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- Wagering Platform Polymarket Fined by CFTC
Wagering Platform Polymarket Fined by CFTC
The Commodity Futures Trading Commission (CFTC) has fined Polymarket for its cryptocurrency prediction service, and ordered it to close down its markets. Users will also be offered full refunds to settle charges that the company did not register with the regulator.
Polymarket Fined Over Violations
The penalties were announced by the CFTC on Monday. Polymarket, the operating name of Blockratize, Inc., failed to seek registration for either a Swap Execution Facility (SEF) or a Designated Contract Market. These are two requirements under the Commodity Exchange Act (CEA) for binary options companies in the US.
Polymarket, a cryptocurrency betting service, allows users to choose from at least two options for a given trade, such as who will win a presidential election. According to the CFTC order, Polymarket has offered at least 900 of these markets in the past 18 months.
The CFTC asserted, “According to the order, such event market contracts, each of which is composed of a pair of binary options, constitute swaps under the CFTC’s jurisdiction, and therefore can only be offered on a registered exchange in accordance with the CEA and CFTC regulations.”
The CFTC explained that Polymarket cooperated in the investigation, which resulted in a lower fine. According to the order, Polymarket will cease offering markets on January 14 and will make all funds available for users by January 24. Polymarket will also cease any further violations to the CEA.
Vincent McGonagle, Acting Enforcement Director for the CFTC, stated that all derivatives markets must follow the law, regardless of technology, especially those within the “decentralized finance” (DeFi) space.
Swift End to a Quick Investigation
Bloomberg reported that Polymarket was being investigated in October 2021. Former CFTC Commissioner Dan Berkovitz stated in June 2021, however, that he believed DeFI markets for derivatives would be under the agency’s jurisdiction.
He stated that the CEA did not provide any exemption from registration for digital currencies or blockchains.
Polymarket said in a statement that it would close three markets and refund its customers by January 14. Polymarket plans to provide more details about its next plans soon, but hasn’t hinted at what may be coming.
The statement added, “We have been encouraged by our learnings through this experience and have built out an exceptional compliance team and robust internal practices and procedures, which will ensure that compliance remains an integral pillar of Polymarket’s global business going forward.”
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Erik brings his unique writing talents and storytelling flare to cover a wide range of gambling topics. He has written for a number of industry-related publications over the years, providing insight into the constantly evolving world of gaming. A huge sports fan, he especially enjoys football and anything related to sports gambling. Erik is particularly interested in seeing how sports gambling and online gaming are transforming the larger gaming ecosystem.
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