It was announced that the CFTC is closely monitoring Polymarket and other overseas crypto betting platforms, and that these platforms, which offer derivative contracts to US customers, may face serious sanctions if they violate the law.

“We are monitoring overseas activity that provides access to U.S. customers, and we want to make sure that it is done within legal limits,” Behnam said in a July 17 speech at the Psaros Center for Financial Markets and Policy in Georgetown.

Behnam emphasized that if an entity’s “footprint” in the United States is large enough and it does not register the derivative contracts it offers, the CFTC will initiate enforcement actions.

He noted that this situation could affect not only large platforms such as Polymarket, but also many players operating in the derivatives market such as exchanges, clearing houses and brokers.

The CFTC’s scrutiny of blockchain-based prediction markets has intensified recently. The popularity of such markets has increased with betting on the 2024 US presidential election.

Polymarket reached a $1.4 million settlement with the CFTC in January 2022. This deal occurred because Polymarket offered more than 900 event-based binary options markets and did not complete the required registration processes.

This event was an important development that pointed out that blockchain-based prediction markets should be kept under regulatory control.

However, the CFTC’s partial defeat in its lawsuit against blockchain prediction platform Kalshi shows that regulatory efforts are not always successful. Kalshi’s presidential election prediction market was suspended by the CFTC on the grounds that it was detrimental to the public interest.

However, the court ruled that the CFTC exceeded its authority, stating that the CFTC did not have the authority to conduct such a public interest review. This was a decision that revealed the complexity of the relationships between regulatory authorities and blockchain-based platforms.

Despite this, Kalshi’s presidential election market was suspended again by the appeals court’s stay of execution on September 12. This decision creates uncertainty about the future of blockchain-based prediction markets in the United States.

However, discussions on the necessity of keeping such platforms under control are expected to deepen further.

These developments are based on a July 5 letter from five U.S. senators and three members of the House of Representatives calling on the CFTC to ban presidential election betting.

This letter is an indication that regulatory pressure on prediction markets is increasing in the United States. The social impacts and regulatory risks of betting, especially on major events such as presidential elections, are causing the CFTC to increase its inspections of such platforms.

The betting volume in Polymarket’s prediction markets for the 2024 US presidential elections is also an important indicator in this regard.

More than $930 million was bet on Polymarket’s “2024 Presidential Election Winner” market, while $208 million was bet on the “2024 Popular Vote Winner” market.

These figures explain how blockchain-based prediction markets are growing in popularity and why regulators are focusing more attention on these markets.