The US Commodity Futures Trading Commission (CFTC) ordered a “decentralized” prediction market platform to shut down non-compliant markets and pay a fine of $ 1.4 million. “Polymarket operated an unlawful, unregistered or unidentified facility for event-based online binary options trading contracts known as ‘event markets’,” the derivatives regulator said.
CFTC Takes First Crypto Enforcement Action of the Year
The Commodity Futures Trading Commission (CFTC) took the first crypto enforcement action of the year in the United States. Polymarket.
The company was accused of “offering binary options contracts based on over-the-counter events and failing to obtain designation as a designated contract market (DCM) or registration as a facility.” swap execution (SEF), ”the CFTC wrote. The regulator detailed:
Order requires Polymarket to pay civil fine of $ 1.4 million, facilitates resolution (c.
The New York-based company must also “cease and desist from violating CEA and CFTC regulations, charges say.”
According to the ordinance, “By January 14, 2022, [the] the Respondent will cease offering trading access to the marketplaces posted on Polymarket.com ”, unless he complies with CFTC rules.
Polymarket describes itself as “a decentralized information marketplace platform, harnessing the power of free markets to demystify the real world events that matter most to you.” It announces that users can “bet” on their beliefs about the outcome of real world events.
The site lists a number of markets users can bet on, such as “What percentage of U.S. cases of Covid-19 will be from the Omicron variant on January 1, 2022?” “And” Will annual inflation in the European Union be 5.4% or more in December? “
However, its website notes, “The markets listed here are for informational purposes only. We are not making any profit from them.
According to the derivatives watchdog, “Polymarket operated an illegal, unregistered or unidentified facility for event-based online binary options trading contracts, known as ‘event markets'” since then. approximately early June 2020.
Noting that the platform “has offered more than 900 separate event marketplaces since its inception while deploying smart contracts hosted on a blockchain to mine the markets,” the regulator described:
Polymarket creates, defines, hosts and resolves the trading and execution of contracts for the event-based binary options markets offered on its website.
The CFTC explained that “Polymarket’s markets cover a wide variety of binary options, including cryptocurrency. [and] digital assets, current events and financial conditions, among other events. “
The regulator stressed that the event market contracts offered on the Polymarket platform “constitute swaps falling under the jurisdiction of the CFTC and can therefore only be offered on a stock exchange registered in accordance with CEA and CFTC regulations”. The platform’s civil financial penalty has been reduced due to its “substantial cooperation with the Enforcement Division’s investigation into this matter,” the CFTC noted.
Following the CFTC’s announcement, Polymarket issued a statement explaining:
We are pleased to confirm that we have been successful in reaching an agreement with the CFTC… the three markets to be resolved after January 14, 2022 that do not comply with the law will be prematurely liquidated and participants reimbursed.
What do you think of the CFTC’s action against this prediction marketplace? Let us know in the comments section below.
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