Polymarket, a blockchain-based prediction market platform, has settled with the US Commodity Futures Trading Commission.
In an announcement Monday, the CFTC said that the settlement was for "offering off-exchange event-based binary options contracts and failure to obtain designation as a designated contract market (DCM) or registration as a swap execution facility (SEF)."
As part of the settlement, Polymarket agreed to pay $1.4 million, wind down the non-compliant markets on its website, Polymarket.com, and "cease and desist from violating the CEA and CFTC regulations, as charged."
As previously reported by The Block, venture-backed Polymarket's platform utilizes smart contracts to let users bet on event outcomes, such as last year's presidential election. Bets are placed using the USDC stablecoin. Yet per the settlement order published Monday, "[t]he products traded on Polymarket are swaps" under US federal law.
In the settlement order, the CFTC noted that "by January 14, 2022 Respondent shall cease offering access to trading in markets displayed on Polymarket.com, unless such offering, solicitation or trading complies with the Act and applicable Commission Regulations, and will facilitate the resolution (i.e. wind down) of all markets displayed on Polymarket.com that do not comply with the Act and applicable Commission Regulations."
"By no later than January 24, 2022, Polymarket will certify to the Commission that it has fulfilled these commitments and has made funds available for full redemption by market participants," the order continued.
"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,” Acting Director of Enforcement Vincent McGonagle said in a statement. "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."
In its press release, the CFTC noted the startup's "substantial cooperation with the Division of Enforcement’s investigation of this matter in the form of a reduced civil monetary penalty."
In a statement posted to Twitter, Polymarket said: "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."
The announcement represents the CFTC's first enforcement action in the crypto space for 2022. The move comes weeks after the agency's new leader, Rostin Benham, was confirmed by the Senate for the position. Benham, a commissioner since 2017, had served in an acting chairman capacity since last January.
During his confirmation hearings, Benham pressed Congress on providing greater crypto market oversight powers to the CFTC.
Bloomberg first reported last fall that Polymarket was the subject of a CFTC inquiry.