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18/09/24
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CFTC Cracks Down on Offshore Crypto Betting Platforms Amid Election Speculation
The United States Commodity Futures Trading Commission (CFTC) is closely monitoring overseas cryptocurrency betting platforms, particularly Polymarket, as these sites offer derivatives contracts to customers in the U.S. The CFTC has signaled its intent to pursue enforcement actions against any entity in violation of legal requirements. The chair of the CFTC has stated that the agency is vigilant regarding offshore activities that could impact U.S. customers and is committed to ensuring compliance with the law.
Entities that maintain a substantial presence in the U.S. but fail to register their derivatives offerings may face enforcement measures. This encompasses a range of businesses, including exchanges, brokers, and clearing houses. The CFTC has indicated it will use civil enforcement authority to halt any unlawful operations, emphasizing the importance of adherence to regulatory standards.
As blockchain-based prediction markets gain traction, particularly amidst the upcoming 2024 presidential election, they are coming under increased scrutiny. The CFTC previously settled with Polymarket for $1.4 million due to its unregistered offering of over 900 event-based binary options markets back in January 2022.
In a notable legal development, the CFTC recently faced setbacks in a lawsuit against Kalshi, another prediction market platform. The court found that the CFTC exceeded its authority by demanding Kalshi halt its election-related markets. The ruling indicated that the agency was not empowered to perform a public interest review in this context, which posed limitations on its regulatory scope.
On September 12, Kalshi’s election markets were suspended again following a stay order from an appeals court, which will remain in effect pending further developments. This comes amid increasing pressure from legislators who are advocating for a ban on presidential election betting. In the meantime, Polymarket has seen substantial activity, with over $930 million wagered on the “Presidential Election Winner 2024” and $208 million on the “Popular Vote Winner 2024” markets.
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