CFTC Fines ‘Decentralized’ Prediction Market Platform Polymarket $1.4 Million, Shuts Down Noncompliant Markets

The U.S. Commodity Futures Trading Commission (CFTC) has ordered a “decentralized” prediction market platform to close down non-compliant markets and pay a superb of $1.4 million. “Polymarket had been working an unlawful unregistered or non-designated facility for event-based binary choices on-line buying and selling contracts, generally known as ‘occasion markets,’” mentioned the derivatives regulator.

CFTC Takes First Crypto Enforcement Action of the Year

The Commodity Futures Trading Commission (CFTC) has taken the primary crypto enforcement motion of the 12 months within the U.S. The derivatives regulator introduced that it entered an order Monday “submitting and concurrently settling prices towards Delaware-registered Blockratize, Inc. d/b/a Polymarket.”

The firm was charged “for providing off-exchange event-based binary choices contracts and failure to acquire designation as a chosen contract market (DCM) or registration as a swap execution facility (SEF),” the CFTC wrote. The regulator detailed:

The order requires that Polymarket pay a $1.4 million civil financial penalty, facilitate the decision (i.e. wind down) of all markets displayed on Polymarket.com that don’t adjust to the Commodity Exchange Act (CEA) and relevant CFTC laws.

The New York city-based firm should additionally “stop and desist from violating the CEA and CFTC laws, as charged.”

According to the order, “By January 14, 2022, [the] respondent shall stop providing entry to buying and selling in markets displayed on Polymarket.com” until they adjust to the CFTC’s guidelines.

Polymarket describes itself as “a decentralized info markets platform, harnessing the facility of free markets to demystify the real-world occasions that matter most to you.” It advertises that customers can “guess” on their beliefs concerning the consequence of real-world occasions.

The web site lists quite a few markets that customers can guess on, resembling “What % of US Covid-19 circumstances shall be from the Omicron variant on January 1, 2022?” and “Will annual inflation within the European Union be 5.4% or extra in December?”

However, its web site notes: “The markets listed below are for informational functions solely. We take no earnings from them.”

According to the derivatives watchdog, “Polymarket had been working an unlawful unregistered or non-designated facility for event-based binary choices on-line buying and selling contracts, generally known as ‘occasion markets’” since roughly the start of June 2020.

Noting that the platform “has supplied greater than 900 separate occasion markets since its inception whereas deploying sensible contracts hosted on a blockchain to function the markets,” the regulator described:

Polymarket creates, defines, hosts, and resolves the buying and selling and execution of contracts for the event-based binary possibility markets supplied on its web site.

The CFTC defined that “Polymarket’s markets cowl a big number of binary choices, together with cryptocurrency [and] digital belongings, present occasions, and monetary circumstances, amongst different occasions.”

The regulator emphasised that occasion market contracts supplied on the Polymarket platform “represent swaps beneath the CFTC’s jurisdiction, and subsequently can solely be supplied on a registered trade in accordance with the CEA and CFTC laws.” The platform’s civil financial penalty has been diminished on account of its “substantial cooperation with the Division of Enforcement’s investigation of this matter,” the CFTC famous.

Following the CFTC’s announcement, Polymarket issued an announcement, explaining:

We are happy to verify that now we have efficiently agreed to a settlement with the CFTC … the three markets set to resolve after January 14, 2022 that don’t adjust to the Act shall be prematurely wound down and contributors refunded.

What do you concentrate on the CFTC’s motion towards this prediction market? Let us know within the feedback part beneath.