Polymarket, a crypto forecasting website headquartered in New York City, has agreed to pay a $1.4 million fine to the Commodity Futures Trading Commission (CFTC).
The company, whose popularity soared during the global epidemic, has been operating an unregistered service that allows people to gamble on the future outcome around since June 2020 which filed order proceedings and simultaneously resolved charges against the site, according to a statement released Monday by the Commodity Futures Trading Commission. In the agreement, Polymarket did not admit or deny any fraudulent activity.
The Commodity Futures Trading Commission (CFTC) penalized Polymarket $1.4 million, ordering Polymarket to close all of its markets because it failed to apply for a Designated Contract Market (DCM) or Swap Execution Facility (SEF) authorization, both of which are required by the Commodity Exchange Act for firms that provide binary options in the United States.
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Polymarket is a crypto online gambling service that uses binary options contracts to allow customers to choose one of at least two choices on specific trades, such as pro-sports games and political election campaigns. Polymarket provided at least 900 of these markets in the last 18 months, according to a CFTC order.
Polymarket must pay a $1.4 million civil monetary penalty as well as start reducing any markets on the platform that do not cooperate with CFTC and Commodity Exchange Act (CEA) laws, according to the order. Polymarket replied on January 4 with a tweet saying they were excited to move forward.
Polymarket, on the other hand, acquired a reduced civil monetary fine as a result of its immense cooperation with the investigative process into the platform, according to the CFTC.
According to the order, the company will stop offering markets on January 14, 2022, and work towards making all funds available to customers by January 24, 2022. Polymarket will also stop violating the CEA in the future, though it does not appear that the company will be shut down.
Under the CFTC’s authority, event market agreements endorsed by a pair of binary options “constitute swaps,” and platforms offering access to the market must be regulated by both the CFTC and the CEA.
The CTFC’s acting director of regulation, Vincent McGonagle, prompted derivatives platforms to register with the enforcement authority, with a special emphasis on those in the decentralized finance (DeFi) sector:
McGonagle said, regardless of the digital technologies used, all derivatives markets, including those in the decentralized finance or ‘DeFi’ space, must operate within the bounds of the law. And digital currencies, blockchains, and smart contracts are not exempt from registration under the CEA.
Polymarket said in a statement sent by an external spokesperson that it would close three markets and issue refunds to users by the January 14 deadline. The company intends to provide more details about its plans in the future.
The statement said:
“We have created an extraordinary compliance team and strong internal practices and procedures, which will make sure that compliance persists an integral backbone of Polymarket’s globalized economy going forward”.