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Crypto predictions platform Polymarket fined $1.4M by CTFC

“All derivatives markets must operate within the bounds of the law regardless of the technology used,” said Acting Director of Enforcement Vincent McGonagle.

New York-based crypto predictions platform Polymarket has reached a settlement with the Commodity Futures Trading Commission (CFTC) to pay a fine of $1.4 million.

Polymarket is a decentralized platform that enables users to bet on the outcomes of event markets such as pro-sports games and political elections via binary options contracts.

On Jan. 3, the CFTC announced that it had entered an order filing and simultaneously settling charges against Polymarket, with the platform found to have operated an “illegal unregistered or non-designated facility” since June 2020.

Under the order, Polymarket is required to pay a civil monetary penalty of $1.4 million along with winding back any markets on the platform that do not comply with CFTC and Commodity Exchange Act (CEA) regulations. Polymarket responded with a Jan 4. tweet stating that they were "excited to move forward".

The CFTC stated that event market contracts backed by a pair of binary options “constitute swaps” under its jurisdiction and that platforms offering exposure to the market must be regulated under the CFTC and CEA.

In the announcement, the CTFC’s acting director of enforcement Vincent McGonagle urged derivatives platforms to register with the enforcement body, he paid particular attention to those operating in the decentralized finance (DeFi) sector:

“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.”

The CFTC did note, however, that Polymarket received a reduced civil monetary penalty due to its “substantial cooperation” with the investigation into the platform.

Related: Will US regulators shake stablecoins into high-tech banks?

Cointelegraph reported back in October 2021 that the CFTC had launched its investigation into Polymarket, with the platform reportedly hiring former CTFC enforcement head James McDonald to handle the probe.

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

CFTC reportedly investigating decentralized prediction platform Polymarket

Polymarket is believed to have hired CTFC enforcement head James McDonald to handle the probe.

New York-based decentralized prediction market Polymarket has come under investigations from the United States Commodity Futures Trading Commission (CFTC).

According to an Oct. 23 report from Bloomberg citing anonymous sources, the CFTC is investigating whether Polymarket is allowing its customers to trade binary options and swaps that should be registered with the financial regulator. The CFTC is yet to confirm whether it is investigating Polymarket.

A spokesperson for the platform stated: “Polymarket is firmly committed to complying with applicable laws and regulations and to providing information to regulators that will assist them with any inquiry.”

The report claims that the company has engaged the former director of the CFTC’s enforcement division and current partner at legal firm Sullivan & Cromwell, James McDonald, to address the probe.

Polymarket hosts a variety of novelty predictive markets that allow users to speculate on the outcome of future events using the USD Coin stable token. Polymarket does not take positions against its customers and hosts the smart contract interface allowing users to interact with the protocol.

The report asserts the investigation comes as Polymarket is in talks to secure a new round of funding, with anonymous sources claiming the raise could see the firm valued at close to $1 billion.

In October 2020, Polymarket secured a $4 million funding round led by Polychain Capital that also saw participation from CoinShares CSO Meltem Demirors, former Coinbase CTO Balaji Srinivasan, and AngelList CEO Naval Ravikant.

Related: Crypto in the crosshairs: US regulators eye the cryptocurrency sector

Polymarket is not alone in offering decentralized prediction markets, with Augur launching a Polygon deployment of its platform at the start of October.

While Polymarket offers an eclectic range of markets including speculation on covid case numbers, CryptoPunks floor prices and Donald Trump’s presidential prospects, Augur markets are currently focussed on sporting events and crypto price forecasting.

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

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‘Surgical removal’ of crypto will only weaken USD dominance, commentators say