Here’s what you’ll find in today’s edition:

• The Senate is off to the races with nomination hearings. 

• Why a law partner says the SEC is “running out of room” to keep evading a “defined position” on crypto regulation. 

• December’s CPI report was mixed, but investors don’t care. 

Assembling the Cabinet

As President Biden rounds out his final days in office, the Senate has begun the process of confirming President-elect Trump’s Cabinet picks.

Defense Secretary hopeful Pete Hegseth was the first to take the hot seat. 

Republicans, as expected, embraced Hegseth, calling his “unconventional” resume a strength while Democrats grilled him about his character and judgement. It was hours of tense questioning, but Senate Majority Leader John Thune says he plans to schedule the vote soon, and Hegseth should have the nomination in the bag. 

On tap for confirmation hearings today are Trump’s picks for attorney general (Pam Bondi), CIA director (John Ratcliffe) and the White House office of management and budget (Russ Vought). 

The Senate Banking Committee has not yet scheduled SEC chair hopeful Paul Atkins’s confirmation hearing, but with widespread Republican support Atkins should be a shoo-in. In the meantime, Trump will select either Commissioner Peirce or Uyeda to serve as acting chair. We’re expecting the transition team to announce this decision in the next few days. 

In his final town hall address Tuesday, outgoing SEC Chair Gary Gensler praised his agency staff for their “wise counsel and help.” 

“You vigorously followed the facts and the law without fear or favor to ensure that market participants comply with the securities laws, whether it be regarding traditional financial products or more recent ones like crypto,” Gensler said, in what may be his final nod to the industry as head of the agency. 

Trump has still not named his pick for CFTC Chair. Rostin Behnam, who long advocated for Congress to grant the CFTC explicit oversight of digital asset commodities, will be stepping down on Monday. Caroline Pham or Summer Mersinger, both Republican CFTC commissioners, are expected to head the agency in the interim. 

External candidates who’ve made Trump’s short list reportedly include former CFTC Commissioner Brian Quintenz, former agency official Josh Sterling and attorney Neal Kumar. I doubt we get an official nomination from Team Trump before Monday, but we’ll be on the lookout just in case. 

Over in the House, Majority Whip Tom Emmer yesterday was selected to vice chair the digital assets subcommittee. 

“With President Trump in the White House, and Gary Gensler confined to the waste bin of Washington, we have an excellent opportunity to ensure that the future of digital assets is guided by Americans, with American values,” Emmer wrote in a statement on X. 

Emmer, who co-sponsored the CBDC Anti-Surveillance State Act, the anti-SAB 121 resolution and FIT21, has advocated for more lenient crypto regulation in recent years. The House Financial Services Committee has not yet released a schedule of upcoming hearings.

— Casey Wagner

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The number of years crypto took to gain 300 million users. 

BlackRock’s Jay Jacobs pointed out this adoption span in a “market insights” post published Monday — noting it’s quicker than the 15 years it took the internet to achieve the same user base, and 21 years for mobile phones.

It’s not surprising to see the world’s largest asset manager throw around points like this to sell its bitcoin ETF. But the prevalence of such education reminds us of the ongoing TradFi marketing muscle behind crypto following the many 2024 crypto ETF launches.

I broke down the Coinbase-SEC court ruling yesterday and noted it would take some time to sort out its broader implications. 

One legal pro’s viewpoint suggests the decision could be a final straw of sorts to force long-anticipated regulatory clarity.

Monday’s court decision was not exactly surprising, according to Arie Heijkoop, a partner in Haynes Boone’s investment management practice group. The SEC’s response to Coinbase’s petition “was lacking in any substance,” he explained; but a court ordering an agency to issue a new rule has a high bar.  

That said, Heijkoop told me the opinion’s descriptive language (exhibiting increased understanding of the space) suggests “the SEC may be running out of room to continue evading coming out with a defined position on crypto and digital asset regulation.”

Indeed, Judge Stephanos Bibas notes the SEC’s “old regulations fit poorly with this new technology, and its enforcement strategy raises constitutional notice concerns.”

Bibas’s concurring opinion, in particular, seems to implore the SEC to distinguish the coins that operate more like securities from those that do not, Heijkoop explained. 

“As the number of crypto products, and how they function, proliferate, if there will ever be crypto regulation handed down, it will likely have to account for those differences,” the Haynes Boone partner added.

This ruling may provide some optimism to defendants to challenge crypto enforcement actions if there is no further SEC guidance. But handing down a new rule would be “a fairly seismic action,” Heijkoop said. 

Further, SEC actions for unregistered securities offerings may not fully cease given the decision’s recognition of crypto products with securities-type characteristics.

Whether the agency’s new administration offers more guidance through regulation rather than litigation remains a key question.

— Ben Strack

The December CPI report shows some prices are coming down more than expected while the cost of other goods and services continue to rise. 

Today’s release was enough to satisfy investors, though. 

The S&P 500 and Nasdaq Composite indexes were trading 1.8% and 2.3% higher, respectively, at 2 pm ET Wednesday. The mid-week rally helped pare losses from earlier in the week. The Nasdaq Composite is now flat for the past five trading days while the S&P 500 has edged into the green, now up 0.5% over that time. 

Prices increased 0.4% over the month and 2.9% over the year, coming in close to the forecasted readings of 0.3% and 2.9%, respectively. Core CPI though, which excludes food and energy prices, slowed to 3.2% in the 12 months ended December, just under analysts’ expectations of 3.3%. 

The report had little impact on interest rate expectations, with fed funds futures markets still calling for a 97% chance committee members hold rates steady later this month. 

Still, December’s reading shows the central bank has made some progress in moving inflation back down to its 2% target, and investors were thrilled. 

Looking ahead, analysts say rate cuts in 2025 are probably still in the cards, but not too many of them. 

“The key question now is whether the FOMC’s ‘skip’ turns into a more prolonged ‘pause’,” said Michael Brown, senior research strategist at Pepperstone. “Risks around the policy outlook this year are considerably more two-sided than those seen last year, with a renewed hawkish risk re-introduced to the policy path.”

— Casey Wagner

• Bitcoin is inching back toward $100,000, but has remained below the level — hovering around $99,100 at 1:30 pm ET. Check out Katherine Ross’s piece on possible price action from here.

• Osprey Funds intends to convert its Bitcoin Trust into an ETF “as soon as practicable,” the asset manager recently revealed. Speaking of that product category, US spot BTC funds bled another $210 million of assets on Tuesday, per Farside Investors data.   

• Crypto derivatives platform Deribit is reviewing opportunities from potential acquirers, Bloomberg reported Tuesday.

• A federal judge ordered crypto exchange BitMEX to pay a $100 million fine related to its 2022 guilty plea for breaching the US Bank Secrecy Act. The company noted in a Wednesday statement that while it’s “disappointed” by the ruling, the amount is “substantially less” than what the DOJ had been pursuing.