CFTC Targets Offshore Crypto Betting Platforms like Polymarket

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The U.S. Commodity Futures Trading Commission (CFTC) has intensified its scrutiny of offshore crypto betting platforms, including Polymarket, as they offer derivatives contracts to U.S. customers without proper registration.

CFTC Chair Rostin Behnam emphasized the agency’s focus on ensuring such activities comply with U.S. law, particularly as blockchain-based prediction markets grow in popularity ahead of the 2024 presidential election. “We are closely monitoring offshore activities that provide exposure to U.S. customers,” he stated at the Georgetown Psaros Center for Financial Markets and Policy.

CFTC Chair’s Stance on Polymarket

Behnam warned that platforms like Polymarket, which break the law by offering unregistered derivatives contracts, could face enforcement actions. This applies to a range of entities, from exchanges and brokers to clearinghouses, highlighting the CFTC’s broad reach.

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Polymarket, a well-known prediction platform, previously settled with the CFTC in January 2022, paying a $1.4 million fine for offering over 900 unregistered event-based binary options markets. The incident set a precedent for the CFTC’s ongoing scrutiny of prediction markets, particularly those tied to political events like the 2024 election.

Over $930 million in bets have been placed on Polymarket’s “Presidential Election Winner 2024” market, while an additional $208 million has been wagered on the “Popular Vote Winner 2024” market.

Incidents of Potential Manipulation

The growing attention on these markets has raised concerns about potential manipulation. The CFTC pointed to recent incidents where prediction markets were exploited, citing an attempted manipulation on Polymarket involving bets on Vice President Kamala Harris winning the 2024 presidential election.

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Additionally, a false poll on PredictIt, suggesting that musician Kid Rock was leading Senator Debbie Stabenow in a Michigan Senate race, affected market prices, showing how easily these platforms can be manipulated.

Kalshi’s Case

The CFTC’s efforts to regulate prediction markets have also faced legal challenges. In a recent case against Kalshi, a blockchain-based prediction platform, the court ruled that the CFTC had overstepped its authority by attempting to shut down Kalshi’s presidential election markets.

Despite the partial legal setback, Kalshi’s election markets were suspended again on September 12 after an appeals court issued a stay order.