Dutch gambling regulator Kansspelautoriteit (KSA) has imposed a penalty order on Polymarket, ordering the cryptocurrency-based predictions platform to cease operations in the country or risk a fine of up to €840,000 ($994,147).
KSA said Adventure One QSS, the company behind Polymarket, had been operating the brand in the Netherlands without a gambling licence. The regulator said betting-style prediction markets on Polymarket constitute games of chance and gambling under Dutch law, and therefore required a licence.
During its assessment, KSA found players could access the Polymarket websites using a local IP address. Operators not licensed in the country are required to block access to Dutch-based players.
Once on the site, users could create an account, log in, deposit money, place bets and take part in markets. Players were also able to see potential winnings and withdraw funds they accumulated from this activity.
Linked in with this, KSA said Polymarket had accepted payments from Dutch banks. Testing the system, KSA investigators could deposit money using a Mastercard – routed through a Dutch bank – while payment instructions appeared in Dutch.
KSA also made several observations that the site was targeting Dutch consumers, in breach of national law. It noted how AI customer support was available in Dutch and the local currency of Euros was used in payments. And the Netherlands was not listed as an excluded country within the website’s terms of use. In addition, KSA said certain betting markets were available for Dutch politics, including on Dutch cabinet events.
Polymarket fails in ‘not traditional gambling’ defence
Responding to the regulator, Polymarket based its defence around how it was not running a traditional gambling website. Instead, it upheld that it was opersting a legitimate predictions market and exchange.
“Polymarket is a prediction market where users trade positions with each other; pricing and settlement come from market dynamics and protocol contract logic, not from a chance mechanism designed by the operator,” Polymarket said. “The result is not purely chance, but (also) the product of informed decision-making and active trading choices.”
The operator also said elements noted by the KSA showed only passive accessibility to Dutch players. As such, it said these were “insufficient” to conclude that the site actively targeted the Dutch market.
However, KSA rejected the defence and upheld its original assessment that Polymarket had been offering games of chance-style gambling. As it did not hold a licence for this, it was deemed to have breached Dutch law and should be penalised.
As such, Polymarket was ordered to cease activities within four weeks from the date of the ruling (20 January). Should it fail to do so, KSA would issue a weekly fine of €420,000, up to a maximum of €840,000.
“Prediction markets are on the rise, including in the Netherlands,” said Ella Seijsener, director of licensing and supervision at the KSA. “These types of companies offer bets that are not permitted in our market under any circumstances, not even by licence holders.
“Besides the social risks of these kinds of predictions – for example, the potential influence on elections – we conclude that this constitutes illegal gambling. Anyone without a licence has no business in our market. This also applies to these new gambling platforms.”
More controversy for Polymarket
This was far from the first regulatory issue Polymarket has faced. The platform launched in 2020 and was initially based on Ethereum before migrating to Polygon, with much of its early activity based on US election markets and forecasts related to Covid-19.
It faced its first, major regulatory action in January 2022 when the US Commodity Futures Trading Commission (CFTC) alleged Polymarket was offering event-based binary options contracts without proper registration. This resulted in a $1.4 million civil penalty, orders to wind down certain non-compliant markets and implement compliance controls.
Polymarket committed to this pledge over the next few years, increasing country restrictions and geo-blocking measures. However, after traffic surged during the 2024 US election cycle, this led to renewed scrutiny from regulators and state-level authorities.
Over the past year, Polymarket has faced more legal battles and both state and national level in the US, with Nevada and Massachusetts among the states to have challenged whether sports and event contracts constitute illegal betting.
Original article: https://igamingbusiness.com/legal-compliance/polymarket-faces-dutch-penalty/
