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

CFTC Fines 'Decentralized' Prediction Market Platform Polymarket $1.4 Miljon, Shuts Down Noncompliant Markets

USA. Commodity Futures Trading Commission (CFTC) has ordered adecentralizedprediction market platform to shut down non-compliant markets and pay a fine of $1.4 miljonit. “Polymarket had been operating an illegal unregistered or non-designated facility for event-based binary options online trading contracts, known asevent markets,'” said the derivatives regulator.

CFTC Takes First Crypto Enforcement Action of the Year

The Commodity Futures Trading Commission (CFTC) has taken the first crypto enforcement action of the year in the U.S. The derivatives regulator announced that it entered an order Mondayfiling and simultaneously settling charges against Delaware-registered Blockratize, Inc. d/b/a Polymarket.

The company was chargedfor offering off-exchange event-based binary options contracts and failure to obtain designation as a designated contract market (DCM) or registration as a swap execution facility (SEF),” the CFTC wrote. Regulaator täpsustas:

The order requires that Polymarket pay a $1.4 million civil monetary penalty, facilitate the resolution (i.e. wind down) of all markets displayed on Polymarket.com that do not comply with the Commodity Exchange Act (CEA) and applicable CFTC regulations.

The New York city-based company must alsocease and desist from violating the CEA and CFTC regulations, as charged.

According to the order, “By January 14, 2022, [a] respondent shall cease offering access to trading in markets displayed on Polymarket.comunless they comply with the CFTCs rules.

Polymarket describes itself asa decentralized information markets platform, harnessing the power of free markets to demystify the real-world events that matter most to you.It advertises that users can “kihla vedada” on their beliefs about the outcome of real-world events.

The site lists a number of markets that users can bet on, such asWhat percent of US Covid-19 cases will be from the Omicron variant on January 1, 2022?” ja “Will annual inflation in the European Union be 5.4% or more in December?”

Kuid, its website notes: “The markets listed here are for informational purposes only. We take no profits from them.

According to the derivatives watchdog, “Polymarket had been operating an illegal unregistered or non-designated facility for event-based binary options online trading contracts, known asevent markets’since approximately the beginning of June 2020.

Noting that the platformhas offered more than 900 separate event markets since its inception while deploying smart contracts hosted on a blockchain to operate the markets,” the regulator described:

Polymarket creates, defines, hosts, and resolves the trading and execution of contracts for the event-based binary option markets offered on its website.

The CFTC explained thatPolymarkets markets cover a large variety of binary options, including cryptocurrency [ja] digital assets, current events, and financial conditions, among other events.

The regulator emphasized that event market contracts offered on the Polymarket platformconstitute swaps under the CFTCs jurisdiction, and therefore can only be offered on a registered exchange in accordance with the CEA and CFTC regulations.The platforms civil monetary penalty has been reduced due to itssubstantial cooperation with the Division of Enforcements investigation of this matter,” the CFTC noted.

Following the CFTCs announcement, Polymarket issued a statement, explaining:

We are pleased to confirm that we have successfully agreed to a settlement with the CFTCthe three markets set to resolve after January 14, 2022 that do not comply with the Act will be prematurely wound down and participants refunded.

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