Gambling and Regulation in Biff Tannen's America

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It's been a big week for me. Cooking up some things you'll see soon 👀. Thank you to everyone who subscribed to the new Tokenized newsletter. We're iterating, getting better. Feedback is welcome :).

The Fintech founder who defrauded JP Morgan was jailed this week. In the shadow of Evolve / Synpase, there’s still (somehow) a debate about fintech bad, banks good, or vice versa.

I dislike binary choices between dystopia and utopia. I'm allergic to partisan anything. But I do love any excuse to reference Back to the Future. This weeks Rant was fun. A movie series that's 40 YEARS OLD. And still worth the watch.

Want to hear this? Just click play! 🎙️

Here's this week's Brainfood in summary

📣 Rant: Back to the Casino 2: Gambling and Regulation in Biff Tannen’s America

💸 4 Fintech Companies:

1. Onflow - One KYC for Everything

2. Myne - Mint.com for Net worth and Estate planning

3. Model ML - Agentic AI for Finance

4. Grain Finance - Embedded Hedging for FX

👀 Things to Know:

1. Robinhood launches Private Banking

2. Mercury raises $300m in a Series C

📚 Good Read: The Wild West of EBITDA Adjustments

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Weekly Rant 📣

Gambling and Regulation in Biff Tannen's America

The wave of deregulation, and corporations like Robinhood pushing gambling as financial services, feel like unfettered capitalism is leading us towards the dystopia from the movie, Back to the Future 2. However, things are rarely that simple. We're staring at a financial reset button. Hitting it can make things better or a hell of a lot worse. 

Which will it be?

That’s down to us.. There has never been a better time to make finance better. 

Back to the Casino 2.

In Back to the Future 2, Marty McFly has to travel between his time (1985), his future (2015), and his past (1955). In this process, his nemesis, Biff Tannen, discovers the sports almanac. 

This artifact from the future (2015) contains all sports results from 1955 to 2000.

Our bad guy, Biff, steals the time machine (A Delorean), travels back to 1955 to give the book to his younger self. In the process, Biff becomes the luckiest man alive, winning at gambling and eventually becoming the local mayor. 

When Marty returns in 1985, he finds a dystopia where his Dad is dead, his mom is married to Biff, and his friend The Doc is also dead.

In this new dystopia, the Casino is central to the Hill Valey neighborhood, where everyone gambles, and crime is rife. This scene feels eerily reminiscent of recent news. Here’s a small sample:

• Robinhood pushback from the CFTC and Massachusetts over “gambling” products 

• The launch of a Neobank for gamblers 

• Trump-backed World Liberty Financial launching a stablecoin, 

• The attempted shut down of the Consumer Financial Protection Bureau.

It's a fun coincidence that Trump was the inspiration for the Biff Tannen character. And you can see why some might be gloomy. If you care about consumer protections, financial inclusion, and good outcomes for society, it's hard to see how taking a chainsaw to government achieves that.

As always, the reality is more complex than "deregulation bad" or "government good." Of course, the world isn't that simple. The takeaway here is that we're about to see a wave of deregulation, and this creates opportunities both good and bad.

The opportunities, both good and bad

Marc Cuban nailed it: deregulation means "a reduction in admin and costs for biz" but also "IRS cheats have a good reason not to file. Climate deniers will pollute without consequence." 

It's looks like financial rumspringa - banks and fintechs running wild while the regulators look away. Meanwhile, the supposed opposition is pushing nonsense like 10% rate cap on credit cards. Hard to say which is worse.

Regulation by populist talking points will not deliver more innovation, growth,h or better consumer outcomes.

But my central thesis here is that this is our time to make a better financial system. 

We've spent decades playing defense against regulations. What if we actually wrote the playbook this time? Not to avoid fines, but to build something that actually works.

Here’s just three of the questions we could answer. By ourselves. And propose then deliver solutions.

1. When is it gambling, and when is it finance?

2. What fee structures are we happy with for consumers on overdrafts or credit?

3. Should banks be able to make money from open banking?

1. When is it gambling, and when is it finance?

Robinhood is trying to blur that line in a not-so-subtle way.

They had intended to launch a “contract” that would allow users to bet on the outcome of the Superbowl. Their argument is that this is a “prediction market” like Kalishi, which is also CFTC-regulated and offers contracts on sports outcomes. The primary difference is that Kalashi isn’t offering 401ks, savings accounts, and credit cards.

The CFTC, with its consumer protection mandate, sees through this - it's retail betting dressed as investments. This fits Robinhood's pattern of capitalizing on every mania from memestocks to memecoins.

That is a rational strategy, it’s also one with human consequences.

Most people lose out, most of the time the more a financial asset resembles gambling.

We need a bright line between what a financial product is and what gambling is. 

We also need a bright line between professional “speculators” and retail. Sophisticated investors in commodities and futures markets would do well at prediction markets

👉 I think we need two new regulatory concepts:

1. A modern definition of a sophisticated investor. Today, “sophisticated” usually means you work for a large firm or already have a lot of money you could afford to lose. Tomorrow it could mean someone who’s gradually built a strong trading track record and increased their available pool of risk products through demonstrating sophistication. Set small, sensible limits for new investors, and step that up as they demonstrate they can deliver. AKA, risk based approaches.

2. A modern definition of investing vs speculation vs gambling. We’re getting there via regulation, but the “prediction vs betting” is still a grey area. Memecoins and predictions are ultra speculative, and should therefore require someone to have demonstrated some level of sophistication before they can go “all in” relative to their earnings. Unless it is very clearly, and I mean, bright shining warning lights clearly, that they were risking it all in a casino like move. 

Watch any 22-year-old drop their paycheck on a memecoin because some influencer pumped it. That's not investing gone wrong - that's gambling without the flashing lights and free drinks. At least casinos are honest about the house advantage.

Ultimately. People are allowed to go to Vegas. But they know they’re in Vegas. 

Lets continue to make that ultra clear.

2. What fee structures are okay for overdrafts and credit?

Bank fees and loan % charges (APR) are like a pin cushion. If you squash one fee, another one pops up somewhere else. Ultimately, banks have to make money from their consumer portfolio, which we should not punish them for.

However, the sneaky way they hide those fees is immensely frustrating and always disadvantages the lower-income, less educated, and excluded populations. The idea of ending “junk fees” is a vote winner because consumers hate it, and it makes their lives worse. 

The classic example is re-ordering debit transactions to be largest first ensure users are charged a fee. 

The answer isn’t just regulation or rate-capping credit cards. We need to get much more creative.

Its immensely hard to find a “fair” way to price banking products or fees. We tend to default to “APR” (the annual percentage rate) for borrowing:

1. Consumers don’t understand APR and

2. They don’t take into account terms or what happens if payments are missed

Yet a 30 year mortgage at 7% on a $500,000 house will cost you ~$625,691

And a 6 loan advance at 50% on a $1,000 will cost you ~$123

That’s if you ignore the fees. But the absolute amount someone pays back is instructive as is the term. We need simple scenarios and to push for the simplest, most comprehensive way to explain fees and charges to people.

👉 We need a UX pattern and best practice for displaying borrowing scenarios, like if you never miss a payment, and if you miss two or three consecutive payments. Display those side-by-side, and don’t you dare hide that in your terms and conditions or with dark UI patterns.

Because the goal here is user trust. It’s not contorting ourselves to maximize profit like some gymnast stepping through regulatory trip wires. 

Well-intended laws like TILA, ECOA, and the FCA’s consumer duty all try to do this, but they do it in such a ham-fisted, legalese way that by the time this stuff touches a user, it's the stuff of UX nightmares. 

Transparent, understandable fee structures are the opposite of a casino. When consumers can clearly see what they're paying and why, they can make informed choices. When they’re bamboozled by APR and charts and %, its much harder.

3. Should banks be allowed to make money from open banking?

Yes. Next question.

Banks are expected to build APIs, secure them, maintain them 24/7, and then give third parties free access? In what universe is that sustainable? The UK tried it, and guess what - our open banking system is mid. Way less effective than what you have in the US.

Rationally, there’s no reason why banks should have all of the downside and very little of the upside from open banking. They have to protect and secure user data, ensure uptime and they don’t get any compensation for that? Why would any rational actor agree to that? They wouldn’t, they’d push back hard.

In the US, the bank lobby is already turning to the dark side and trying to water down the 1033 and CFPB rules on open banking. Banks are freaking out about "pay by bank."

This CFPB comment letter by JP Morgan is practically hyperventilating:

"Requiring the sharing of payment initiation information will be a catalyst for significant growth of 'Pay by Bank' models, a payment method that is ill suited..."

Translation: "We already have pay by bank. They're called debit cards. Please don't break our business model."

Are debit cards the answer? No.

As Alex puts it. Pay by bank isn’t cheaper, its better (great line eh?)

Whereas with pay by bank you get the data around the transaction as a merchant. That’s HUGE, that’s amazing, that is the ball game.

Rich data around a transaction can help unlock new use cases like merchants preventing their customers from going overdrawn to make a payment, personalized offers, fraud prevention and risk monitoring. Merchants hate the card rails, yes because they’re “expensive” but also because they see so little data.

I’m with Alex here. Pay by bank is the future, but banks shouldn’t be left out of that future.

The solution to me is obvious. Share the love.

Our goal isn’t cheaper payments, or zero fees for data access. It’s better payments and better data access.

Incentives matter.

👉 Set standard fees for data access and stop the pointless battle. Banks deserve compensation for secure data sharing, and consumers deserve functioning services that use their data to help them. This isn't complicated. For every login, onboarding, and payment transaction. If you’re the bank securing that, you should get paid.

👉 We could also set fees for payment initiation. If “regulated debit” already exists and we “already have” pay by bank, then surely, regulated debit fees would copy and paste nicely 😉

In Biff's world, power is concentrated and exploitative. But in the alternative, we're building capabilities like "pay by bank" that distribute power more across the ecosystem, including to consumers themselves. This means participants need to get paid for their role in making the ecosystem work. 

The outcome is a much better market structure. More incentives for market participants create more economics for managing risk and incentives for doing the job well.

From “Dystopia” to tech-driven effective regulation...

This moment could turn into Biff's casino hellscape, or it could be our shot at regulation that doesn't suck. Not less regulation - BETTER regulation. Regulation that actually works instead of just generating paperwork.

Simple, highly effective regulation can have more teeth, and prevent more harm that regulation by enforcement. The SEC under Gensler didn’t prevent FTX, they cosied up to them. Regulatory clarity is useful, harm preventing and can be a big unlock.

I honestly don’t believe this should be a partisan issue. The greatest single unlock for the US economy came from a Democrat administration, Section 230 which allowed the internet to be free of publishing restrictions. 

But we've entered an entirely different era, where policy is being set by the ability to draw headlines, while agency staff and lobbyists scramble to take advantage of the chaos.

That doesn’t have to be the way. There is a gap for simple yet effective solutions to enter the void.

Outcomes Over Paperwork

👉 What if regulation is measured by how effective it creates better outcomes. On this broadly non-controversial point, we seem to have lost our way, and get caught in partisan fighting over inches, and legalese.

Technology as Regulatory Superpower

👉 What if we applied LLMs and transparency through cryptography to regulation? This might sound crazy, but the Bank of International Settlements has a project to prove that banks could cryptographically prove they’d done their checks. 

This whole speech by the BIS is fascinating. The Bank of International Settlements (BIS) is the hub of global central banks and regulators. This speech shows the global regulatory community is very keen, and leaning into policy innovation (and as a Brit, its wonderful to see how much of that happens in the London Hub)

Technology for Supervision as a Rising Tide

👉 What if we applied LLMs and transparency through cryptography to supervision? It’s pretty clear that the employees of The United States Government need much more modern tools to do their job well. 

Government procurement is broken, but the US Government is able to accept gifts of goods and services if you waive any expectation of payment. Whatever your thoughts are on DOGE, that’s essentially how they’re able to use modern tech, rapidly. 

This essentially means if we want new rules about more effective, tech-driven regulation, we could build the supervisory tech that meets those rules too. 

I dislike the idea that it’s a binary choice between Biff's unregulated casino and suffocating bureaucracy. 

• Technology enables a third path: regulation that's simultaneously lighter touch and more effective at preventing harm. 

• Incentives create an opportunity to create better outcomes more than just regulation.

• Standards are a step towards problem solving by the industry, for the industry that can be evolved over time.

Stepping Up Before the Next Crisis

Remember Synapse? Evolve? The industry disasters where everyone asked "where were the regulators?" after the fact? 

Instead of waiting for the next blow-up, some industry players created the Coalitiion for Financial Ecosystem Standards (CFES) - a certification framework for bank-fintech partnerships that actually sets measurable standards.

Critics say it lacks "teeth." Valid point. But what's the alternative? Wait for another catastrophic failure, then endure years of regulatory overreaction?

The CFES framework has five levels - from "rudimentary" to "optimized" - with clear benchmarks for each. This isn't vague corporate speak; it's specific, actionable criteria:

What's interesting is how Federal agency staff are responding. They're not dismissing it - they're engaging with it. Because even regulators know that thoughtful industry self-regulation can work better than enforcement after the fact.

Will these standards prevent the next crisis? Maybe not entirely. But they give everyone a common language for what "good" looks like. That clarity alone is worth its weight in gold.

Don't like these standards? Fine. Help make them into better ones, build something else. But do something.

Back to the Future We Actually Want

Let's be clear: Banks need to make money. Startups need to innovate. Customers need protection. All three can coexist.

What made Biff's casino town so dystopian wasn't just the gambling - it was the exploitation. The house always won, and consumers always lost.

Our alternative isn't some financial socialist utopia. It's a system where:

• Clear boundaries exist between investments and gambling

• Fees are transparent, not buried in fine print

• APIs are accessible AND properly compensated

• Technology makes regulation more effective, not just more burdensome

Every single suggestion I’ve made combine:

1. Incentives for all participants

2. Industry-led risk mitigation (through standards or otherwise)

3. Tech as the enabler 

After Terra/Luna collapsed, FTX imploded, and Synapse left customers stranded, everyone asked, "Where were the regulators?"

Wrong question. 

Where were WE? The industry insiders who saw the risks? The executives who could have spoken up? The product people who could have built better?

Marty McFly didn't wait for the police to fix his dystopian timeline. He took action himself. 

This moment - this deregulatory window - is our DeLorean. We can use it to create Biff's casino, or we can use it to build something that actually works.

The choice is ours. Not the regulators'. Not the politicians'. Ours.

Do the thing.

ST.

4 Fintech Companies 💸

1. Onflow - One KYC for Everything

KYC promises to let users KYC once for everything. Aimed at developers, secureKYC helps users create "encrypted identity containers" on their devices (e.g., by storing their passports). Users can then give "secure proofs" of age or being from a non-sanctioned country with Zero Knowledge Proofs (ZKPs) for extra privacy.

🧠 This type of solution feels inevitable eventually. The question is when and how it gets network effects. I've seen almost exactly this solution every crypto market cycle. Now we have stablecoins and regulatory clarity, perhaps timing could be everything. Founders are likelier to be too early than too late with a great idea. They're building on base, backed by Coinbase ventures, and it feels far more likely that ecosystem will innovate in identity than Apple at this rate.

🧠 The $day_job training makes me wonder, what happens if a bad actor puts a synthetic or stolen identity into one of these vaults?

2. Myne - Mint.com for Net worth and Estate planning

Myne helps users track multiple brokerage, retirement and savings accounts in one place. It supports banks, brokerages and crypto wallets to create a personal wealth dashboard. It categorizes expenses, provides a diversification score, offers insurance, and helps users create a living Will and retirement plan.

🧠 The missing half of Robinhood? The old joke was that Notion was the missing half of Slack. Given how aggressively Robinhood is courting every asset users have, I wonder about the meta work around that. It's one thing to have oversight and action. It's another way to gain insight and foresight. Those are hard to do in action-oriented apps. They live somewhere else and are more async. They're also naturally outside of the business model when you're trying to build AUM or fees. Myne is distributing via employers, but I wonder if they're missing a trick there. Wouldn't RIAs and (IFAs for my UK readers) be better?

3. Model ML - Agentic AI for Finance

Model ML connects documents, files, calls, meetings, and third-party data (like HubSpot, LinkedIn, SAP, and Salesforce) to make them available in any document or context. This helps investment banks do memos, earnings summaries, portfolio monitoring, and more.

🧠 Traction is everything in this category. Lots of companies in the Capital Markets x AI space, like Rogo, have done well with emerging managers. Model ML has a quote from the former HSBC CEO on the top of the fold and quotes an MD at a global investment bank on its homepage. That's a tough-to-penetrate sector. The question is does this go beyond grunt work into value add once you have all of that data?

I wrote about AI eating capital markets here

4. Grain Finance - Embedded Hedging for FX

Grain offers a solution for FX risk via APIs. It enables companies operating across currencies to manage currency volatility risk by hedging with a foward or options contract.The solution automatically builds customer hedging strategies based on currency history and previous cancellations. They target travel companies, marketplaces, and payments companies.

🧠 Is this the must-have feature missing from every Fintech App for B2B? Someone like Brex, which has many growth customers, could potentially manage this for their customers. Or, like a bank, they could sell this as a product. It's an idea that feels there for the taking. Competitor Alt21 does a similar thing, and I always feared they're too clever by half. Great dashboard for power users, but what about hedging for the average Wise customer?

Things to know 👀

1. Robinhood launches Private Banking

Robinhood just launched "Robinhood Banking" plus its AI "Robinhood Cortext. The private bank features include - Real-time net worth tracking across ALL your accounts, family accounts (including for kids), and Integrated estate planning with trust creation. It also has CPA access and tax preparation, instant international money movement, and premium perks like F1 and Coachella tickets

Robinhood Cortex is an AI that helps create strategies for stocks and options based on what it sees the user doing on the screen to avoid being "just another annoying chatbox."  

🧠 They're making it incredibly compelling to "go full Robinhood." While private bankers are still mailing quarterly statements, Robinhood users are checking their entire family finances from a single hub.

🧠 This directly threatens Morgan Stanley, Schwab, and every other wealth manager. Especially as we start to see the wealth transfer from older generations to millenials.

🧠 The X1 acquisition just paid for itself 100x Robinhood acquired X1 Card for $90M. That team built Robinhood Gold and now Robinhood Banking. Given how central it's becoming to their strategy, it might be one of the greatest acquisitions in fintech history.

🧠 Is Robinhood becoming a full bank? They already have credit cards, 401(k)s, crypto trading, stock/options trading, and now private banking.

The only thing missing is a banking license—and I'm betting that's next given the administration change and how hard Robinhood is lobbying.

🧠 Are traditional private banks cooked? YES. They won't feel it this year, or next year. It will just be a slow erosion as their existing customers die out, and younger customers never choose them.

2. Mercury raises $300m in a Series C

Mercury achieved a $3.5bn post-money valuation, more than double their Series B from 2021. The company also announced Ten consecutive quarters of profitability based on both EBITDA and GAAP net-income. $500 million in revenue in 2024. 40% growth in customers year-over-year. $156 billion in annual transaction volume, up 64% year-over-year

🧠 These are solid numbers but can they sustain them?

• Compare this with Plaid, that is in the mid 250s, growing in the mid-20s, and looking to IPO. Mercury's position feels stronger

• But I doubt they'll IPO. This was a great time to raise. The AI bubble has just about peaked.

• Mercury likely benefitted from the wave of new companies being created and funded.

• Mercury's acquisition funnel via partnerships with company formation product like Stripe Atlas or Doola is clever.

• No adjusted EBITDA, no GAAP weirdness, halleluja!

🧠 The board announcements are possibly the most interesting news here.

• The former FDIC exec appointed to fix SVB post-crisis joins.

• Tom Brown is an ex-DOJ lawyer who's defended Visa on antitrust matters (and former NYCA partner)

• and Sonya Huang has a ton of exposure to AI and Fintech.

• That's the kind of board I'd build if I wanted to get a charter some day.

🧠 Will they get a charter?

• I will ask this about every major Neobank, but the latter is the most likely candidate out of Brex, Ramp, and Mercury.

• The account is the core of their product.

• They've had the most trouble with bank partners and hired some heavyweight compliance staff.

• Why else would you talk so much about profitability and raise a private round? Banks need to be profitable, while pre-IPO companies tend not to be as scrutinized.

• They could pull it off, and there's a window between now and 2029 to get it done.

PS. Since Sequoia led the Series C do we no longer call them "a16z-backed Fintech Mercury?" when there's some BaaS drama 🙃

Good Reads 📚

1. The Wild West of EBITDA Adjustments

When is a loss-making company profitable? When it doesn't follow standard GAAP accounting principles. For example, Klarna reported $181M in Adjusted Operating Profit in 2024 despite a GAAP operating loss of—$121M. CoreWeave claims a sky-high 64% Adjusted EBITDA margin—but on a GAAP basis, they're running at a -45% loss.

🧠 We need to do something about "adjusted EBITDA"

That's all, folks. 👋

Remember, if you're enjoying this content, please do tell all your fintech friends to check it out and hit the subscribe button :)

(1) All content and views expressed here are the authors' personal opinions and do not reflect the views of any of their employers or employees.

(2) All companies or assets the author mentions in which the author has a personal and/or financial interest are denoted with a *. None of the above constitutes investment advice, and you should seek independent advice before making any investment decisions.

(3) Any companies mentioned are top of mind and used for illustrative purposes only.

(4) A team of researchers has not rigorously fact-checked this. Please don't take it as gospel—strong opinions weakly held

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