The United States Commodity Futures Trading Commission says it’s paying close attention to Polymarket and other offshore crypto betting platforms offering derivatives contracts to US customers — threatening enforcement actions against those who break the law.
“We are observing any activity that’s occurring offshore and is providing exposure to US customers and we want to make sure it is done legally and within the bounds of the law,” said CFTC Chair Rostin Behnam in a July 17 discussion at the Georgetown Psaros Center for Financial Markets and Policy.
If an entity’s “footprint” in the US is significant enough and doesn’t register the derivatives contracts it offers, enforcement actions will follow, said Behnam.
“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.”
This may include entities from exchanges and clearing houses to brokers, Behnam added.
Blockchain-based prediction markets have been heavily scrutinized in recent months, with their popularity coinciding with punters betting on the upcoming 2024 presidential election.
CFTC Chair Rostin Behnam speaking at Georgetown University in Washington DC on July 17. Source: Psaros Center for Financial Markets and Policy / YouTube
Behnam mentioned Polymarket’s $1.4 million settlement with the CFTC back in January 2022, for offering more than 900 event-based binary options event markets without obtaining registration.
However, the CFTC partially lost a recent lawsuit it filed against blockchain prediction platform Kalshi, with the court ruling that the CFTC had “exceeded its statutory authority” by ordering the US-based entity to suspend its election markets.
Related: Bloomberg adding Polymarket election data to Terminal
The CFTC claimed Kalshi’s presidential election markets were causing harm to public interests, but the court ruled that it wasn’t authorized to conduct such a public interest review.
However, Kalshi’s election markets were paused again a week later, on Sept. 12, after an appeals court issued a stay order — which will remain in effect until further notice.
It followed a July. 5 letter from five US Senators and three House representatives calling for the CFTC to ban presidential election betting.
More than $930 million in bets placed in Polymarket’s “Presidential Election Winner 2024” market, while $208 million in bets have been placed on the “Popular Vote Winner 2024” market.
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