By | January 4, 2022


Key Takeaways

  • Polymarket has been fined $1.4 million by the CFTC and also will be compelled to close down all of its markets.
  • The prediction market service provided occasions contracts, one thing that solely registered markets are allowed to do.
  • Although Polymarket used cryptocurrency, it was not absolutely decentralized and was operated by an organization in New York.

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The Commodity Futures Buying and selling Fee (CFTC) has compelled the crypto-based predictions market Polymarket to close down.

CFTC Settles With Polymarket

Based on a CFTC press launch made public right this moment, Polymarket’s mother or father firm, Blockratize, Inc., has been charged with “providing off-exchange event-based binary choices contracts.” The CFTC says that the platform provided greater than 900 of those markets.

Till now, Polymarket allowed customers to wager on the result of real-world occasions, resembling reported COVID-19 instances, nationwide inflation charges, and political elections and nominations. Contracts of those varieties can solely be provided on a registered change, in line with the CFTC.

“Polymarket creates, defines, hosts, and resolves the buying and selling and execution of contracts for the event-based binary choices markets provided on its web site,” the CFTC’s announcement reads.

Because of the settlement, Polymarket should pay a $1.4 million civil financial penalty and terminate all markets displayed on Polymarket.com. The shutdown comes at an inopportune time for the service, which not too long ago raised $4 million in a funding spherical.

Can Prediction Markets Evade Regulation?

Cryptocurrency-based prediction markets are sometimes thought-about a solution to keep away from U.S. laws that restrict such actions. The mainstream prediction market PredictIt limits investments to $850, for instance, whereas the Iowa Digital Markets (IEM) limits positions to $500.

Polymarket was nominally a decentralized software insofar because it didn’t have custody of consumer funds and didn’t impose such limits on its customers. Nonetheless, Polymarket was operated by an organization in New York, which allowed regulators to focus on the platform.

It’s unsure if maximally decentralized prediction markets, resembling Augur and Omen, might meet the identical destiny.

Disclosure: On the time of writing, the writer of this piece owned BTC, ETH, and different cryptocurrencies. 

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