CFTC fines Polymarket $1.4m for unregistered activity
Polymarket received a reduced civil monetary penalty after cooperation with the CFTC
The Commodity Futures Trading Commission (CFTC) has fined Polymarket, the crypto predictions platform, $1.4m (£1.03m).
Polymarket allows users to bet on the outcomes of event markets, such as “Will Joe Biden’s approval rating be 41.5% or higher on 6 January 2022?” via binary options contracts.
As Polymarket states, it allows you to “bet on your beliefs”. But on 3 January the CFTC entered an order filing and simultaneously settling charges against Polymarket, as Polymarket did not obtain the registration as a designated contract market (DCM) or swap execution facility (SEF) that is needed by companies offering binary options in the US.
As well as paying the fine, Polymarket must also “wind down” any markets on the platform that do not comply with the Commodity Exchange Act (CEA) and applicable CFTC regulations.
Polymarket “excited to move forward”
In response to the fine, Polymarket tweeted that it is pleased to have “successfully agreed to a settlement with the CFTC and [is] excited to move forward”.
The CFTC recognised Polymarket’s “substantial cooperation” with the Division of Enforcement’s investigation into the matter and so reduced the civil monetary penalty.
The CFTC also found that Polymarket has offered more than 900 separate event markets since June 2020. The questions Polymarket offers that you can place a bet on, relate to an event taking place in the future which can be answered with a “yes” or “no” answer.
DeFi space must abide by the law
Vincent McGonagle, acting director and principal deputy director of the CTFC’s Division of Enforcement, said: “All derivatives markets must operate within the bounds of the law regardless of the technology used, and particularly including those in the so-called decentralised finance or ‘DeFi’ space.
“Market participants should proactively engage with the CFTC to ensure that our markets remain robust, transparent, and afford customers the protection provided under the CEA and our regulations,” McGonagle continued.
The CFTC issued warnings to US customers prior to the Polymarket fine, advising them to ensure they are dealing with a registered binary options exchange.