CFTC Unleashes New Probe on Polymarket for Alleged US Trading Violations!

The Commodity Futures Trading Commission (CFTC) has reportedly revived an inquiry into Polymarket, investigating whether the prediction market platform violated a 2022 enforcement settlement. This probe, initially closed in 2025 without charges, strikes at the core of Polymarket’s efforts to operate prediction markets within US legal frameworks.

In January 2022, Polymarket settled with the CFTC, paying a $1.4 million penalty for offering event-based binary options without proper registration. As part of that agreement, the company committed to blocking American users from its offshore exchange using geofencing tools. However, regulators and critics have since highlighted instances of traders accessing the site via VPNs.

According to sources, the current investigation focuses on three key areas: the effectiveness of Polymarket’s location controls, its advertising activities within the United States, and the onboarding processes and customer protections implemented on its US platform, which launched late last year. Polymarket, headquartered in New York, operates its offshore exchange through a Panama-registered entity. It's important to note that a probe is an inquiry, not a definitive finding, and many investigations conclude without enforcement actions.

This renewed scrutiny is part of a broader regulatory push. In June, The Wall Street Journal reported allegations that Polymarket paid individuals to create videos featuring fictitious winning bets. Subsequently, Senators Adam Schiff and John Curtis urged the CFTC to open a probe into these claims. Bloomberg also reported that investigators were examining the company's social media activities.

CFTC Chairman Michael Selig has expressed his view of prediction markets as legitimate tools for hedging and information discovery, advocating for federal, rather than state, oversight. Conversely, Enforcement Director David Miller has pledged rigorous policing of the sector, underscoring the agency's commitment to strict enforcement.

A notable test case emerged in April when US soldier Gannon Ken Van Dyke was charged with making $400,000 from insider bets placed on the offshore platform. The indictment alleged he used a VPN and an “exit mode” to appear as if he was in a foreign country. Van Dyke has denied the charges, and Polymarket states it referred the matter to authorities.

Polymarket's increasing scale also raises the stakes. In October 2025, Intercontinental Exchange (the parent company of the NYSE) agreed to a substantial investment of approximately $2 billion, and founder Shayne Coplan, 27, has been identified by Bloomberg as one of the youngest self-made billionaires. As the platform grows, the efficacy of its geographic restrictions becomes even more critical.

Concerns about market manipulation have also surfaced. A study revealed that Polymarket’s five-minute Bitcoin up/down contract was exploited by a small group of 821 wallets, representing about one in 300 traders, who collectively took $8.2 million. This manipulation involved pushing Binance’s price in the final seconds before each contract's close, resulting in 93% of the losses falling on retail bettors. The study found no similar manipulation in the fifteen-minute contract, suggesting that a longer window effectively dilutes such fixed pushes. This lesson is particularly relevant as Nasdaq and Cboe have filed to list similar binary contracts on equity indices, highlighting the importance of robust market design.