Polymarket in turmoil. Crypto betting platform (or predictive markets), Polymarket is currently in the spotlight, but not for the right reasons. The US Department of Justice has launched an investigation into the company for allegedly allowing US users to place bets on its platform, an activity considered illegal in the US. This case raises questions about the legality of crypto betting platforms and highlights the regulatory challenges these companies face. Let's take stock together.
- Polymarket has been under investigation by the US Department of Justice for enabling illegal betting by US users.
- The company has taken steps to comply with US laws, but still risks legal action.
Polymarket, a controversial crypto platform
Polymarket is a crypto betting platform which allows users to bet on various events, ranging from political elections to sports results. However, this activity is strictly regulated in the United States, where Online betting is illegal in many states. According to the Department of Justice, Polymarket violated these laws by allowing American users to participate in betting on its platform.
In detail, on November 13, 2024, the FBI raided Shayne Coplan's apartmentthe CEO of Polymarket in Manhattan, grabbing his phone and several electronic devices. This intervention follows forecasts from the Polymarket platform which had predicted the victory of Donald Trump, raising suspicions of “political retaliation”. According to a source close to Coplan, the operation would be a “political staging” to discredit Polymarket after its winning prediction for Trump.
Polymarket, the ugly duckling?
Polymarket is also facing accusations of market manipulationwith reports evoking practices of wash-trading (where a trader simulates market activity by buying and selling the same asset). In 2022, the platform had already had to suspend its activities in the United States and pay a fine of $1.4 million to the CFTC for lack of registration.
Financially, Polymarket is linked to certain pro-Trump circles, notably via $70 million in funding from Peter Thiel, a supporter of the ex-president.
Furthermore, Polymarket is under the microscope of the National Gaming Authority (ANJ) in France, which wishes to ensure that its operations comply with local legislation. For its part, Polymarket defends itself by asserting that the platform does not intervene in transactions and that all market data is accessible for public analysis.
In response to these allegationsPolymarket said it was taking steps to comply with U.S. regulations. The company announced that it will restrict access to its platform for users based in the United States and that it is working with authorities to resolve this issue. However, these measures may not be enough to avoid legal action.
Polymarket's response
In the process and in the face of the accusations raining down on the platform, Shayne Coplan spoke out on social networks:
“It is disheartening to see that the current administration seeks to go after companies it deems associated with political opponents as a last resort.
We are deeply committed to being nonpartisan, and today is no different, but incumbents should do some soul-searching and recognize that taking a more business- and startup-friendly approach could change their fortunes this election.
Polymarket has brought value to tens of millions of people this election cycle, without harming anyone. We are deeply proud of it. I'm also proud to say that the future of America, and especially American entrepreneurship, has never been brighter. In the face of adversity, we build”
To which Elon Musk, future minister of Donald Trump, commented:
” Indeed. »
Crypto betting facing regulation
This case highlights the regulatory challenges faced by crypto betting platforms. Although these platforms are often based abroad to avoid local regulations, they must still comply with laws of the countries where they operate. In the United States, the law on online gambling is particularly strict, and platforms that do not respect these rules face severe penalties.
Besides the United States, many other countries also have strict online gambling laws. For example, in France, online betting is regulated by the National Gaming Authority (ANJ), which issues licenses to operators that comply with French law. Crypto betting platforms that wish to operate legally in these countries must therefore obtain the appropriate licenses and comply with local rules. This is also what happened recently for Polymarket in France.
What future for Polymarket?
Indeed, the result of the presidential election in the United States was a victory for Donald Trump. But also for Polymarket and its flagship trader Theao 4, a Frenchman. The French online gaming regulatory authority (ANJ) is reportedly preparing to ban Polymarket in the face of this success.
Despite these regulatory challenges, crypto betting continues to gain popularity. These platforms offer a decentralized alternative to traditional betting sites, allowing users to bet without having to go through an intermediary. Additionally, crypto betting often offers better odds and faster payouts than traditional betting sites. As cryptocurrency regulations tighten, it is likely that crypto betting platforms will face increasing pressure to comply with local laws.
