Key Points
- The US Justice Department is investigating Polymarket for allegedly allowing US-based users to trade on their platform, violating a 2022 agreement with federal regulators
- Platform activity surged around the 2024 US presidential elections, with wagers approaching $1 billion – a 500% increase – drawing increased scrutiny from authorities
Federal Investigation Intensifies
In a significant development reported by Bloomberg, the Department of Justice has launched an investigation into cryptocurrency predictions platform Polymarket, focusing on allegations that the company continued to accept trades from US-based users despite explicit prohibitions. The investigation reached a crucial point when FBI agents executed a search warrant against Polymarket’s CEO Shayne Coplan, seizing his phone and electronic devices.
Regulatory Background and Current Violations
The investigation stems from Polymarket’s 2022 settlement with the Commodity Futures Trading Commission (CFTC), which included a $1.4 million penalty and a mandate to block US-based traders from the platform. Despite these restrictions and recent claims of implementing additional verification measures, the company has faced ongoing scrutiny over its compliance efforts.
Electoral Impact and Market Manipulation Concerns
The platform gained significant attention during the lead-up to the November 5th presidential elections, positioning itself as a more reliable predictor of political outcomes compared to traditional polling methods. Unlike its competitors, Polymarket allows unlimited betting amounts, a feature that came under intense scrutiny when a French trader placed massive bets favoring Trump in the days before the election. Critics argued these large-scale wagers could potentially manipulate public perception of the electoral outcome.
In response to the investigation, Polymarket issued a statement defending its operations, characterizing the FBI’s actions as politically motivated. “Polymarket is a fully transparent prediction market that helps everyday people better understand the events that matter most to them, including elections,” the company stated, vowing to “stand up for ourselves and our community.”
Coplan’s response to the situation came through a casual post on X, simply stating “new phone, who dis?” – an apparent reference to the seizure of his devices.
The investigation continues as authorities work to determine the extent of any potential violations and their implications for the broader cryptocurrency prediction market landscape.
