The US Commodity Futures Trading Commission (CFTC) has taken action against Delaware-registered Blockratize, which is operating as Polymarket, for illegally offering event-based binary options contracts in the country. Polymarket was charged for operating without obtaining a designated contract market (DCM) or registration as a swap execution facility (SEF).
The regulator has entered an order filing and simultaneously settled with the company on Monday, making it pay a civil monetary penalty of $1.4 million. In addition, it agreed to wind down all the markets that do not comply with US regulations.
Lucrative Event Market
The official announcement detailed that the platform started to offer binary contracts around June 2020. It offered event-market contracts, allowing traders to bet on any particular events like the outcome of the US presidential elections or the price target of a cryptocurrency by a specified date.
The platform offered more than 900 even-based contracts since its inception, which were hosted as smart contracts on a blockchain .
“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,” Vincent McGonagle, who is the Acting Director of Enforcement at the CFTC, 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.”
Though binary options have been termed illegal in most of the jurisdictions due to the fraudulent activities conducted by the operators, the US is one of the very few countries that still allow the operation of the licensed binary options market. However, very few such players are operating in the country.
Interestingly, the major crypto derivatives exchange, FTX made its name offering such event-based contracts, but it did not offer its services in the United States due to the strict regulations.
