The Commodities Future Trading Commission (CFTC) has announced it is fining decentralized information markets platform PolyMarket $1.4m and forcing it to cease operations in the US.
The announcement, on Monday, followed a probe into Polymarket for suspected unregistered and unlicensed binary options that started in October last year.
Polymarket is a platform that offers services including the ability to speculate on future outcomes. Users can bet ‘yes’ or ‘no’ on events like “Will Donald Trump run for US President in 2024”. These bets are made in speculative digital assets which brings additional compliance scrutiny.
In the US there are steps that must be taken before options like these are approved and the CFTC stated PolyMarket “failed to obtain designation as a designated contract market (DCM) or registration as a swap execution facility (SEF)”.
The CFTC has ordered PolyMarket to cease its operations in the US by next week. This will be a big hit to the platform as its largest volume options have been related to US politics.
Its largest ever betting option was related to the Presidential Inauguration which had more than $30m in volume. PolyMarket has offered close to a thousand different events without registering beforehand.
In its statement the CFTC pressed that even decentralized companies must register and get the correct permits to run these types of operations in the US. These binary betting options are viewed by the CFTC as swaps which can only be facilitated on regulated exchanges.
The CFTC is not new to cryptocurrency and has recently come after major companies. Last year Tether was fined more than $40m for not providing evidence of financial backing for its stablecoin.
More recently, Binance has been under investigation for offering futures products without being registered in the CFTC jurisdiction. Many have speculated that as the regulations become clearer in the US, the CFTC and other regulatory bodies will begin to approach projects which hold public and private sales which it views as illegal fundraising.
Crypto betting has been growing in the US with some states now allowing online gambling with digital assets. The CFTC has promised to continue to push clearer guidelines for companies who wish to start their own betting companies in the US.
It is unlikely that completely decentralized and open platforms will be able to run around the world without finding a way to properly register themselves and verify their customers' identities.