Polymarket, the New York-based company that has created USDC-native prediction markets, is under investigation by the Commodity Futures Trading Commission (CFTC). The CFTC’s investigation revolves around whether Polymarket’s prediction markets allow users to trade swaps or binary options, and therefore if Polymarket should be registered with the CFTC. As of press time, Polymarket has not been accused of any wrongdoing.
“Polymarket is firmly committed to complying with applicable laws and regulations and to providing information to regulators that will assist them with any inquiry,” a Polymarket spokesperson said.
Who regulates prediction markets?
The CFTC has historically regulated prediction markets; according to Investopedia, “Prediction markets are just futures markets where the future event being traded upon is something other than the price of an asset at some point in the future,” which falls directly into the jurisdiction of the CFTC if true.
Although the CFTC has not pressed any charges or reached a conclusion in its investigation into the digital currency predictions platform, the Polymarket team has taken a proactive approach. Polymarket has retained James McDonald, a partner at law firm Sullivan & Cromwell and a former CFTC enforcement chief, to help them navigate the ongoing probe.
Too big to break the law
The blockchain and digital asset industries have become too large for companies to fly under the radar. Government agencies around the world are now turning their attention to the blockchain and digital currency space and making sure that the proper regulation is in place so that their citizens, investors, and residents are protected.
We have seen more and more government intervention in the emerging blockchain and digital currency markets in the past few years, with government agencies and committees increasingly discussing blockchain and digital currency markets and companies. This has led to the SEC, CFTC, and DoJ probing several digital currency exchanges and service providers.
Recently, many digital currency companies that offer digital currency borrowing and lending services are being investigated by securities regulators. Regulators stated that the products that many of these companies are offering—including Coinbase, BlockFi, Celsius, and Nexo—are unregistered securities.
As the blockchain and digital asset space continue to grow, you should expect even more government and regulatory scrutiny. The days of companies launching without the proper licenses and without registering with the proper government agency are over. And the Polymarket investigation could be the paradigm case that sets a precedent for the other bitcoin-native companies that offer prediction market products.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—a from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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