The US Commodity Futures Trading Commission (CFTC) has ordered the “decentralized” prediction market platform to close non-compliant markets and imposed a fine of 1.4 million US dollars. The derivatives regulator said: “Polymarket has been operating illegal unregistered or unspecified facilities for event-based binary options online trading contracts, called the’event market’.”

CFTC takes the first cryptocurrency enforcement action of the year

The Commodity Futures Trading Commission (CFTC) has taken its first crypto enforcement action this year in the United States. The derivatives regulator announced that it had issued an order on Monday to “file and resolve the allegations against Blockratize, Inc. registered in the state of Delaware. d /b/a Poly Market.”

The CFTC wrote that the company was accused of “providing binary options contracts based on off-exchange events, but failed to obtain the designation of the designated contract market (DCM) or registration as a swap execution vehicle (SEF)”. The regulator explained in detail:

The order requires Polymarket to pay a civil fine of $1.4 million to facilitate the resolution (ie, closing) of all markets shown on Polymarket.com that do not comply with the Commodity Exchange Act (CEA) and applicable CFTC regulations.

The New York City-based company must also “stop violating CEA and CFTC regulations in accordance with the allegations.”

According to the order, “By January 14, 2022, [the] Unless they comply with the CFTC rules, the respondent should stop providing trading access to the market shown on Polymarket.com.

Polymarket describes itself as “a decentralized information market platform that uses the power of the free market to demystify the real world events that are most important to you.” It promotes that users can “bet” on the outcome of real world events. the opinion of.

The website lists multiple markets where users can bet, such as “On January 1, 2022, how many of the U.S. Covid-19 cases are from the Omicron variant?” and “The EU’s annual inflation rate in December will reach 5.4% Or higher?”

However, its website states: “The markets listed here are for reference only. We will not profit from them.”

According to the derivatives regulator, “Polymarket has been operating an illegal unregistered or unspecified event-based online trading contract facility for binary options, called the’event market’”, approximately since early June 2020.

The regulator pointed out that the platform “has provided more than 900 independent event markets since its establishment, and deployed smart contracts hosted on the blockchain to operate the market,” the regulator described:

Polymarket creates, defines, escrows, and resolves the trading and execution of contracts on the event-based binary options market provided on its website.

The CFTC explained that “Polymarket’s market covers a variety of binary options, including cryptocurrencies. [and] Events such as digital assets, current events, and financial conditions. “

The regulator emphasized that the event market contracts provided on the Polymarket platform “constitute swaps within the jurisdiction of the CFTC, and therefore can only be provided on registered exchanges that comply with CEA and CFTC regulations.” The investigation conducted substantive cooperation,” and the platform’s civil fines have been reduced.

After the CFTC announcement, Polymarket issued a statement explaining:

We are happy to confirm that we have successfully reached a settlement with the CFTC… The three non-compliant markets scheduled to be resolved after January 14, 2022 will end early and participants will receive refunds.

What do you think of the CFTC’s actions on this prediction market? Please let us know in the comments section below.

Kevin Helms

As a student of Austrian economics, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection of economics and cryptography.