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State of Play’s TL;DR
- Polymarket is facing a CFTC investigation and a Missouri cease-and-desist letter.
- The firm is also dealing with multiple lawsuits as pressure on prediction markets grows.
Polymarket is facing mounting US legal and regulatory pressure as the Commodity Futures Trading Commission (CFTC) investigates the company and Missouri Attorney General Catherine Hanaway’s office has sent a cease-and-desist letter over event contracts offered in the state.
The scrutiny matters beyond one company. More than a dozen state lawsuits are now testing whether prediction market platforms such as Polymarket, Kalshi, and Robinhood are operating as unlicensed gambling or sports wagering products, a fight that could ultimately define how event contracts are treated in the US.
Missouri and federal scrutiny add to pressure
Hanaway’s office sent cease-and-desist letters to Polymarket, Kalshi, and Robinhood, arguing that facilitating event contracts amounts to unlicensed sports wagering in Missouri.
Hanaway also argued that operating without a license lets those platforms avoid the state’s 10% wagering tax and fail to ensure users are over 21.
At the federal level, the CFTC is investigating Polymarket. The New York Council is probing prediction market advertising practices.
The broader legal challenge is growing as well. More than a dozen state lawsuits are focused on whether prediction market operators are functioning as unlicensed gambling platforms. The outcome of those cases could reshape the industry.
Report cites compliance failures as Polymarket pursues new funding
SBJ reports that current and former Polymarket employees have described internal compliance problems, legal challenges, and software issues while the company pursued rapid user and investor growth.
According to SBJ, Polymarket was alerted in February that fraudsters were flooding the app. One processor reportedly rejected more than 80% of the deposits it handled as fraudulent, compared with an industry standard of roughly 1%.
Employees told SBJ that concerns were raised with CEO Shayne Coplan. The report said Coplan responded:
“Just keep growing and pay a fine if regulators ever find out.”
Employees described that approach as a “growth at all costs” strategy.
That pressure is unfolding while Coplan is reportedly raising $1 billion in a funding round that would value Polymarket at about $21 billion.
What comes next is likely to center on the CFTC investigation, Missouri’s enforcement effort and the state court fights over whether event contracts should be treated more like regulated financial products or unlicensed wagering.
Based on reporting by SBJ.
