Founded in 2014, Augur is a decentralized prediction market platform developed on the Ethereum blockchain. Shortly after a $152 million legal battle between its founding members, it is now being scrutinized by regulatory authorities.
Betting on the outcome of future events, which Augur allows, may not necessarily be illegal, but its “death-pools” may be a cause for concern. That’s because their recent associated activity is considered illegal in the United States.
“Death pools” or “assassination markets” let users place bets anonymously, which means that someone could be motivated to commit a murder if they’re paid for it.
Potential For Unregulated Options Market
Moreover, American regulators think that Augur could potentially help facilitate a very large and unregulated options market. At present, options trading is part of a huge global financial derivatives market, which is very tightly regulated.
Only a very limited number of investors are able to meet the strict requirements for options trading. However, Augur lets its users easily issue what can be described as over-the-counter (OTC) derivatives.
While Augur’s current market size may be too small to concern regulators such as the US Commodities Futures Trading Commission (CFTC), it’s still possible that its blockchain-based predictions platform could begin to attract more investors.
Hard To Regulate, Impossible To Shut Down
Should Augur’s options market grow significantly large, then it would become very difficult to monitor and regulate. Unlike a traditional financial market where the participants are basically centralized entities, and are easy to track, Augur’s distributed network allows its users to trade on its platform from any part of the world.
So, if there are traders on Augur’s platform who engage in fraudulent activities, it would be very difficult for authorities to take legal action against them. There would be no central or fixed location where they could be reached. Also, if the offender is a citizen of another country, then it may be very costly to prosecute them.
What might be even more worrying for authorities is that even if Augur’s developers wanted to close down the decentralized oracle, they would not be able to. That’s because it’s a fully open-source protocol, which has already been introduced in the market.
Anyone wanting to create a predictions market similar to Augur’s platform could do so, or they would also be able to easily maintain and support the existing Augur network.
Notably, other concerns cited about the Augur (REP) platform are that it has attracted around $255 million in investments, but the number of people actually using the platform is comparatively minuscule - at less than a 100 a day in recent weeks.