May was a politically turbulent month in the UK, with Labour’s local election losses prompting a government reset and renewed pressure on the legislative agenda. Yet beneath the political noise, the regulatory direction remained consistent: economic growth through financial modernization, with considerably more state oversight of the infrastructure enabling it.

Labour’s poor local election performance in May triggered a government reset focused on economic delivery, growth, AI, and public service reform. A period of cabinet instability – including the resignation of Health Secretary Wes Streeting – added to a broader sense of political pressure on the Prime Minister.

UK and Europe

UK King’s Speech: digital identity, growth, and resilience

The State Opening of Parliament set out the Government’s legislative priorities for the session. The bills most relevant to payments and fintech include:

Digital Access to Services Bill – establishes a national digital identity framework and modernizes citizen access to public and private services. The implications for onboarding, KYC, and consent infrastructure are significant.

Regulating for Growth Bill – introduces a strengthened statutory growth duty for payment regulators and enables broader use of regulatory sandboxes. Reinforces the UK’s position as a pro-innovation regulatory environment, even as oversight tightens.

Cyber Security and Resilience Bill – carried over from the previous session, it expands resilience and reporting obligations for digital infrastructure providers.

Competition Reform Bill – aims to make Competition and Markets Authority (CMA) processes more predictable for businesses, with relevance to platform competition, payments, and digital ecosystems.

Together, these bills reflect a government trying to hold two positions simultaneously: competitive openness and greater systemic control. For firms operating in payments, identity, and open banking, the direction is toward deeper regulatory integration, not lighter-touch oversight.

Fund tokenization framework now live

FCA Policy Statement PS26/7, Progressing Fund Tokenization, entered into force on April 30, 2026, with implementation activity accelerating through May. The framework formally enables authorized funds to maintain fund registers on-chain and introduces the optional Direct2Fund (D2F) dealing model.

This is a binding operational framework for tokenized authorized funds – a material step for regulated tokenized finance infrastructure in the UK. It supports broader institutional adoption of tokenized assets and increases demand for fiat-stablecoin interoperability and real-time settlement infrastructure.

Payments regulatory reform: HM Treasury confirms direction

On May 12, 2026, HM Treasury (HMT) published its formal response to its July 2025 consultation on cross-cutting reforms to the financial services regulatory framework. The response confirms the legislative changes HMT intends to make to the framework governing the FCA and the Prudential Regulation Authority (PRA), marking a significant milestone in the Government’s broader Financial Services Growth and Competitiveness Strategy.

The focus remains on making the UK regulatory framework more coherent, more growth-oriented, and more internationally competitive while maintaining robust consumer protection and systemic oversight.

AI Act implementation enters the operational phase

May saw EU institutions move from AI Act legislation toward implementation and simplification ahead of the next major compliance milestones in August 2026. The European Council and Parliament agreed measures to reduce administrative burden, but the core governance requirements remain intact – and the clock is ticking.

For payments and fintech firms, the August deadlines are the ones to watch. Any system using AI to make or influence decisions around credit, fraud, affordability, identity, or transaction risk is likely to fall within the high-risk category, bringing with it mandatory obligations around human oversight, data quality, audit trails, and ongoing monitoring. Firms that have been treating AI governance as a future concern will need to accelerate their compliance programs now.

The simplification measures agreed in May provide some relief on process, but they don’t dilute the substance of what’s required. If your product uses AI in a regulated decision-making context, the question is no longer whether these rules apply to you – it’s whether you’ll be ready when they do.

Open finance and capital markets integration

Momentum continued around the EU’s Financial Data Access (FIDA) framework and broader capital markets integration efforts. Germany’s signals of increased openness to compromise on EU Capital Markets Union reforms – including potential centralization of supervision – represent a notable shift. Germany has historically been one of the more cautious voices on EU financial integration, and any movement here could have real consequences for the pace and scope of reform.

The broader direction remains toward greater data portability, deeper interoperability between member-state financial systems, and increased focus on digital sovereignty and financial infrastructure resilience. For banks, lenders, insurers, and investment platforms – not just payment providers – this signals an expanding compliance perimeter. As open finance frameworks take shape, firms holding pension, mortgage, insurance, and investment data will face the same portability and interoperability obligations that open banking placed on current account providers. The scope of “who must share what, with whom” is about to get significantly wider.

United States

Federal vs. state conflict escalates

May brought direct regulatory confrontation. The CFTC sued Minnesota after the state introduced the first outright ban on prediction markets, and ongoing disputes continue with New York, Nevada, Arizona, and Wisconsin over attempts to apply state gambling laws to these platforms. CFTC Chair Selig confirmed the Commission would continue challenging state restrictions.

A bipartisan Senate hearing in May highlighted growing concerns around regulatory arbitrage, consumer protection, gambling harm, integrity risks, and the ability of nationally available platforms to bypass state-level restrictions. The political temperature around this issue is rising.

Sports leagues and surveillance concerns

Professional sports leagues are becoming directly involved in the regulatory debate. The NHL signed an integrity-sharing agreement with the CFTC focused on fraud, insider trading, and market manipulation risks, and the CFTC is reportedly in discussions with multiple major leagues around suspicious trading activity and cross-market surveillance.

The involvement of sports bodies signals how far prediction markets have penetrated mainstream financial and entertainment markets – and how complex the governance challenges will be.

Key takeaways

The common thread running through May’s developments is straightforward: regulators are getting closer to the infrastructure, and expectations are rising faster than many firms’ readiness to meet them.

For payments and fintech firms, the immediate priority is governance. The AI Act’s August deadlines are approaching, open banking is transitioning to a more commercially complex Future Entity model, and the UK’s legislative agenda is creating new obligations around digital identity and resilience – all at the same time. Firms that have been managing these as separate workstreams may find that the cumulative pressure arrives faster than anticipated.

For iGaming operators and gambling-adjacent businesses, the signals from both the UK and US should prompt a reassessment of payments infrastructure. In the UK, the trend is toward greater payment-layer visibility and data-driven compliance. In the US, the prediction markets debate is hardening jurisdictional lines, and operators with any exposure to event-based products need to understand which regulatory framework governs them and where liability resides.

More broadly, the firms best positioned for what’s coming are those treating regulatory change as a product and infrastructure question, not just a compliance one. The rules being written now will shape what payments look like in 2027 and beyond. Getting ahead of them – rather than retrofitting to them – is the more durable strategy.

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