- Polymarket has been fined $1.4 million by the CFTC and will also be forced to shut down all of its markets.
- The prediction market service offered events contracts, something that only registered markets are allowed to do.
- Though Polymarket used cryptocurrency, it was not fully decentralized and was operated by a company in New York.
Share this article
The Commodity Futures Trading Commission (CFTC) has forced the crypto-based predictions market Polymarket to shut down.
CFTC Settles With Polymarket
According to a CFTC press release made public today, Polymarket’s parent company, Blockratize, Inc., has been charged with “offering off-exchange event-based binary options contracts.” The CFTC says that the platform offered more than 900 of these markets.
Until now, Polymarket allowed users to bet on the outcome of real-world events, such as reported COVID-19 cases, national inflation rates, and political elections and nominations. Contracts of these types can only be offered on a registered exchange, according to the CFTC.
“Polymarket creates, defines, hosts, and resolves the trading and execution of contracts for the event-based binary options markets offered on its website,” the CFTC’s announcement reads.
As a result of the settlement, Polymarket must pay a $1.4 million civil monetary penalty and terminate all markets displayed on Polymarket.com. The shutdown comes at an inopportune time for the service, which recently raised $4 million in a funding round.
Can Prediction Markets Evade Regulation?
Cryptocurrency-based prediction markets are often considered a way to avoid U.S. regulations that limit such activities. The mainstream prediction market PredictIt limits investments to $850, for example, while the Iowa Electronic Markets (IEM) limits positions to $500.
Polymarket was nominally a decentralized application insofar as it did not have custody of user funds and did not impose such limits on its users. Nevertheless, Polymarket was operated by a company in New York, which allowed regulators to target the platform.
It is uncertain if maximally decentralized prediction markets, such as Augur and Omen, could meet the same fate.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.
Crypto Prediction Markets Were The Election’s Biggest Winner
The winner of the U.S. presidential election will dictate the direction of the world’s largest economy. And though Biden and Trump stand opposed, the markets only fear one thing: a…
A Guide to Yield Farming, Staking, and Liquidity Mining
Yield farming is arguably the most popular way to earn a return on crypto assets. Essentially, you can earn passive income by depositing crypto into a liquidity pool. You can think of these liquidity…
Polymarket Raises $4 Million for Crypto Prediction Market
Polymarket has raised $4 million to expand its Ethereum-based prediction market platform, according to a press release. Funds Will Expand Polymarket The company’s latest funding round brought in money from…
What Is Augur? Introduction to REP
What is Augur? Augur is a cryptocurrency that powers prediction markets. It can be used to bet on sporting events, political outcomes, economies, and just about everything else in the…