CFTC Fines Crypto Betting Service Polymarket $1.4 Million, Orders Shutdown of Three Markets
US futures regulator has ordered the crypto platform that allowed users to bet on world events, including celebrity engagements and Covid cases, to “wind down” operations of markets that violate CFTC rules and regulations
SOURCE: SHUTTERSTOCK
key takeaways
- The CFTC filed a cease and desist order against popular crypto betting platform Polymarket
- The startup allowed users to bet on anything from election results to celebrity engagements to earn cryptocurrencies
The Commodity Futures Trading Commission (CFTC) took its first public action against decentralized finance (DeFi) companies of the year on Monday.
The regulator fined cryptocurrency betting platform Blockratize Inc., which operates under the name Polymarket, $1.4 million. The CFTC has also ordered the New York-based company to wind down “all markets displayed on Polymarket.com that do not comply with the Commodity Exchange Act (CEA),” according to a statement from the CFTC.
Polymarket enables users to bet on current events, including politics and pop culture, using cryptocurrencies. Popular bets of the past year included whether or not Jennifer Lopez and Ben Affleck would get engaged or if the United States would reach 100,000 new daily coronavirus cases before Jan. 1, 2022.
Users select one of at least two options for the given scenario and place bets, which, under federal law, qualifies the markets as swaps. The CFTC reports that Polymarket has offered more than 900 different event markets since its inception in 2020.
Polymarket failed to obtain a Designated Contract Market (DCM) and Swap Execution Facility (SEF) registration, both requirements under the CEA, the CFTC 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 decentralized finance or ‘DeFi’ space,” acting director of enforcement, Vincent McGonagle, said in a statement. “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.”
Polymarket responded to the filing late Monday afternoon via Twitter.
Reports that the CFTC was investigating Polymarket first surfaced in October 2021. The company secured a $4 million seed funding round the same month. Polychain Capital was a lead investor.
Polymarket cooperated with the investigation, the CFTC report noted, which helped the company secure a lower fine. All Polymarket markets will end by Jan. 14, 2022, and refunds will be available to users by Jan 24.
Updated July 23, 2024 at 3:49 pm ET: A previous version of this article stated that Polymarket was founded in 2018, whereas it was founded in 2020.
Updated January 3, 2022, at 10:09 pm ET to add additional information and a statement from Polymarket.
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