The Commodity Futures Trading Commission has cracked the whip on Polymarket, ordering the decentralized prediction market platform to shut down all non-compliant markets. It also ordered the platform to cough up a fine of $1.4 million.
The regulator further stated that Polymarket had been operating a non-designated facility for events-based binary options online trading contracts.
Coming Down Heavily On Polymarket
The action taken by the Commodity Futures Trading Commission marks the first stringent action in crypto regulation to take place in 2022. The regulator had announced on January 3rd that it was entering an order filing while also simultaneously settling charges against Polymarket. Polymarket has been charged with “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 further added in its statement,
“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.”
It also stated that the company must stop violating CEA and CFTC regulations.
A Decentralized Information Market
Polymarket allows users to bet on real-world outcomes, describing itself as a “decentralized information markets platform, harnessing the power of free markets to demystify the real-world events that matter most to you.” Users on Polymarket can bet on pretty much any real-world scenario outcome such as inflation, weather, and even Covid-19 cases.
However, according to the CFTC, Polymarket’s service that enables users to pick one of two options on trades qualifies as swaps under market law.
Polymarket Cooperating With The CFTC
The CFTC stated that Polymarket is cooperating with the investigation, resulting in a reduced fine. Polymarket will stop offering markets by January 14th and make funds available to users by January 24th. The order states that Polymarket will cease any further violations of the CEA, although the company will continue to operate.
Polymarket further stated,
“We have been encouraged by our learnings through this experience and have built out an exceptional compliance team and robust internal practices and procedures, which will ensure that compliance remains an integral pillar of Polymarket’s global business going forward.”
Vincent McGonagle, the Acting Enforcement Director, added issued a statement adding,
“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.”
CFTC’s Prior Crackdown
The CFTC had earlier cracked the whip on Tether and Bitfinex, with Tether, the firm behind the USDT stablecoin, ordered to pay $41 million in civil monetary penalties. The other company that bore the brunt of the CFTC’s crackdown was iFinex, the parent company of the Bitfinex exchange, which was ordered to pay a fine totaling $1.5 million.
The companies were ordered to pay the fines as part of a settlement deal, with allegations that Tether had been violating the Commodity Exchange Act, while Bitfinex was fined for undertaking off-exchange commodity transactions.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Credit: Source link