Did you really think we’d stop talking about prediction markets after the election?
Perhaps the best-known one, Polymarket, burst back into the spotlight on Wednesday after the FBI raided the home of its 26-year-old founder, Shayne Coplan. Reports of a Justice Department investigation leaked shortly thereafter.
The future of the popular platform now looks hazy. To briefly recap, Polymarket was kicked out of the U.S. in 2022 for letting U.S. users bet on political prediction markets, which, at the time, was against the law. Since then, the 2024 election catapulted Polymarket into prominence when its users correctly predicted Donald Trump’s victory, and a gutsy legal gambit from its competitor, Kalshi, paved the way for electoral betting to be legalized in the U.S.
It’s always difficult for a company that broke U.S. law and then left to return, but Polymarket had a potential path back home, thanks to Trump’s victory and an ostensibly more lax regulatory environment (Polymarket call for Trump’s win may help its chances with the famously narcissistic president-elect.) An apparent DOJ investigation, however, makes matters more difficult.
Prosecutors could be looking into a variety of issues. At the light end, Polymarket’s former regulator—the Commodity Futures Trading Commission—may have complained to the Justice Department about U.S. residents still betting through the site, in violation of the company’s previous consent order. But that likely wouldn’t have warranted an FBI raid.
On the more serious end, Polymarket could be looking at money laundering violations under the Bank Secrecy Act related to compliance failures around “know-your-customer” policies, which verify users’ identities to prevent illicit behavior. The Justice Department has used similar infractions to prosecute other crypto companies like Binance.
“If it is a money laundering investigation, it is not uncommon for the DOJ to be brought in and for the investigation to be conducted collaboratively,” said Hadas Jacobi, a former attorney with the New York Department of Financial Services and counsel at Reed Smith’s crypto group. She cautioned that without more information, it would be impossible to know the motivations for the probe, but described the raid as a “dramatic” move.
Polymarket has characterized the raid as politically motivated. A spokesperson declined to comment further.
Even before the raid, I was curious…
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