unexpectedly) last month, up 0.1 percent from the previous month. Economists polled by Reuters had estimated the decline was 0.2 percent.
Leena ElDeeb, research analyst at 21Shares, noted that the “beating expectations” retail sales were well-received by the market, “alleviating recession fears for now.”
The price of Bitcoin was near $61,000 as of 2 p.m. ET Tuesday, up about 4.7% from 24 hours earlier.
Brian Dixon, CEO of Off The Chain Capital, told Blockworks that better-than-expected retail sales numbers could push the Fed to cut rates by just 25 basis points tomorrow, “as the economy is still quite strong but is clearly showing signs of slowing.”
He added: “I think the overall data shows that the Fed probably thinks it would be better to cut rates gradually rather than launch massive cuts.”
As mentioned yesterday, such a gradual cut would run counter to the wishes of three Democratic senators who urged the Fed (in a letter to Powell on Monday) to cut rates by 0.75% at the September meeting.
Early rate cuts could help the U.S. economy “avoid sliding into a potential crisis,” wrote Senators Elizabeth Warren, Sheldon Whitehouse and John Hickenlooper.
Several analysts have said the market is pricing in a 100 basis point rate cut by the end of the year.
“Of course, even though inflation has come down, there is certainly a concern that it could come back if the overall monetary easing happens too much and too quickly,” Dixon said.
— Ben Strack
Bold New Feature for New York’s Latest Social Club: SEC Fine
Flyfish Club LLC, the company behind the members-only social club set to open in midtown Manhattan this month, was fined $750,000 by the SEC yesterday afternoon.
In 2021 and 2022, Flyfish sold memberships to its yet-to-be-built private club via NFTs priced between 2.5 and 4.25 ETH. Approximately 1,600 NFTs were sold, generating approximately $14.8 million in gross revenue. The funds were used to finance the construction of the “Flyfish Club,” a private restaurant in midtown Manhattan, according to the SEC.
This is the latest action by securities regulators against an NFT issuer for allegedly offering unregistered securities. This time, however, we were treated to a rather astute dissenting opinion from Commissioners Hester Peirce and Mark Uyeda.
“For grumpy commissioners like us, enforcing crypto rules feels a bit like going to a restaurant for a meal, Omakase-style,” Peirce and Uyeda wrote, referring to the Japanese dining experience Flyfish Club plans to offer.
“Omakase means ‘I leave it up to you to make your choice,’” they added. “This directive is wonderful in the hands of a renowned chef, but disastrous in the hands of a cryptography-obsessed commission.”
The club continues to push a September 20 opening date, which isn’t really surprising. They already signed a 10-year lease and the team obviously knew the enforcement action was coming before the SEC announced the settlement yesterday. They’ve had time to get their affairs in order. Plus, no press is bad press, as they say.
Those suffering from FOMO can still purchase a membership NFT on OpenSea (the SEC hasn’t blocked secondary sales, but it has given Flyfish 10 days to stop collecting royalties) for just 1,425 ETH. At the time of writing, that’s less than the cost of a standard membership purchased directly from Flyfish.
If any of our New York readers are members, please let us know. I’m curious to hear about your experience with the club and whether the omakase is a good thing.
—Casey Wagner
Notice board
- There’s a lot of talk about the Fed’s expected rate cut. You can catch the FOMC statement at 2:00 p.m. ET on this page before tuning into Powell’s press conference on the central bank’s YouTube channel at 2:30 p.m. And, of course, check back tomorrow for more on the Fed’s decision in the On the Margin newsletter.
- Bitcoin miner CleanSpark has acquired two more sites in Mississippi for nearly $5.8 million. The facilities are expected to increase the company’s operational hash rate by about 1 exahash per second. The deal comes after the Las Vegas-based company agreed last week to buy seven more facilities in Tennessee for cash payments totaling $27.5 million.
- Figure Markets has launched its licensed cryptocurrency exchange in the Cayman Islands, the company announced Tuesday. Figure secured $60 million earlier this year (in a round led by Jump Crypto, Pantera Capital, and Lightspeed Faction) to build a decentralized competitor to the largest centralized cryptocurrency exchanges. Figure CEO Mike Cagney told Blockworks at the time that the exchange was looking to use the Provenance blockchain to become a marketplace for equities, fixed income, alternatives, and crypto assets.
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