The U.S. Commodity Futures Trading Commission (CFTC) has settled charges against Polymarket, an Ethereum-based prediction markets platform, ordering the firm to pay a $1.4M penalty and remove its unauthorized markets by Jan. 14.
Polymarket hosts binary options contracts that allow users to speculate on whether a particular event may occur in the future. The CFTC found the contracts constitute swaps and said Polymarket was offering the markets without the licensing required by the Commodity Exchange Act.
Swap Execution Facility
A Jan. 3 announcement from the CFTC states that Polymarket was sued for “offering off-exchange event-based binary option contracts” without being licensed as a “designated contract market” or “swap execution facility.”
“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,” Vincent McGonagle, CFTC Acting Director of Enforcement,, said in a statement. “Market participants should proactively engage with the CFTC.”
900 Unique Events
The CFTC also noted that Polymarket received a reduced civil monetary penalty due to the company’s “substantial cooperation” with their investigation.
Polymarket acknowledged the charges in a tweet, stating that it will resolve three markets found to violate the act that are scheduled to expire after Jan 14. “We’re pleased to confirm that we’ve successfully agreed to a settlement with the CFTC, & are excited to move forward & focus on the future of Polymarket,” the team said.
The order notes that Polymarket has offered contracts for more than 900 unique events since launching in June 2020.