Binance’s CZ Will Spend Less Than a Year in Prison, Polymarket Traders Bet

Changpeng “CZ” Zhao, the founder and ex-CEO of Binance, is set to be sentenced in a Seattle courtroom on Tuesday, according to the Department of Justice. The memo from the DOJ recommends that he serve a three-year prison term due to the magnitude of his wrongdoing.

Polymarket bettors think he’ll be out much sooner.

The price of “Yes” shares for contracts with a duration of under six months on the crypto prediction market platform was approximately 42 cents on Monday. This implies a probability of around 42% that CZ will leave his position within the next six months. (Each share yields a payout of $1 if the forecast is correct, and nothing otherwise.)

According to the trading indicators, there is approximately a 17% probability that the sentence will last between 6 and 11 months, while there is a 19% chance it could extend to 12-17 months. In total, these estimates suggest about a 96% likelihood that the individual will serve less than two years in prison, with only a minuscule chance of being sentenced for 30-35 months, which aligns with the federal prosecution’s recommendation.

As a researcher studying the legal proceedings of this case, I’ve observed that traders are relying on obtaining letters of support to present before the judge in an attempt to reduce the proposed sentence from the DOJ’s recommendation.

As a researcher examining the court submission, I came across signatories of notable individuals who added their names to the document. Among them were Max S. Baucus, a former U.S. Ambassador to China; esteemed professors hailing from Columbia and McGill Universities, where CZ had studied; Sean Yang, a managing director at Morgan Stanley; and members of the influential ruling family in the United Arab Emirates.

In his own statement, CZ acknowledged that he had not implemented sufficient regulatory checks at Binance and apologized for this oversight. He assured readers that this would mark his first interaction with the legal system in relation to this issue.

CFTC vs. political bets

According to a report by Bloomberg, the U.S. Commodity Futures Trading Commission is considering implementing stricter regulations for prediction markets.

As an analyst, I would rephrase it as follows: The Commodity Futures Trading Commission (CFTC) is reportedly contemplating a prohibition on derivatives wagering on U.S. elections and could potentially limit other event contracts, such as those related to sports and global health crises. This development arises amidst a legal challenge from Kalshi, a company that doesn’t offer direct election bets but rather focuses on approval rating numbers or political events like appointments, against the CFTC’s denial of approval for its proposed election-related contracts.

Despite having one of the briefest Republican primary seasons due to many candidates withdrawing within weeks and failing to challenge Donald Trump’s dominance, there is unprecedented enthusiasm for the upcoming general election. This is evident in the significant increase in bets placed on a Polymarket contract predicting its outcome, which now totals approximately $117 million – a considerable jump from the previous $100 million wagered only a few weeks prior.

As an analyst, I would put it this way: I’ve examined the situation and found that the $117 million in question wouldn’t originate from American individuals based on paper transactions. This is due to a settlement agreement between Polymarket and the Commodity Futures Trading Commission (CFTC), which mandates blocking U.S.-based users for certain transactions.

As a crypto investor, I want to remind you that engaging in betting on elections at a state level is generally prohibited. Nevada, for instance, explicitly states this in their Nevada Revised Statutes § 293.830. In simpler terms, making, offering, or accepting any wager or bet on the outcome of an election, a candidate’s success, or the number of votes, whether it be overall or for a specific candidate, or even a single voter’s vote, is considered a gross misdemeanor offense.

In New Jersey and Texas, laws regarding gambling bear resemblance. Elsewhere, gambling is generally prohibited, except in cases where it’s explicitly permitted or occurs on Native American lands. This exception is what allows online sports betting to be legalized on a state-by-state basis.

As a researcher studying electoral laws around the world, I’ve come across the phenomenon of election gambling being illegal in various countries. In the case of Taiwan, the Presidential and Vice Presidental Election and Recall Act explicitly forbids such activities. A recent instance involving a Polymarket contract about their general election resulted in arrests and a nationwide blockade of the domain by authorities.

PredictIt, a well-known U.S. election betting platform, continues to function under the oversight of the Commodity Futures Trading Commission (CFTC), following a court ruling that upheld their operation after a previous no-action letter was revoked. This decision sets limitations on the number of participants per question, which is capped at 5,000, and the maximum bet size, set at $850.

Will U.S. interest rates drop below 5.25%?

As a crypto investor, I’ve been keeping a close eye on the financial news lately. There’s been growing chatter about the Federal Reserve potentially reducing interest rates once again. This comes amidst increasing concerns about stagflation – a situation where inflation coexists with economic stagnation – in both traditional finance and crypto markets.

On Kalshi, unlike Polymarket, which is regulated by the Commodity Futures Trading Commission (CFTC) and operates exclusively within the United States, settling all bets in U.S. dollars, the probability of exactly zero interest rate cuts this year stands at 37%. However, the collective likelihood adds up to 60% for a total of 1-3 cuts.

When the cuts come, how low will they go?

According to the collective intelligence, there is a 62% probability that the figure is below 5.25%, while there’s a 36% chance it falls even lower than 5%.

The central bank’s benchmark rates is currently at 5.5%.

The Federal Reserve last significantly reduced interest rates during the Covid-19 pandemic, and prior to that in 2019 as a precautionary measure against potential fallout from former President Trump’s trade disputes with China. The situation was distinct back then, as the Fed maintained that inflation wasn’t a concern at the time.