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Polymarket, a cryptocurrency betting website, was today hit with a $1.4 million fine by the Commodity Futures Trading Commission.
The regulatory body said in a statement Monday that Polymarket offered “off-exchange event-based binary options contracts” and “failed to obtain designation as a designated contract market (DCM) or registration as a swap execution facility (SEF).”
In other words, the website allegedly let people make bets without being registered. Polymarket must cease offering access to the offending markets by January 14, according to the CFTC's complaint.
Polymarket lets its users make simple yes or no bets with cryptocurrencies on a number of different topics. These include anything from whether annual inflation in the USA will be 7.0% or more in December 2021 to if Donald Trump will be the 2024 Republican presidential nominee.
"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 the statement, referring to the non-custodial lending, borrowing and trading applications that exist mostly on Ethereum.
"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."
The CFTC said that Polymarket had been illegally offering event-based binary options since June 2020. It added that Polymarket had offered 900 different event markets since it started and binary options constitute swaps under the CFTC’s jurisdiction. They can then only be offered on a registered exchange.
The CFTC is no stranger to coming down hard on crypto companies that fall foul of U.S. trading regulations: it last year fined Tether $41 million and launched an investigation into the world’s biggest exchange, Binance.
Editor's note: This article and its headline were updated after publication to clarify that Polymarket has not been ordered to shut down but rather ordered to cease offering access to trading on its site unless it registers with the CFTC.