WASHINGTON, D.C. – Irish-based prediction market operators Intrade The Prediction Market Limited and Trade Exchange Network Limited (TEN) have been ordered to pay a $3 million penalty for violating U.S. commodity trading laws, the Commodity Futures Trading Commission (CFTC) announced. The judgment, issued by Senior Judge Royce C. Lamberth of the U.S. District Court for the District of Columbia on July 5, 2018, stems from a case dating back to 2012.
The CFTC originally filed a complaint against Intrade and TEN on November 26, 2012, alleging violations of the Commodity Exchange Act (CEA) and CFTC Regulations. Judge Lamberth granted the CFTC summary judgment on two counts in 2015, finding that the companies permitted U.S. customers to trade 5,503 binary option contracts – a form of off-exchange trading – involving CFTC-regulated commodities between September 2007 and June 25, 2012. This constituted a violation of the CFTC’s ban on off-exchange options trading.
The court also found that TEN had violated a 2005 Cease and Desist Order issued by the CFTC for similar conduct. Specifically, TEN allowed U.S. customers to trade the prohibited contracts, failed to block access for U.S. customers on 2,027 contracts, and even lifted existing blocks. Judge Lamberth permanently enjoined both TEN and Intrade from further violating the CEA and CFTC Regulations.
While a decision on disgorgement and civil monetary penalties was initially deferred, the court ultimately ordered the $3 million penalty, citing the “serious” and “brazen defiance” of the 2005 order. Prior to this final judgment, Intrade and TEN had already disgorged and distributed approximately $250,000 to U.S. customers as part of a resolution.
The CFTC’s Division of Enforcement, led by Kathleen Banar, James Deacon, Erica Bodin, Michelle Bougas, Mary Q. Lutz, and Rick Glaser, investigated the matter. The agency continues to warn consumers about fraudulent schemes involving binary options, advising them to check a firm’s registration status with the National Futures Association before investing. Individuals suspecting commodity trading violations are encouraged to contact the CFTC via its toll-free hotline or online complaint system.
Source: CFTC.gov
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