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Changpeng Zhao Could Get Less Than One Year Prison Sentence, Polymarket Bets, Relying on Support Letters

Last Updated April 30, 2024 9:27 AM
Teuta Franjkovic
Last Updated April 30, 2024 9:27 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Ex-Binance CEO Changpeng Zhao’s court sentencing date arrives, with a potential three-year prison term on the table.
  • The Polymarket decentralized betting platform market predicts a shorter sentence for CZ, possibly due to support letters.
  • American regulators consider tighter controls after soaring election bets on Polymarket.

Changpeng “CZ” Zhao, founder and former CEO of Binance, will be sentenced in a court in Seattle, Washington, US, on Tuesday.

A recent memo  from the Department of Justice recommended a three-year prison sentence. Despite this, bettors on decentralized betting platform Polymarket  predict that he will be released much sooner because of supporting letters.

CZ Sentence: Three Years Recommended, Polymarket Bets on Shorter Term

Changpeng “CZ” Zhao, the founder and former CEO of Binance, will be sentenced this Tuesday in Seattle, Washington. Due to the gravity of his misconduct, the Department of Justice has recommended a three-year prison term.

Despite the recommendation, bettors on Polymarket are predicting  a shorter sentence. Current trading suggests that there is a 17% chance he will receive a sentence of 6 to 11 months and a 19% chance for 12 to 17 months. Overall, the odds indicate a 96% probability that Zhao will be released from jail in less than two years. In contrast, the market thinks there is less than a 2% chance he will receive a sentence within the 30 to 35 month range.

CZ sentencing bets
Credit: Polymarket

Will Court Consider Lighter Sentence Following Supportive Letters?

On Monday, “Yes” shares for the “less than six months” contract on the crypto-based prediction market platform traded at approximately 42 cents, suggesting a 42% probability that Zhao’s release will be in less than six months. Each share will pay out $1 if this prediction is correct, and nothing if it is not.

Traders might be optimistic due to letters of support that could influence the presiding judge to significantly reduce the sentence from what the DOJ has recommended.

Signatories to the letters submitted to the courts  encompassed a diverse group, including:

  • Max S. Baucus, former U.S. Ambassador to China. p
  • Professors from Columbia and McGill Universities, CZ’s alma mater.
  • Sean Yang, Managing Director at Morgan Stanley.
  • Members of the ruling family in the United Arab Emirates.

In his letter, CZ admitted: “There is no excuse for my failure to establish the necessary compliance controls at Binance.” He also pledged that this instance would be his sole “brush with the criminal justice system”.

Election Bets Soar to $117 Million as Regulators Eye Crypto Markets

The U.S. Commodity Futures Trading Commission is considering  tightening regulations on prediction markets. The regulator is contemplating banning derivatives related to betting on US elections and may impose restrictions on other event contracts, including those involving sports and global health crises. This move follows a lawsuit from Kalshi , which, although not offering direct election contracts, engages in betting on approval rating numbers or other political events. Kalshi is challenging the CFTC’s decision not to approve its plans for election-related contracts.

Despite the unusually short Republican primary season, where most candidates withdrew within weeks, unable to surpass Donald Trump, interest in the general election remains exceptionally high. Evidence of this is the nearly $117 million wagered on a Polymarket contract concerning its outcome, up from $100 million just a few weeks ago.

It’s noted that the $117 million figure likely does not include contributions from Americans. Polymarket has to block US-based users, as part of a settlement with the CFTC.

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