Polymarket Under Fire as Wall Street Watchdog Launches Investigation

Polymarket, one of the world's largest prediction market platforms, is facing renewed regulatory scrutiny after the US Commodity Futures Trading Commission (CFTC) reportedly launched an extensive investigation into the company.

According to a source familiar with the matter, the Wall Street regulator has opened a confidential probe into the prediction market operator, although the exact focus of the investigation remains unclear. The development comes as policymakers in Washington increase their attention on the fast-growing prediction market industry, where users place wagers on political events, sports and popular culture.

The reported investigation highlights growing concerns over the expanding influence of prediction markets, particularly those linked to sensitive political and geopolitical events. Lawmakers from both major US political parties have expressed concerns about Polymarket's offshore markets, including contracts related to the conflict involving Iran, warning that such markets could create opportunities for insider trading and market abuse.

The latest regulatory attention follows fresh legal challenges facing the company. A consumer protection organisation recently filed a lawsuit accusing Polymarket of using misleading advertising campaigns across social media platforms. The legal action has intensified questions over how prediction market operators promote their services to potential users.

Polymarket declined to comment on the reported CFTC investigation. However, the company's Deputy Chief Legal Officer, Olivia Chalos, said the firm continuously reviews how it engages with users and is committed to strengthening public trust. As part of that effort, the company is conducting a comprehensive review of its active promotional content to ensure it meets both internal standards and all applicable legal and regulatory disclosure requirements.

The CFTC also declined to comment, maintaining its long-standing policy of neither confirming nor denying the existence of ongoing investigations.

Reports of the investigation emerged shortly after media coverage examining Polymarket's marketing practices. Recent investigations alleged that the company had distributed misleading promotional videos through social media. Separate reports also claimed that a senior Polymarket executive used a personal PayPal account to make payments to well-known online content creators involved in promotional activities.

The issue has also attracted attention from lawmakers. US Senators John Curtis and Adam Schiff recently urged the CFTC to increase its oversight of Polymarket, citing recent media reports and calling for closer scrutiny of the company's operations.

The reported investigation is notable because the CFTC has generally adopted a more supportive stance towards prediction markets since Chairman Michael Selig took office following President Donald Trump's inauguration. The regulator has proposed industry-friendly rules and pursued legal action against several opponents of prediction markets. The latest probe, however, suggests that regulatory support does not exempt companies from enforcement action where compliance concerns arise.

This is not the first time Polymarket has faced regulatory action. In 2022, the company agreed to pay US$1.4 million to settle CFTC allegations that it had operated an unregistered financial exchange serving US customers. Although the settlement resolved those claims without prolonged litigation, it placed the company firmly on regulators' radar.

More recently, federal authorities ended separate investigations conducted by both the CFTC and the US Department of Justice. Those enquiries had previously led to a raid on the New York home of Polymarket founder and Chief Executive Shayne Coplan.

Coplan founded Polymarket six years ago when prediction markets remained a niche segment of the financial technology industry. The platform's profile changed dramatically during the 2024 US presidential election, when political prediction markets attracted unprecedented public interest and significantly increased trading activity. As the sector expanded, companies operating in the space also strengthened their presence in Washington through lobbying and political connections.

Among those moves, Polymarket appointed Donald Trump Jr. as an adviser last year. The company also received investment from venture capital firm 1789 Capital, where Trump Jr. serves as a partner. At the same time, he also became an adviser to Kalshi, one of Polymarket's largest competitors.