For years, Wyoming public officials have been looking for ways to cash in on the crypto craze sweeping the nation. The top officials in the state government, in league with Wyoming’s legislators at the state and federal levels, have fine-tuned local law to facilitate digitalization of the financial sector, over the objections of community banks and members of the public.
This is the fifth article in a series investigating the people, processes, and partners involved in the launch of the first state stable token. As Disruption Banking noted in the overview contained in first article of this series, LayerZero issued the token, Fireblocks manages the blockchain, and Franklin Advisers manages reserves, along with Inca Digital to provide intelligence and financial audit and monthly attestations from The Network Firm.
The second and third drills deeper into the project partners, especially Franklin Templeton. The fourth explores the officials behind the project, especially Mark Gordon, Wyoming’s governor, who is the chairman of the commission and put his finger on the scale by lifting the location restriction, so the Wyoming Stable Token Commission or WSTC can partner with out-of-state firms.
Innovation in a Legal Grey Area
The stable token, FRNT has been issued in a legal gray area carefully constructed by the state’s lawmakers over the past few years. The idea is that FRNT is in a category all its own, reportedly unaccountable to any foreign government and even autonomous from the language of the GENIUS Act.
The primary animating force for several of the main actors in this boondoggle was originally the desire to spite federal officials and regulators of the Biden administration in Washington, D.C.
In a meeting of the Select Committee on Blockchain, Wyoming State Senator Chris Rothfuss declared, “And if, honestly, if the Feds don’t want to see it that way, then this is just one more fight I think we probably have to fight. And if not us, who? So I think it’s well worth taking on because it’s the right approach and it’s the way this sector needs things to go to be effective. The idea once again that the SEC just gets to shut things down because they want to classify something as a security, which in my view is clearly not a security in any way by any intent of securities law, but wants to be characterized that for federal control. So we’ll see how it goes.”
The rationale became even clearer as committee members discussed legal strategy. They believed a state, unlike a private company, could invite a showdown with the SEC and survive the blowback. Only a state had the firepower to take on the Biden SEC, and Wyoming had just enough pluck and gumption to do it, but they knew they had to steer clear of securities laws.
Sovereign State Against The D.C. Swamp
Senator Rothfuss stated, “And honestly, it’s one of the reasons why I think it’s appropriate for Wyoming to step into this fight because as a sovereign state, as opposed to, as a corporation, we have the capacity, I think, to step into it a little bit harder and to start from the standpoint that I think a lawsuit would have to probably be filed against us to cease our operation and then effectively have governance on our side in this fight as opposed to a circumstance where a corporation can just receive a letter from the SEC and that letter says shut down or we send you to jail.”
In these statements, the political motive of thumbing one’s nose at the feds is the primary reason, at least for Senator Rothfuss, who is not only the majority leader in the state senate since 2013, he is also the former president of Chico Payment Systems, a payments company, as well as Rothfuss Advanced Research and Engineering Corporation, dissolved in 2024 after a tax delinquency notice, and is the “organizer” of Rothfuss Enterprises LLC, still active as of 2025.
FRNT was born not out of economic necessity but out of ideological conflict between elites in Wyoming and elites in D.C.
To Be, or Not To Be, A Security
Rothfuss framed the stable token as a vehicle to reclaim state power, positioning Wyoming as a kind of digital-frontier insurgent against federal agencies.
On September 20, 2022, during a meeting of the Select Committee on Blockchain, Matt Kaufman, the Governor’s Liaison, said, “And so what I’m proposing that we look at with respect to the Stable Token Act is maybe we’ve answered the question of ‘is it a security’ to begin with, but what about the manner of offering? Maybe there’s a way to ensure that the distribution of that, A) doesn’t cross the lines of making it unconstitutional as, right, minting a coin. But secondarily, we restrict in some logical way the distribution of that. So we stay out of the reach of the SEC.”
A stable token could not be yield-bearing without being considered a security, so that was out of the question. However, when Donald Trump won in 2024, the landscape suddenly shifted, and the Commission no longer had an antagonistic SEC to spite. Instead, the Commission effectively had the wind at its back with the new administration.
With a friendlier SEC, Wyoming no longer needed to frame FRNT as an act of defiance. What emerged instead was a more ambitious but also riskier vision of a state-run digital money system with few external checks.
A Constitutional Problem?
Yet even as Wyoming’s architects leaned into the political fight, privately they expressed doubts. Internal meetings show officials wrestling with the same constitutional red flags critics now raise.
During the September 20 meeting of the Select Committee on Blockchain, Kaufman said, “I’m not the constitutional guy. I haven’t done the constitutional analysis. I do worry about that. And admittedly, I’ve told many of you, when the Stable Token Act first was revealed last year, that was one of my concerns — the constitutional aspects. Maybe that’s been answered. But the less like a medium of exchange and a payment mechanism that looks like, to me, the better chance we have of that being successful on a legal challenge. So in that respect, to the extent our stable token could look more like a settlement mechanism for, you know, Wyoming SPDIs and trust companies, that to me is really interesting because we could structure that in such a way that it is at least difficult for the SEC to reach, as being characterized as a security.”
Kaufman’s remarks reveal the tension inside the project: lawmakers wanted a token powerful enough to challenge federal regulators but legally engineered so carefully that it avoided being classified as a currency, a security, or a CBDC. That strategic ambiguity became the defining feature of FRNT, which is positioned to side-step laws against a Central Bank Digital Currency (CBDC), which is illegal at both the state and federal levels.
Inside the Select Committee, constitutional concerns resurfaced repeatedly, even as the project advanced.
On June 6, 2023, “I would ask you the exact same question I asked the Federal Reserve. I was asked to speak on CBDC to the Board of Governors and the first question I asked them was what problem are you trying to solve? I believe if you have 50 problems floating around this room, if you ask each person, you’re trying to solve a different problem. A stablecoin or a CBDC? Because please don’t confuse, you are talking about issuing a CBDC. You don’t want to say that because that violates the U.S. Constitution, because you don’t get to issue a currency at a state level. But ultimately, it’s a digital token. It’s a representation of a dollar.”
Very Stable GENIUS
“What is the need for a Wyoming stablecoin when Wyoming residents have plenty of options for private stablecoins?” asked Ross Delston, an independent attorney and expert witness in financial crime cases. “Not only does Wyoming’s issuance of the Frontier Stable Token fragment the mostly private stablecoin market, potentially destabilizing the traditional banking system, but also Wyoming’s token ends up competing with traditional bank deposits. To quote Senator Lummis, Wyoming is very much a part of the ‘Wild West’ and this whole concept is a good example of that.”
Wyoming’s own legislature judged that the prospect of a CBDC was undesirable for several reasons, which were outlined in Wyoming House Bill HB0264, a prohibition on CBDCs. It wrote, in part, “The legislature finds a central bank digital currency would not provide any unique benefits to Wyoming citizens or businesses compared to existing technologies and poses serious risks including: (i) Establishing a direct line between a person’s financial activity and government; (ii) Easily prohibiting the purchase of certain goods or limiting purchases by a person; (iii) Reducing credit availability.”
Delston’s assessment cuts to the core contradiction: Wyoming denounces CBDCs as tools of surveillance yet is constructing a token with similar capabilities, minus the constitutional safeguards that would bind a federal agency.
The FRNTman: “An Entirely Different Kind of Product”
Not to worry, WSTC Executive Director Anthony Apollo has voiced his personal opposition to the notion of a state-backed CBDC, saying “WYST is an entirely different type of product.” WYST is the previous name of FRNT.
In support of this claim, the article merely conveys the Director’s argument about the token which is “unlike CBDCs, which are digitally issued by a central bank the same way cash is...”
Yet, at a meeting of the Select Committee on Blockchain, Senator and Co-Chairman Rothfuss said, “And honestly, I think particularly with what has been coming out recently, the reality is the stakeholders want a payment token, right? And they want a variety of payment tokens and they, not just Wyoming. But this is what is desired in the digital asset space is the ability to transact, to recognize that a payment token is not going to be a security. It’s not, doesn’t need to be a municipal bond, doesn’t need to be a commodity. It’s effectively operating, as we write in statute, it’s a U.S. Dollar held in trust by the state of Wyoming on behalf of the token holder. So you’re paying in dollars with a Wyoming stable token. You know, that’s the intent. You’re paying in dollars. You’re not paying in coins or new currency. You’re paying in U.S. Dollars!”
When talking to investors, it’s a digital dollar. When talking to the SEC, it’s a payment token! Kaufman’s remarks underscore a reality the Commission rarely acknowledges publicly: structurally, FRNT behaves like a CBDC, even if its creators insist it is merely a “payment token.” That tension sits at the heart of the legal uncertainty surrounding FRNT.
Stay tuned for the next installment of this Special Investigation.
Author: Tim Tolka, Senior Reporter
#Crypto #Blockchain #DigitalAssets #DeFi
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
