CFTC Warns Polymarket and Other Offshore Crypto Betting Platforms of Enforcement Actions
The U.S. Commodity Futures Trading Commission (CFTC) has warned Polymarket and other offshore crypto betting platforms about enforcement actions if they continue to offer unregistered derivatives contracts to U.S. customers.
Speaking at a Georgetown Psaros Center event on Tuesday, CFTC Chair Rostin Behnam said the agency monitors offshore activity.
“We are observing any activity that’s occurring offshore and is providing exposure to U.S. customers, and we want to make sure it is done legally and within the bounds of the law,” he said.
Platforms With Presence in U.S. Face Enforcement Action
Behnam further clarified that if a platform’s operations have a substantial presence in the U.S. and do not comply with registration requirements, the CFTC will take action.
“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,” Behnam added.
The crackdown may target various entities, including exchanges, clearinghouses, and brokers.
Blockchain-based prediction markets, which have gained popularity with the approach of the 2024 presidential election, have been under intense scrutiny in recent months.
Polymarket had previously settled with the CFTC for $1.4 million in January 2022, after being accused of offering more than 900 event-based binary options markets without registering them.
However, the CFTC faced a legal setback in its recent lawsuit against Kalshi, a blockchain prediction platform.
A court ruled that the CFTC had overstepped its statutory authority by attempting to halt Kalshi’s election markets.
Despite the ruling, the CFTC’s concerns over the potential harm to public interest led to a pause in Kalshi’s election markets following a stay order issued by an appeals court on September 12.
Amid these regulatory battles, betting on the 2024 presidential election has surged.
Polymarket’s market for the “Presidential Election Winner 2024” has attracted over $930 million in bets, while its “Popular Vote Winner 2024” market has seen $208 million in bets placed.
CFTC Warns of Potential Manipulation in Prediction Markets
Earlier this week, the CFTC warned about the susceptibility of prediction markets to manipulation in its latest filing against Kalshi.
The agency mentioned examples of recent manipulative actions on competitor platforms, suggesting that Kalshi’s markets could face similar issues.
One example involved traders on Polymarket attempting to manipulate contracts related to Vice President Kamala Harris’ potential victory in the 2024 U.S. presidential election.
Additionally, a fabricated poll on PredictIt, showing musician Kid Rock leading Senator Debbie Stabenow in a senate race, significantly impacted the pricing of contracts for Stabenow’s reelection.
Kalshi, which allows users to bet on election outcomes, had previously faced legal challenges from the CFTC.
Last month, leading financial data and news service provider Bloomberg LP revealed that it aims to incorporate election odds data from the crypto betting platform Polymarket into its widely used Terminal.
Polymarket, a blockchain-based prediction market operating on the Polygon network, has become a prominent platform for tracking real-time election odds.