CFTC launches first DeFi enforcement in 2022: prediction market Polymarket fined $1.4 million

On Monday, the U.S. Commodity Futures Trading Commission (CFTC) took its first enforcement of the year against a decentralized finance (DeFi) firm, after the crypto prediction market platform Polymarket failed to gain access to the Commodity Exchange Act for offering binary options contracts based on over-the-counter events. CEA) for the registration of the Designated Contracts Market (DCM) and Swap Execution Facility (SEF). Ask Polymarket to pay a $1.4 million fine and shut down all markets that do not comply with regulations.

Obviously, the CFTC classifies event products on the Polymarket platform as swaps (transactions in which two parties agree to exchange an asset with each other at a certain time in the future).

According to the survey, Polymarket has provided more than 900 independent event marketplaces since its inception, deployed and operated by smart contracts hosted on the blockchain. Since its launch in June 2020, Polymarket has traded around 5 billion times while being among the crypto unicorns with a valuation of over $1 billion.

Polymarket is actively cooperating with regulation, and the CFTC’s press release noted that the company “substantially cooperated with law enforcement in the investigation of this matter in the form of reduced civil penalties.” Polymarket said on Twitter: "We are delighted that we have successfully reached a settlement with the CFTC, and are excited to move forward and focus on the future of Polymarket, where non-compliant activity markets will be addressed early. What we have learned from this experience We are encouraged and have built an exceptional compliance team and strong internal practices and procedures, which will ensure compliance remains an integral pillar of Polymarket's global business moving forward."

The crypto market is not first come, first served
In layman's terms, prediction markets are derivatives markets created based on clear, verifiable facts in the future. Unlike platforms with preset odds, prediction markets are based on factual information gathered by participants, and prices are determined by the activities of all participants in the prediction market. Participants judge and bet on the outcome of future events, and according to publicly verifiable rules, if the prediction is correct, they can earn a profit.

Essentially, the price of a "stock" in a prediction market reflects what the participants think will be the outcome. These events range from the results of the presidential election to the weather tomorrow.

Since the information revolution, human beings have been working on making prediction markets online so that all users can quickly and easily participate in prediction markets through the Internet. The traditional prediction market relies heavily on intermediaries to play a role in it, and the correctness and fairness of the prediction results need to be matched by intermediaries, which also leads to fees being charged by intermediaries. Such factors as maintenance costs, fragmented markets, and black-box operations will prevent users from getting the corresponding returns.

As encrypted assets continue to move towards the mainstream, the underlying blockchain technology provides solutions and facilitates the development of a decentralized world. With the support of blockchain technology, the prediction market has gained open and credible features. For example, who will be elected in the next US election, and which team will win in a football game? These questions happen at some point in the future, and the end result is clearly verifiable and not ambiguous.

A crypto prediction market is a decentralized DeFi protocol where anyone can trade the outcome of events on smart contracts when certain conditions are met, without the need for an intermediary. As the user experience of DeFi becomes better, the advantage of a decentralized prediction market is that it can be exposed to more hot events around the world, providing users with more competitive interest rates and better liquidity.

Polymarket is a decentralized prediction market project built on the second-layer solution of Ethereum, Polygon, where users can bet on the world's hot topics, such as the US election, epidemic situation, encrypted asset prices, etc., backed by US dollars The stablecoin USDC to trade the outcome of the event. It is worth noting that Vitalik Buterin, co-founder of Ethereum, has praised Polymarket:

“Try Polymarket now. What’s special about it is that it’s built on top of Polygon’s Ethereum sidechain and provides an optimized UI to attract outsiders. It also offers the option to buy USDC with a credit card .”