The U.S. District Court for the District of Columbia ("District Court") ordered two Ireland-based companies that jointly operate an online "prediction market" trading website to pay a $3 million civil monetary penalty for violating a 2005 cease and desist order and illegally trading binary options.
According to the Memorandum Opinion, Intrade The Prediction Market Limited and Trade Exchange Network Limited ("TEN") (collectively, the "defendants") allegedly (i) violated a 2005 cease and desist order for breaching the CFTC's ban on off-exchange options and (ii) further violated the CFTC's ban by trading binary options. The District Court found that the defendants allowed U.S. customers to trade 5,503 binary contracts concerning CFTC-regulated commodities from September 2007 to June 25, 2012. Additionally, the Court determined that TEN violated the 2005 cease and desist order by (i) permitting U.S. customers to trade binary option contracts, (ii) failing to have procedures in place to stop U.S. customers from trading on 2,027 prohibited binary option contracts and (iii) removing blocks on prohibited binary option contracts.
Judge Royce C. Lamberth noted in the Memorandum Opinion that the defendants' repeated violations of CEA and CFTC Regulations warranted the civil monetary penalty of $3 million. Additionally, the District Court permanently enjoined the defendants from violating the CEA and CFTC Regulations any further. The defendants reached a separate agreement with the CFTC and agreed to disgorge approximately $250,000 to be distributed among U.S. customers.