CFTC Fines Polymarket and Issues a Cease and Desist
What is Polymarket
Polymarket is a well-known, decentralized platform that allows users to bet on the outcome of current events. Users stake tokens and earn for betting correctly. Current events could include elections, global economic indicators, such as inflation forecasts, and even crypto price levels for a given day.
For a given outcome, users select one of two possible outcomes provided and then place their crypto stake.
At the start of the year, one bet was on whether the EU’s annual rate of inflation would be 5.4% or more in December. User have the option to select Buy (yes) or Sell (No) and the size of the stake.
Regulator Activity Spikes
It’s been a busy December and start to the year for regulators. With regulatory risk a key factor for the broader markets, recent activity has tested support for the crypto markets.
Overnight, news hit the wires of the CFTC and Polymarket agreeing on a $1.4m settlement. Just yesterday, the South Korean government widened the net on crypto holdings. News of the government requiring individuals to report all overseas assets in excess of 500m Korean Won was a blow for the market. Overseas assets include cryptos.
The move followed news of Indian authorities searching 6 crypto exchanges on the suspicion of tax evasion. Polymarket is one of a number of platforms to face regulator wrath in recent weeks. Last month, Binance announced that it was withdrawing its Singapore application. The decision was reportedly for failing to meet the Monetary Authority of Singapore’s AML and KYC requirements. Just last week, Binance was in hot water again. This time, Binance got on the wrong side of the Ontario Securities Commission.
For the broader market, the recent pickup in regulator activity will likely be a concern. With the SEC and Ripple case ongoing, hopes of a favorable outcome for Ripple may also wane.
The CFTC Fine and Cease and Desist Order
It didn’t take long for the CFTC to kickstart the year. On Monday, the CFTC reportedly ordered Blockratize Inc. to cease and desist “all markets displayed on Polymarket.com that do not comply with the Commodity Exchange Act (CEA)”.
According to the CFTC statement, the filing and simultaneous settling of charges was for offering off-exchange event-based binary options contracts and failure to obtain designation as a designated contact market (DCM) or registration as a swap execution facility (SEF).
Polymarket must pay a $1.4m monetary penalty and wind down all markets displayed on Polymarket.com that do not comply with the Commodity Exchange Act (CEA) and applicable CFTC regulations. Polymarket.com must also cease and desist from violating the regulations breached.
According to the CFTC, event market contracts, which are composed of a pair of binary options, constitute swaps under the CFTC’s jurisdiction.
Crypto Market Reaction
While direct market reaction was relatively muted, the majors have struggled at the turn of the year. Increased regulatory chatter has tested support, with Bitcoin (BTC) falling back to sub-$46,000 levels before steadying.
At the time of writing, Bitcoin (BTC) was down by 0.54% to $46,200.Source