Key Highlights
- Polymarket is exploring a licensed framework to legally offer event-based markets in the U.S.
- Its earlier departure came due to enforcement action related to unregistered binary options based on real-world outcomes.
- A U.S. return would require compliance measures such as surveillance and identification checks.
Prediction market platform Polymarket is seeking regulatory approval from the Commodity Futures Trading Commission (CFTC) to reenter the U.S. market.
According to a Bloomberg report dated April 28, the platform aims to launch a fully regulated exchange in the US, contingent on securing the necessary approvals. This marks another attempt by Polymarket to regain access to American users after previously banning U.S. participation due to regulatory challenges.
The platform had prohibited U.S. users following a 2022 settlement with the CFTC, in which it paid a $1.4 million fine for allegedly operating without proper registration.
Reason behind the ban
In 2022, the CFTC filed and settled charges against Blockratize, Inc., doing business as Polymarket. The regulator stated that, in 2020, Polymarket had been functioning as an unregistered facility for trading event-based binary options contracts, known as “event markets.”
According to the CFTC:
- Polymarket offered contracts that permitted users to bet on the results of real-world events.
- The CFTC found that these event-based binary option contracts qualified as “swaps” under the Commodity Exchange Act.
- As per the US law, swaps and such commodity options can only be offered on a properly registered or designated platform.
- Polymarket was not registered with the CFTC as either a DCM or SEF, making its platform an illegal and unregistered derivatives trading facility.
As part of the settlement, Polymarket paid a $1.4 million civil penalty and agreed to a cease-and-desist order. It was also required to wind down non-compliant markets and stop serving U.S. users.
Renewed push for compliance
The latest push comes as the prediction market sector continues to expand globally. Polymarket is now working toward compliance that would permit it to run a formal exchange structure accessible to US participants.
CFTC approval is broadly seen in the industry as the crucial dividing line that would permit not only a domestic service relaunch but also wider business expansion, including potential amalgamation with traditional financial intermediaries.
The CLOB v2 upgrade
Alongside its regulatory push, Polymarket continues to upgrade its platform. Today, it officially rolled out a much-anticipated CLOB v2 upgrade. After one hour of planned downtime, during which trading was halted and old order books were reset, the new platform was released.
The update includes a rebuilt CLOB backend, new exchange smart contracts, and a new collateral asset known as pUSD (Polymarket USD), an ERC-20 token pegged to USDC at 1:1 on the Polygon network. To increase liquidity on the new exchange, the Polymarket team offered $1 million in incentives, split into $500K for the first two hours and $500K for the remaining period.
A potential turning point
If Polymarket secures approval from the CFTC, it would signal a major shift from operating offshore to running a fully regulated U.S. platform. This would likely require stricter compliance measures, including market surveillance and user verification.
For now, the outcome remains uncertain and will depend on regulatory discussions. However, the move highlights how the evolving regulatory landscape is shaping the future of prediction markets and crypto-based financial platforms.
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