On November 13, the FBI raided the home of Shayne Coplan, CEO of Polymarket – a decentralized prediction market platform. This raid is part of an investigation by the U.S. Department of Justice (DOJ) aimed at clarifying suspicions that Polymarket allowed U.S. users to access its platform, violating a legal agreement with the Commodity Futures Trading Commission (CFTC) dating back to 2022. During the raid, the FBI seized Coplan’s phones and other electronic devices, but no arrests were made.
Polymarket, a platform enabling users to bet on the outcomes of various events, reached an agreement with the CFTC in 2022 after being fined $1.4 million for offering unregistered options trading. Under the CFTC’s requirements, Polymarket was obligated to block U.S. users from accessing the platform to avoid breaching regulations governing derivatives trading, which mandate strict compliance for platforms offering financial instruments.
However, the DOJ suspects that Polymarket continued allowing U.S. users to access the site through virtual private networks (VPNs), a common method in the tech world for bypassing geo-restrictions.
The DOJ’s investigation is unfolding as Polymarket amasses a substantial trading volume, reaching $3.7 billion, from bets on the outcome of the 2024 U.S. presidential election. Polymarket representatives argue that the current investigation is a form of “obvious political retribution” by the outgoing Biden administration, asserting that the platform has “accurately predicted” the election outcome – a point seen as sensitive amidst the already tense U.S. electoral environment.
“It’s discouraging that the current administration would seek a last-ditch effort to go after companies they deem to be associated with political opponents,” Coplan wrote.
“We are deeply committed to being non-partisan, and today is no different, but the incumbents should do some self-reflecting and recognize that taking a more pro-business, pro-startup approach may be what would have changed their fate this election.”
This is not the first time Polymarket has encountered legal issues. The use of VPNs by U.S. users to access the platform is one loophole the CFTC has flagged, but Polymarket continues to face difficulties in managing this activity. U.S. users’ evasion of restrictions via VPN remains a challenging issue in regulating decentralized platforms, given the borderless and anonymous nature of blockchain technology.
Several legal experts argue that current regulations may not be entirely adequate for overseeing international prediction markets like Polymarket, especially as such platforms could potentially be exploited to manipulate results, facilitate money laundering, and significantly impact major events like elections.
Related news: Polymarket Plans $50 Million Fundraising, Considers Launching Its Own Token
