CFTC Gives Polymarket a Green Light to Operate with Flexibility

The Commodity Futures Trading Commission (CFTC) has granted regulatory relief to Polymarket, a crypto-based prediction market platform, by issuing a no-action letter that temporarily exempts it from certain reporting obligations related to event contracts. The relief was issued for QCX LLC and QC Clearing LLC, entities recently acquired by Polymarket in a $112 million deal that included a CFTC-licensed derivatives exchange and clearinghouse. The no-action letter pertains to swap data reporting and recordkeeping regulations for event contracts, allowing Polymarket to offer binary option and variable payout contracts without the need to report data to swap data repositories during the period covered by the letter [1].

According to the CFTC’s announcement, the regulator will not recommend enforcement actions against QCX or QC Clearing, or their participants, for failure to comply with specific swap-related recordkeeping requirements. However, the relief is not a full exemption from regulatory compliance; it merely provides temporary flexibility while the companies operate under the acquired infrastructure. The CFTC emphasized that event contracts in question remain fully collateralized and that no third-party clearing is allowed [1]. This regulatory leniency signals a strategic move by the CFTC to facilitate the integration of crypto-based derivatives into the U.S. financial market framework.

The CFTC’s action aligns with broader regulatory efforts under the Trump administration to position the U.S. as a global leader in the crypto industry. Recent joint initiatives between the CFTC and the Securities and Exchange Commission (SEC) have aimed to streamline the trading of spot crypto assets on registered platforms. These efforts are part of a broader initiative, including the SEC’s “Project Crypto” and the CFTC’s “crypto sprint,” designed to support market development while adhering to existing regulatory frameworks [3].

Polymarket’s CEO Shane Coplan highlighted the significance of the CFTC’s decision, calling it a “green light” for the platform to operate in the U.S. and commending the Commission and its staff for accelerating the process. The company reported a surge in market activity in July, with over 11,500 new prediction markets launched, a 44% increase from the previous month [2]. This growth reflects growing interest in event-based financial instruments, although it remains below peak levels observed earlier in the year.

The regulatory relief comes amid heightened public interest in prediction markets, particularly in politically sensitive scenarios. For instance, a recent wave of speculation over President Donald Trump’s health led to over $1.6 million in bets on his potential resignation or removal from office via the 25th Amendment. Prediction markets like Polymarket and Kalshi offered contracts with varying probabilities, though the likelihood of such events remains very low. Notably, Donald Trump Jr. serves on the advisory boards of both platforms, raising ethical concerns about conflicts of interest in such high-profile betting markets [4].

The CFTC’s no-action letter does not mark a permanent regulatory shift but rather a pragmatic approach to fostering innovation while managing risk. The agency has previously issued similar no-action letters to other designated contract markets and derivatives clearing organizations, suggesting a pattern of selective regulatory accommodation for emerging fintech models [2]. This approach may influence future regulatory decisions on event-based derivatives and their role in U.S. financial markets.

Source:

[1] US Regulator Grants Polymarket Relief on Event Contract Reporting Rules (https://cointelegraph.com/news/cftc-no-action-polymarket-letter-qcex-event-contracts)

[2] Polymarket Can Go Live in the US Following CFTC Ruling, CEO Says (https://www.theblock.co/post/369377/polymarket-can-go-live-in-the-us-following-cftc-ruling-ceo-says)

[3] U.S. SEC, CFTC Combine Forces to Clear Registered Firms Trading of Spot Crypto (https://www.coindesk.com/policy/2025/09/02/u-s-sec-cftc-combine-forces-to-clear-registered-firms-trading-of-spot-crypto)

[4] Trump Death Rumors Fueled $1.6 Million in Prediction Market Gambling (https://www.mitrade.com/insights/shares-analysis/Others/beincrypto-TRUMPUSD-202509031416)