New York-based platform Polymarket for crypto predictions has reached a settlement to pay a $1.4 million fine to the Commodity Futures Trading Commission.
Polymarket allows users to place bets on outcomes of event markets, such as pro-sports and elections via binary options contracts.
The CFTC announced on Jan. 3 that it had filed an order to file and simultaneously settle charges against Polymarket. Polymarket was found to have operated an illegal unregistered facility since June 2020.
The order also requires Polymarket to pay a $1.4 million civil monetary penalty and wind down any markets that are not in compliance with CFTC or Commodity Exchange Act regulations. Polymarket replied with a Jan 4 tweet, stating that they were excited to “move forward”.
We are pleased to announce that we have reached a settlement agreement with the CFTC. Now, we want to focus on the future and Polymarket. The order will prevent the three markets that have been in existence beyond 1/14 from violating the Act. More information soon
— Polymarket (@PolymarketHQ), January 3, 2022
The CFTC stated event market contracts backed with a pair binary options “constitute Swaps” under its jurisdiction, and that platforms offering market exposure must be regulated by the CFTC or CEA.
Vincent McGonagle, the CTFC’s acting Director of Enforcement, encouraged derivatives platforms to register with enforcement. He particularly focused on those who operate in decentralized finance (DeFi).
“All derivatives markets must function within the limits of the law, regardless of technology used, especially those in the so called decentralized finance space or ‘DeFi’.
However, the CFTC noted that Polymarket was subject to a lower civil monetary penalty for its “substantial cooperation” in the investigation into the platform.
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Cointelegraph reported in October 2021, that the CFTC was investigating Polymarket. The platform reportedly hired James McDonald, a former CTFC enforcement chief, to lead the investigation.