CFTC Chair Rostin Behnam warns offshore entities with a significant U.S. presence to register their derivative contracts or face enforcement actions.
Threatening to take legal action against anyone who violates the law, the US Commodities Futures Trading Commission said it is closely monitoring Polymarket and other offshore cryptocurrency betting platforms that provide derivatives contracts to US users.
At a July 17 conversation at the Georgetown Psaros Center for Financial Markets and Policy, CFTC Chair Rostin Behnam stated, “We are observing any activity that’s occurring offshore and is providing exposure to US customers, and we want to make sure it is done legally, and within the bounds of the law.”
Enforcement actions will occur if a company has a large enough “footprint” in the US yet fails to register the derivatives contracts it sells, according to Behnam.
“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.”
According to Behnam, this could include organizations like clearinghouses, exchanges, and brokers.
Recent months have seen a close examination of blockchain-based prediction markets, whose appeal has coincided with wagerers placing bets on the 2024 presidential election.
Behnam brought up Polymarket’s January 2022 $1.4 million settlement with the CFTC for providing over 900 event-based binary options event markets without registering.
But in a recent action it brought against the blockchain prediction platform Kalshi, the CFTC lost in part because the court decided that by directing the US-based company to halt its election markets, the CFTC had “exceeded its statutory authority.”
The court determined that the CFTC lacked the authority to conduct the public interest evaluation it had asserted Kalshi’s presidential election markets were doing.
A week later, on September 12, Kalshi’s election markets were again put on hold due to an appeals court issuing a stay order, which remains in place until further notice.
It came after a letter from three House members and five US senators requesting that the CFTC outlaw wagering on presidential elections on July 5.
There have been bets totaling over $930 million on Polymarket’s “Presidential Election Winner 2024” market and $208 million on the “Popular Vote Winner 2024” market.