US Regulator Hits Crypto Betting Site Polymarket With $1.4m Fine

  • The CFTC said Polymarket offered an illegal platform for ‘event markets’ since June 2020
  • Polymarket offers betting on real-world events like politics, economic indicators, COVID-19
  • The online platform will prematurely wind down three markets that do not comply with the CEA
  • CFTC said all derivatives markets must operate within the law, regardless of the technology used
  • Polymarket’s “substantial cooperation” in the investigation earned it a reduced fine
Bags with dollar signs
A US regulator has hit a crypto betting site, which offers betting on real-world events like COVID-19 cases, with a $1.4m fine. [Image:]

CFTC alleges illegal trading

The Washington DC-based Commodity Futures Trading Commission (CFTC) has ordered online betting platform Polymarket to pay a fine of $1.4m to settle allegations it offered illegal trading.

operated an illegal platform

In a statement issued Monday, the US derivatives regulator said the New York City firm operated an illegal platform “for event-based binary options online trading contracts, known as ‘event markets’” since around the start of June 2020.

The operator of the online platform, which offers wagering on real-world events including politics, economic indicators, and COVID-19 cases, shared its successful resolution with the CFTC via Twitter:

According to the CFTC, Polymarket has offered over 900 different event markets since it started operations while establishing “smart contracts hosted on a blockchain to operate the markets.”

In settling with the regulator, Polymarket will prematurely wind down three markets that do not comply with the Commodity Exchange Act (CEA) and refund participants.

Betting on beliefs

According to Bloomberg, Polymarket “didn’t admit or deny wrongdoing in the settlement,” nor did its holding company, Blockratize Inc., as yet respond to a request for comment.

Polymarket describes itself on LinkedIn as “an information markets platform, where speculators bet on the world’s most highly-debated topics (COVID, Politics, etc) — producing actionable insight on the matters most important to society, and helping you better plan for your future.” Rather than US dollars, users wishing to trade on Polymarket have to use a cryptocurrency called USD Coin.

Polymarket’s website lists a variety of markets giving users the opportunity to “bet your beliefs.” Markets include the percentage of Omicron variant cases in the US, the annual inflation rate in the European Union, and whether Tim Tebow will score a touchdown in the 2021/22 NFL season.

The CFTC didn’t detail how Polymarket should go about listing new contracts in order to comply with its rules. According to Bloomberg, however, a lengthy and complicated regulatory process underpins the required approvals Polymarket needs to list binary options.

In a Monday press release, CFTC’s acting director of enforcement Vincent McGonagle 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.”

Reduced penalty

Despite the hefty sounding fine, the CFTC said Polymarket’s “substantial cooperation” in the investigation earned it a reduced civil monetary penalty.

The CFTC, an independent agency of the US government established in 1974, regulates the national derivatives markets, which includes futures and swaps. The CFTC’s mission is to “promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.”

In related crypto law-infringing news from July, a legal expert accused a popular Twitch streamer from Texas, Tyler Niknam, of breaking US law by streaming himself playing on a digital cryptocurrency casino. Multiple crypto-facing casinos have started paying popular streamers to play their games on their channels.

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