The U.S. DOJ is investigating Polymarket for alleged violations of U.S. regulations, triggering tensions after an FBI raid on CEO Shayne Coplan’s home.
The U.S. Department of Justice (DOJ) has reportedly initiated an investigation into Polymarket, a cryptocurrency-based prediction market platform, in response to allegations that it has violated U.S. regulations regarding U.S. citizen participation.
Polymarket, which provides prediction markets that enable users to wager on the results of real-world events, such as elections, reached a settlement with the Commodity Futures Trading Commission (CFTC) in 2022. The settlement was the result of allegations that the platform was violating U.S. statutes by permitting U.S.-based users to engage in markets that involved commodity betting.
U.S. DOJ Begins Investigation
Polymarket consented to limit its services to users outside the United States and paid a penalty of $1.4 million as part of the settlement.
New information indicates that U.S. citizens may continue to access the platform, despite these efforts to comply with regulatory requirements. This has initiated an investigation by the Department of Justice, which is purportedly investigating the platform’s operations and its capacity to guarantee compliance with U.S. laws.
The cryptocurrency industry has responded with robust reactions to the investigation. Brian Armstrong, the CEO of Coinbase, publicly criticized the Department of Justice’s actions, implying that the investigation may be politically motivated.
Armstrong vented his frustration on social media, contending that the investigation could bolster Polymarket’s position by emphasizing its influence in the prediction market.
The FBI Raid and the Increase in Tensions
Following a recent FBI search on the residence of Polymarket’s CEO, Shayne Coplan, tensions between the company and the United States government intensified. The FBI agents reportedly confiscated Coplan’s phone and other electronic devices during the investigation, which took place at his Manhattan residence early in the morning on Nov. 13.
This development occurred mere days after Polymarket’s prediction market accurately predicted Donald Trump’s victory in the 2024 presidential election, which prompted concerns that the investigation may have political implications.
Polymarket’s Response
Polymarket responded promptly to the incidents, claiming that the Department of Justice‘s actions were politically motivated and part of an effort to target companies associated with political opponents.
Coplan, in particular, characterized the investigation as a “last-ditch effort” by the current administration to penalize businesses that they perceive as oppositional. He emphasized that Polymarket does not engage in political partisanship and has solely sought to offer consumers a transparent, open prediction market.
A spokesperson for the platform informed CoinDesk that Polymarket is a completely transparent market, with no fees levied and no positions taken by the platform.
The spokesperson contended that the platform is a public benefit, enabling global users to freely analyze market data. In addition, they emphasized Polymarket’s contribution to providing valuable insights into significant events, such as elections, without the intention of influencing public opinion.
Skeptics contend that the size and scope of these bets could have an undue impact on public opinion and election outcomes, despite Polymarket’s defense of its platform as a tool for obtaining knowledge about events like elections.
A report emerged that alleged executives from Kalshi, a competitor prediction market platform, had disseminated fraudulent information about Polymarket, further complicating the situation. These allegations encompassed allegations of money laundering and cleanse trading.