CFTC Imposes $1.4 Million Fine on Binary Options Platform Polymarket

The Commodity Futures Trading Commission entered an order filing and simultaneously settling charges against Delaware-registered Blockratize, Inc. d/b/a Polymarket, based in New York City, for offering off-exchange event-based binary options contracts and failure to obtain designation as a designated contract market (DCM) or registration as a swap execution facility (SEF).

The order requires that Polymarket pay a $1.4 million civil monetary penalty, facilitate the resolution of all markets displayed on Polymarket.com that do not comply with the Commodity Exchange Act (CEA) and applicable CFTC regulations, and cease and desist from violating the CEA and CFTC regulations, as charged.

"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," said Acting Director of Enforcement Vincent McGonagle. "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 order finds that, beginning in approximately June 2020, Polymarket had been operating an illegal unregistered or non-designated facility for event-based binary options online trading contracts, known as "event markets." 

According to the order, through its website, Polymarket offered the public the opportunity to "bet on your beliefs" by buying and selling binary options contracts related to an event taking place in the future that are susceptible to a "yes" or "no" resolution. 

As stated in the order, the CFTC recognizes Polymarket's substantial cooperation with the Division of Enforcement's investigation of this matter in the form of a reduced civil monetary penalty.