New York-based crypto betting service Polygon has received a slap on the wrist by US Commodities Futures Trading Commission (CFTC) for selling swaps without registering with the regulator.
Taking its first crypto enforcement action of 2022, CFTC filed an action against Polymarket for allegedly offering event-based binary options contracts and failing to register as a designated contract market (DCM) or registration as a swap execution facility (SEF).
Polymarket is a ‘decentralized’ crypto betting platform that allows users to make bets with crypto assets on event outcomes ranging from annual inflation in the USA to future crypto prices to pro-sports gaming results.
However, the betting platform cannot offer event-based binary options without informing the CFTC. As a penalty, CFTC has required Polymarket to pay a $1.4 million civil monetary penalty, shut down its several markets, and discontinue violating the CEA and CFTC regulations.
“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,” CFTC Acting Director of Enforcement Vincent McGonagle said in a statement. He added:
“Market participants should proactively engage with the CFTC to ensure that our markets remain robust, transparent, and afford customers the protection provided under the CEA and our regulations.”
Meanwhile, Polymarket has responded positively to the penalty and said in a tweet:
“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.”
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.
As per the order, the 3 markets lasting past 1/14 that don't comply with the Act will be prematurely resolved. More soon
— Polymarket (@PolymarketHQ) January 3, 2022