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CFTC reportedly investigating Polymarket

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The United States Commodity Futures Trading Commission (CFTC) is investigating whether Polymarket‘s prediction platform has committed violations by offering swaps and binary options to clients. As well as whether the company should register with the agency. Bloomberg writes about this with reference to informed sources.

According to the interlocutors of the publication, the regulator initiated an investigation against the background of negotiations that the company is conducting with potential investors. During the upcoming round of financing, its value can allegedly be estimated at $1 billion.

“Polymarket is determined to comply with applicable laws and regulations. We are ready to provide regulators with any information that will help them in the investigation,” the company’s representative said.

Speculating on the outcome

Polymarket hosts a number of novel predictive markets, where users can speculate on the outcome of future events using the USDC stable token. The platform does not take sides with its customers and hosts the smart contract interface. Which allows users to interact with the protocol.

Polymarket allows you to place bets on events in the real world. Such as the deadline for the approval of an infrastructure plan or the number of infected COVID-19.

As part of the proceedings, Polymarket hired a partner of the law firm Sullivan & Cromwell, James McDonald. The specialist previously headed the CFTC Enforcement Department.

False sense of security

This is not the first time the CFTC has paid attention to contracts based on real events. Previously in March 2021, the crypto-derivative exchange Eris Exchange LLC (ErisX) withdrew RSBIX National Football League (NFL) futures for the results of matches, which bookmakers could use to hedge risks. These products were similar in structure to the Polymarket offer. Also, the company was unable to coordinate them with the requirements of the regulator.

Earlier, the commissioner of the department, Dawn Stump, said that the Commission has the authority to regulate derivative financial instruments for digital assets.

Recall that later in October, the regulator ordered the Bitfinex cryptocurrency platform and its affiliated company Tether to pay fines of $42.5 million. Dawn Stump, in a concurring statement, supported the move; while also expressing concern that the agreement might “give consumers of stablecoins a false sense of security”. Leading them to believe that the CFTC monitors and supervises stablecoin issuers.

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