New York State Sued Polymarket, Alleging It Runs an Illegal Gambling Business

In Today's Note

• The 30-year Treasury yield rose around 8bps to just shy of 5.5%, a level last seen in 2004, even as the Treasury bought back $4.08B of long-dated bonds on Thursday, short of the $6B maximum it had targeted.
• Ondo Finance launched three onchain portfolio tokens built on BlackRock model portfolio strategies, each representing a weighted basket of tokenised assets that can be minted or redeemed as a single token.

Market Snapshot: Overnight Moves

Macro & Markets

• Another bout of volatility in US bond markets resulted in a lack of new risk appetite among crypto and US equity traders.
• BTC spent the last 24 hours ranging sideways between $83K and $85K, the S&P 500 declined a modest 0.025%, while the Nasdaq-100 rose by a small 0.028%.
• Brent crude oil whipsawed, though ended the day slightly lower on reports of a potential US-Iran deal in the Strait of Hormuz.

• The biggest move in financial markets occurred in US Treasuries, as the selloff in government bonds deepened further on Thursday.
• That drove the 30-year Treasury yield, the US government’s longest-dated bond, to jump around 8bps to just shy of 5.5%, a level last seen in 2004.
• The yield on the 10-year note rose a further 10bps to 5.21%, its highest since 2007 and is up around 20bps over the past two days alone.
• Since just the start of the Iran war, short-dated two year yields have climbed more than 150bps, while at the back-end, 30-year yields are up over 80bps.

• The prolonged increase in longer-dated yields continues to undercut measures by the US Treasury department to bring down the cost of long-term borrowing, for example Treasury Secretary Scott Bessent’s expanded government bond buyback program announced in mid-August.
• Yesterday, as part of its second operation in the buyback program since announcing an increase to the maximum size, Treasury accepted $4.08B of the $6B maximum it targeted in an operation to buy back off-the-run 20-to-30-year bonds.
• The amount purchased was less than the $5.2B in the first operation in early September and appeared not to be large enough to calm markets as yields continued to rise higher after the announcement.

• Brent crude did fall slightly over the last 24 hours to around $105 per barrel after reports that US and Iranian negotiators are potentially looking at a phased deal that would see Iran reopen the Strait of Hormuz and the US lift its economic blockade of Iranian ports.
• The push towards breaking the deadlock took place on the sidelines of the United Nations General Assembly meetings in New York, with Qatari officials mediating the negotiations.

• A number of Fed speakers yesterday indicated that a one-and-done hiking cycle was unlikely, increasing pressure to risk-on sentiment.
• New York Fed President John Williams said that forecasts from market participants show investors think "it's likely that another rate hike may be appropriate by the end of the year. That seems to me a reasonable way of thinking about it". That indicated at least another hike will be needed to reign in US inflation as the FOMC committee “still have a lot of work to do”.

• His colleague, Anna Paulson, the President of the Philadelphia Fed also echoed a similar sentiment, “Looking ahead, if conditions evolve as I expect, some modest further tightening may be warranted”, considering that underlying measures of inflation remain “stubbornly elevated”.

• Also speaking yesterday, Cleveland Fed President Beth Hammack warned that the series of supply-side shocks that hit the US economy also mean that "The inflation outlook continues to be highly uncertain, with risks tilted to the upside", and that "the longer that high inflation persists, the more challenging and costly it can be to bring it back down”.

DeFi / Web3 / Altcoins / Crypto

• Ondo Finance has launched three onchain portfolio tokens based on model portfolio strategies developed by BlackRock.
• The products are BLKHIon for income, BLKDIGon for diversified growth and BLKGRWon for higher-growth exposure.
• They are available to eligible investors outside the U.S. in permitted jurisdictions.
• Each token represents a weighted basket of tokenized assets, so investors can mint or redeem a single token instead of managing every underlying position separately.
• Ondo said the portfolio holdings, weights and rebalances are visible onchain.
• The tokens can also be transferred between wallets, exchanges and supported DeFi protocols.
• BlackRock’s role is limited to providing nondiscretionary model portfolio strategies based on parameters supplied by Ondo.
• BlackRock does not manage the onchain portfolios or handle tokenization, issuance, custody, distribution or operations.
• The products are issued by Ondo Global Markets, and Ondo said it plans to launch additional onchain portfolio products over time.

• All five SkyAI directors retained their board seats despite receiving significantly more withheld votes than votes in support.
• Each director received roughly 18.4M-20.7M withheld votes versus 6.9M-9.2M votes in favor, but SkyAI’s plurality voting rules meant withheld votes did not count against the nominees.
• Shareholders did reject SkyAI’s proposed 2026 equity incentive plan, with 22.5M votes against and 5M in favor.
• The plan would have authorized up to 5.145M shares for equity awards, including 5M newly available shares for stock-based compensation.
• The vote followed an opposition campaign led by Forward Industries and Bastion Trading.
• Forward, the largest public SOL treasury company, has been trying to acquire SkyAI since June and submitted a revised proposal on Sept. 15.
• The updated offer values each SKYA share at 0.306 FWDI shares.
• SkyAI has not yet publicly responded to the revised proposal, while Forward requested an answer by 5 p.m. ET on Sept. 25.

• New York has sued Polymarket, alleging that the prediction market platform is operating an illegal gambling business in the state.
• New York Attorney General Letitia James and Governor Kathy Hochul argue that Polymarket’s contracts fall under the state’s definition of gambling and therefore require a license from the New York State Gaming Commission.
• The state is asking the court to block Polymarket from operating and advertising in New York until it properly registers.
• Officials also accused the company of avoiding taxes associated with regulated gambling operations.
• New York is seeking $100,000 plus additional fines and penalties.
• The lawsuit is part of a broader dispute over whether prediction markets should primarily be regulated by state gambling authorities or at the federal level.
• New York previously sued Kalshi over similar allegations, while other states including Massachusetts and Rhode Island have also taken action against prediction market operators.
• Polymarket Chief Legal Officer Neal Kumar said the company intends to remain in New York and has been working with state officials to address their concerns.

• OpenZeppelin has integrated its smart contract security and development tools with TRON, giving developers access to its audited contract libraries and deployment tooling on the network.
• The integration includes OpenZeppelin Contracts, secure upgrade tools and the Contracts Wizard, adapted for TRON.
• Developers can use the tooling for functions such as token creation, access control, governance and upgradeable applications.
• The TRON version also supports features including passkey authentication, supply controls and permissions.
• OpenZeppelin said the goal is to provide developers with reusable, audited components while accounting for TRON-specific network requirements.
• The integration is aimed at reducing development and security risk for applications built across TRON’s stablecoin, DeFi and payments ecosystem.
• OpenZeppelin says its contract libraries have supported $37T in value transferred and that the firm has completed more than 900 security engagements.

This Week's Calendar

Charts of the Day

Figure 1. Block Scholes BTC Risk-Appetite Index (white, left-hand axis) and BTC spot price (orange, right-hand axis). Source: Deribit, Block Scholes.

Figure 2. Block Scholes ETH Risk-Appetite Index (white, left-hand axis) and ETH spot price (purple, right-hand axis). Source: Deribit, Block Scholes.

Figure 3. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes.

Figure 4. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes.

Figure 5. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes.

Figure 6. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes.

Block Scholes is an FCA-regulated institutional crypto derivatives analytics platform. Live data, IV surfaces, and backtesting available via blockscholes.com.

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