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The U.S. Department of Justice (DOJ) reportedly launched an investigation into Polymarket, a cryptocurrency-based prediction market platform, over its alleged violations of U.S. regulations related to U.S. citizen participation.
Polymarket, which facilitates prediction markets where users can bet on the outcome of real-world events, including elections, settled with the Commodity Futures Trading Commission (CFTC) in 2022. The settlement followed allegations that the platform was violating U.S. laws by allowing U.S.-based users participate in markets involving betting on commodities.
As part of the settlement, Polymarket paid a penalty of $1.4 million and agreed to restrict its services to users outside the United States.
Despite these efforts to comply with regulatory requirements, new information suggests that U.S. citizens may still be accessing the platform. This has triggered the DOJ’s investigation, with officials reportedly examining the platform's operations and its ability to ensure compliance with U.S. laws.
The investigation has sparked strong reactions from within the cryptocurrency industry. Coinbase CEO Brian Armstrong publicly criticized the DOJ’s actions, suggesting that the probe might be politically motivated.
Armstrong expressed his frustration on social media, arguing that the investigation could strengthen Polymarket’s position by highlighting its influence in the prediction market space.
The FBI Raid and Rising Tensions
Tensions between Polymarket and the U.S. government escalated following a recent FBI raid at the home of Polymarket’s CEO, Shayne Coplan. The raid occurred early in the morning on Nov. 13, at Coplan’s Manhattan residence, where FBI agents reportedly seized Coplan’s phone and other electronic devices.
This development came just days after Polymarket’s prediction market correctly forecasted Donald Trump’s victory in the 2024 presidential election, raising suspicions that the investigation could have political undertones.
Polymarket’s Response
Polymarket quickly responded to the incidents, calling the DOJ’s actions politically motivated and part of an effort to target companies associated with political opponents. Coplan, in particular, described the investigation as a “last-ditch effort” by the current administration to penalize businesses they perceive as oppositional. He emphasized that Polymarket does not engage in political partisanship and has only aimed to provide users with an open, transparent prediction market.
A spokesperson for the platform told CoinDesk that Polymarket is a fully transparent market, with no fees charged and no positions taken by the platform itself. The spokesperson argued that the platform serves as a public good, allowing global users to analyze market data freely. They also highlighted Polymarket’s role in offering valuable insights into key events, such as elections, without intending to sway public opinion.
While Polymarket has defended its platform as a tool for gaining knowledge about events like elections, skeptics argue that the size and scope of these bets could exert undue influence on public opinion and election outcomes.
Further complicating matters, a report surfaced alleging that executives from rival prediction market platform Kalshi had spread false claims about Polymarket. These claims included accusations of wash trading and money laundering.