Polymarket Under CFTC’s Microscope, Rostin Behnam Threatens Regulatory Action
(Photo by Chip Somodevilla/Getty Images)
- The CFTC may bring fresh enforcement actions against offshore crypto gambling and prediction markets.
- Polymarket’s 2024 U.S. Election market has over $900 million wagered on it so far.
- Vitalik Buterin, Coinbase, Gemini, and Robinhood are against the CFTC’s proposal to ban event contracts.
Offshore crypto gambling sites like Polymarket can expect increasing pressure from the U.S. Commodity Futures Trading Commission (CFTC) as the regulator mulls taking regulatory action.
Polymarket Scrutiny
CFTC Chair Rostin Behnam has warned that offshore crypto gambling sites such as Polymarket could soon be facing enforcement actions against them.
Speaking at Georgetown Psaros Center for Financial Markets and Policy on Sept. 17, Benham explained that the CFTC is closely observing such platforms, especially ones offering unregistered derivative contracts to U.S. clients.
“If anyone, Polymarket or otherwise, conducts themselves in a way that breaks the law we will use our civil enforcement authority to make sure that conduct stops.”
The CFTC Chair mentioned Polymarket’s $1.4 million settlement back in 2022 for offering over 900 event-based option events markets without registration.
This was the beginning of the CFTC’s campaign against prediction markets; however, Polymarket appears to have been able to continue business as usual following the settlement.
Polymarket is Huge
On Polymarket, users can bet on everything from what Donald Trump might say during the debate with Kamala Harris to the number of times Elon Musk will post to X within a week.
As per data from Dune, Polymarket has seen an absurd increase in monthly volumes and monthly active users.
At the beginning of the year, monthly volumes sat at $54 million. This figure slowly picked up pace and then exploded to $111 million in June. July saw $387 million, and August volumes shot to $472 million.
So far in September, Polymarket volumes are on track to reach new highs, currently sitting at $296 million. Tens of thousands of monthly active traders regularly bet on the platform, so it’s no wonder Polymarket has caught the ire of the CFTC.
Politically Unethical?
There’s an argument to be made that prediction markets can potentially influence real-world events through collusion, insider trading, and so on.
For example, over $900 million has been wagered on Polymarket for the winner of the U.S. 2024 elections. Lawmakers and politicians have argued that this could erode electoral integrity and diminish faith in the democratic process.
This could come from foreign actors betting large on certain outcomes to meddle with public perceptions. Another example is that billionaires could effectively place bets and then run massive information campaigns to sway the vote in their desired direction.
Ethereum co-founder Vitalik Buterin has come out in defense of Polymarket, describing predictions markets as important “epistemic tools” that can give the public an insight into the importance of certain events.
He noted that such applications are also free from editorial bias, which he explains is very common in news and social media.
This sentiment has been echoed by Robinhood, Gemini, and Coinbase, all of whom pushed back against the CFTC’s proposal to ban political betting. Notably, Coinbase argued that event markets are a “promising area” of the nation’s future economy.”
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