Event-Betting Platform Polymarket to Pay $1.4 Million U.S. Fine

(Bloomberg) -- Polymarket, an online platform for betting on politics, economic indicators and other real-world events, will pay $1.4 million to settle U.S. regulators' allegations it offered illegal trading and must “wind down” contracts people use to wager.

The firm, whose popularity surged during the pandemic, has been running an unregistered platform that lets people bet on the outcome of events since around June 2020, the Commodity Futures Trading Commission said in a statement Monday. Polymarket didn't admit or deny wrongdoing in the settlement.

“All derivatives markets must operate within the bounds of the law regardless of the technology used, and particularly including those in the so-called decentralized finance or ‘DeFi' space,” Vincent McGonagle, the CFTC's acting director of enforcement, said in the statement. The commission said that Polymarket received a “reduced” penalty for cooperating with the investigation.

Polymarket, operated by New York-based Blockratize Inc., said in a statement that in the wake of the settlement it will prematurely wind down three betting markets set to expire after Jan. 14 and refund people's money. The company didn't say how it planned to change its business to ensure it was complying with CFTC rules.

“An announcement on the future of Polymarket will be released in the coming days,” the firm said. “We are thrilled to put this settlement behind us, and are prepared and excited for the next chapter.”

For its part, the CFTC also didn't specify the process for Polymarket listing new contracts that comply with its rules. Getting approval for binary options like the ones that the regulator says the firm was offering can be a lengthy and complicated process.

Instead of U.S. dollars, customers who want to make trades on Polymarket have to use USD Coin, a stablecoin backed by Coinbase Global Inc. The platform doesn't take custody of money or digital tokens, and just displays existing markets live on the Ethereum blockchain.

According to the order settling the allegations, Polymarket must certify to the CFTC by no later than Jan. 24 that it has wound down all of its non-compliant contracts, and must make funds available for redemption by those who had bet in the market.