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Happy Wednesday, Fintech Fans! 

Well, after 41 years, the Montana State University Bobcats are the FCS football champions!

It was not easy to get to this point. My formative years rooting for this team were an exercise in misery. We were in the midst of an epic streak of losing to our in-state rivals. Making the playoffs was completely unrealistic, and when we eventually started getting into the playoffs, we had no expectations of going anywhere.

To go from that to this season, in which we beat the Grizzlies twice and then won the first-ever overtime championship game in the history of the Football Championship Subdivision, is absolutely wild. 

I think I may have had a stroke at one point during Monday night’s game. It was that intense (here are the highlights). Credit to the Illinois State Redbirds. What a tough, relentless team.

But the Bobcats came out on top! And thank goodness. Now I can rest easy, and I promise no more college football talk (at least until next Fall!)

- Alex

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3 BIG IDEAS FROM THE PODCAST

Welcome back, and welcome to 2026!

This week, Jason and I did something a little different. Instead of recapping the last month in fintech, we recapped the entirety of last year through the lens of the big themes that shaped the industry and set the stage for 2026.

We dig into regulation in the Upside Down. The stablecoin gold rush. The open banking whiplash. The cultural rot at the heart of prediction markets. And the return of IPO season.

And of course, we end with some predictions, which we may or may not stand behind, but had to make anyway.

And read below for my three big ideas... 

The promise, heading into 2025, was that banks were going to get some regulatory relief under a new administration.

But did they?

One big theme I noticed, across agencies, was a narrowing of supervisory focus. The idea seems to be that quantifiable financial risks are the only ones regulators should be watching. Reputation risk should be eliminated as a supervisory priority. Agencies should do less, often with fewer people.

Is this good for banks?

Perhaps.

After the collapse of Silicon Valley Bank, there was a critique that supervision had become too process-driven. Too many checklists, and not enough focus on what could actually cause a bank to fail.

However, the risks that end up breaking institutions — operational complexity, third-party exposure, risk from novel technologies and business models — often don’t manifest as obvious financial risks until the very end, when it’s too late. Regulatory supervision, when it's done well, can help banks see around corners.

At the same time, the political language around “helping community banks” can obscure where regulatory tailoring actually lands. The biggest changes often don’t benefit the smallest institutions. They benefit the largest banks, which, coincidentally, tend to have the most weight to quietly throw around in closed-door lobbying sessions.

And then, of course, there’s the gutting of the CFPB, an agency that has never been beloved by banks (to put it very mildly), but might have ultimately been an effective check on the power of non-bank competitors in financial services. 

Thematically, I would file all of these developments under the heading of “Be Careful What You Wish For.”

2025 was the year stablecoins crossed from niche curiosity to mainstream financial technology strategy.

You could see it in predictable places. Multiple conferences dedicated entirely to stablecoins. And in less predictable ones (like at Thanksgiving, raised by relatives with bank accounts and no crypto exposure, which is usually a tell).

The GENIUS Act was signed into law in July, which means we now have the beginnings of a federal framework for payment stablecoin issuers and the rulemaking process to implement it. 

And the market has responded.

PayPal has had PYUSD for a while. Fiserv announced FIUSD. SoFi and Klarna followed suit. Even the state of Wyoming got in on the act (they call it a “token,” because states are prohibited from issuing their own coinage).

The problem is obvious. As Jason said, imagine a world where there are hundreds of consumer-facing stablecoins that are functionally all undifferentiated. Is that realistic? Is it valuable? Is it sustainable?

History offers a clue for what happens next.

Starting in the 1930s, under Regulation Q, banks were prohibited from paying interest on demand deposits and capped on what they could pay on savings and time deposits. But that didn’t stop banks from competing. Instead, they got creative. If you couldn’t pass along some of the yield directly, you gave away clocks and toasters as incentives for opening new accounts. 

Stablecoins could be headed toward the same dynamic. 

Even if issuers can’t pay yield directly (we will see if the GENIUS Act prohibition ends up sticking), stablecoin-powered ecosystems will find ways to offer rewards and perks that function like yield (imagine a Disney stablecoin that facilitates early entry to the theme parks). In this way, stablecoins function as loyalty infrastructure. A way to create lock-in, distribute value indirectly, and stay technically compliant.

The question is, how will these indirect competitions impact the overall supply of stablecoins in the market? Will we see consolidation? If so, which providers will end up winning?

Prediction markets didn’t just grow in 2025. They discovered a loophole, yanked it wide open, and sprinted through.

The critical play wasn’t product innovation. It was regulatory arbitrage. Because prediction markets sit under the CFTC’s purview (if you’re interested in the legal background, read this), they have been able to offer bets (including, notably, sports bets) nationally without dealing with the state-by-state regulatory maze. Once that asymmetry became exploitable, gambling could be distributed nationally without inheriting the frictions or safeguards that states have carefully built over decades.

Sports betting is expensive and annoying to roll out one state at a time, and not all states allow it. Prediction markets have (at least temporarily) solved that. 

And they have benefited enormously. In November of last year, more than 90% of Kalshi’s volume came from sports event contracts.

Capital followed quickly. Kalshi raised a $1 billion round at an $11 billion valuation. Polymarket reportedly plans to raise up to $2 billion at an $8 billion valuation. DraftKings and FanDuel, after initially saying this was regulatory arbitrage that wouldn’t last, reversed course. They broke with traditional gambling trade associations and launched their own prediction-market offerings. Meanwhile, Robinhood and Coinbase integrated prediction markets directly into apps they already frame as investing platforms.

This is where the consequences compound. States regulate gambling for a reason. They have hotlines you can call. They have opt-out lists you can add yourself to. 

There are no hotlines, no opt-out lists, and no friction separating betting from investing when prediction markets live inside financial apps.

The deeper question for financial services isn’t whether people should be allowed to gamble. It’s what happens when gambling becomes a default financial behavior, sitting one tap away from ETFs and savings balances.

Once that boundary collapses, rebuilding it won’t just be a regulatory exercise. It will be a cultural one as well.

🎬 DIRECTOR'S COMMENTARY

Jason and I independently came up with a few predictions for 2026, and whew boy! They got dark!

I think he and I see similar parallels today to the problematic patterns of the recent past (2025 felt 2021-ish), and while we hope for the best, we are prepared (with our tape recorders and typewriters!) for the worst. 

WHAT I'M LISTENING TO

I’m not sure if I’ve recommended Hard Fork in the newsletter previously. If not, I remedy that mistake today.

Consistently excellent, with a good mix of optimism about tech and skepticism about tech companies.

One of my favorite annual listens!

Agreed with some (Andor fucking rules) and disagreed with others (Adolescence was way too depressing for me, no thank you!), but a delight, as always, to listen to Chris and Andy talk about TV!

Thanks for the read! Let me know what you thought by replying back to this email. 

— Alex  

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