The U.S. Commodity Futures Trading Commission (CFTC) is examining whether the Polymarket prediction platform allowed violations by offering clients swaps and binary options, and whether the company should register with the agency. Bloomberg reports, citing informed sources.
According to sources familiar with the matter, the regulator launched the investigation amid talks the company is holding with potential investors. In the forthcoming financing round its value could reportedly be about $1 billion.
“Polymarket is firmly committed to complying with applicable laws and regulations. We are ready to provide regulators with any information that may assist them in the investigation,” said a company spokesperson.
The platform позволяет размещать bets on real-world events, such as the approval timeline for an infrastructure plan or the number of people infected with COVID-19. Polymarket uses an automated market maker (AMA) to determine prices.
The CFTC has previously scrutinized contracts tied to real-world events. In March 2021, cryptocurrency derivatives exchange ErisX отозвала futures on NFL game results, which bookmakers could use to hedge risks. These products, in structure, were similar to Polymarket’s offering, and the company could not get them approved under the regulator’s requirements.
Earlier, Commissioner Don Stump said the Commission has authority to regulate derivatives on digital assets.
As part of the proceedings, Polymarket hired Sullivan & Cromwell partner James McDonald, Bloomberg reports. The attorney previously headed the CFTC’s enforcement division.
In September, the regulator ordered the cryptocurrency platform Bitfinex and its affiliated company Tether (issuer of USDT) to pay penalties of $42.5 million.
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