- The CFTC is eyeing crypto prediction platforms.
- Possible legal actions could arise if regulations are not followed.
- Polymarket has encountered past regulatory scrutiny from the CFTC.
The upcoming US elections have become quite the crypto industry chatter, with anticipation mounting, particularly surrounding which candidate will emerge as the next president. The growing speculation has driven a surge in the use of crypto prediction platforms, with several industry participants placing odds on potential outcomes.
The growing popularity of these platforms has caught the attention of regulatory authorities, who are now turning their focus to the frontier.
Polymarket and Other Betting Platforms Under CFTC Scrutiny
The rising activity on decentralized prediction markets such as Polymarket has drawn regulatory scrutiny from the U.S. Commodity Futures Trading Commission (CFTC). During a recent conversation at the Georgetown Psaros Center for Financial Markets and Policy, CFTC Chair Rostin Behnam stressed the commission’s intent to crack down on prediction markets that violate regulations.
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Benham explained that the CFTC is closely monitoring offshore crypto betting platforms offering derivatives contracts to customers within the United States.
“If anyone, Polymarket or otherwise, conducts themselves in a way that breaks the law we will use our civil enforcement authority to make sure that conduct stops,” the CFTC Chair stated.
The scrutiny is fueled by concerns that election-related betting contracts could potentially influence or undermine democratic processes by indirectly affecting voter behavior. Chair Behnam highlighted that the Commodity Exchange Act prohibits contracts tied to certain sensitive topics such as terrorism, assassination, elections, and any activities deemed contrary to the public interest or illegal under federal or state law.
Benham’s comments also build on the CFTC’s recent enforcement actions against predictions market Kalshi. The CFTC claimed Kalshi’s presidential election markets were harming public interests, although a district court ruled that the commission had exceeded its authority in conducting such a review.
However, this is not the first time the CFTC has focused on Polymarket.
CFTC vs Polymarket
Nearly a year after its launch, the decentralized betting platform faced legal challenges from the CFTC in January 2022.
The enforcement actions stemmed from Polymarket’s offering of over 900 event-based binary options markets without registering as a designated contract market (DCM) or swap execution facility (SEF), as the regulatory commission required.
The commission argued that Polymarket operated an illegal, unregistered facility for trading event-based binary options, allowing the public to place bets on outcomes like “yes” or “no” for various events.
Polymarket paid a staggering $1.4 million civil penalty to settle the charges, agreeing to wind down non-compliant markets on its platform and adhere to the Commodity Exchange Act and applicable CFTC regulations.
On the Flipside
- The CFTC has proposed a regulation that, if enacted, would ban all event contracts on decentralized prediction markets.
- At press time, Polymarket’s 2024 Election Forecast shows Kamala Harris leading Donald Trump with a 50% to 48% margin.
- The CFTC has recently contested a court ruling in its case against Kalshi.
Why This Matters
Global regulatory authorities are intensifying their scrutiny of the crypto industry in pursuit of greater oversight. The recent comments from the CFTC chair about Polymarket and other similar prediction platforms signal a strong intent to enforce regulation.
Read this article for more about the CFTC’s recent enforcement actions:
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