The Commodity Futures Trading Commission (CFTC) has forced Polymarket’s crypto-based forecasting market to close.
According to a press release published by the CFTC today, Polymarket’s parent company, Blockratize, Inc., has been accused of offering “Forex Event-based Binary Options Contracts”. According to the CFTC, the platform already serves more than 900 of these markets.
So far, Polymarket has allowed users to bet on the outcomes of real events such as COVID-19 cases, national inflation rates, elections, and political nominations.
According to the CFTC, such contracts can only be offered on a registered exchange.
“Polymarket creates, defines, stores, trades and executes contracts for the event-based binary options markets offered on its website.”
As a result of the settlement, Polymarket was sentenced to pay a civil penalty of $ 1.4 million and to close all marketplaces displayed on Polymarket.com. It comes after the service raised $ 4 million in a funding round.
Cryptocurrency-based prediction markets are often viewed as a way to bypass US regulations. For example, the mainstream prediction market, PredictIt, will cap investments at $ 850, while Iowa Electronic Markets (IEM) cap positions at $ 500.
In nominal terms, Polymarket is a decentralized application as it has no right to manage user funds and does not impose such restrictions on its users. However, Polymarket is operated by a company in New York which allows regulators to target the platform.
It is uncertain whether decentralized prediction markets like Augur and Omen will suffer the same fate.
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