The U.S. Department of Justice and Commodity Futures Trading Commission (CFTC) have quietly ended their investigations into the crypto-based prediction market, Polymarket. The investigation into the company was initiated during the final months of the Biden administration and was formally dropped earlier this month, according to a person familiar with the matter. The U.S. DOJ has dropped its Polymarket investigation The company had previously agreed to restrict access to U.S.-based users following a 2022 settlement with the CFTC, but federal agencies were examining whether it had violated that agreement by continuing to allow bets from U.S. residents through workarounds such as virtual private networks (VPNs). The Trump administration is pushing to ease restrictions on crypto-related activities and align policy with the interests of digital asset entrepreneurs and investors. The decision comes as Congress prepares to send major legislation to the president’s desk that will formally regulate aspects of the digital asset industry for the first time. Industry advocates are celebrating this feat with what some have dubbed “Crypto Week.” Polymarket came under fire following its rapid growth during the 2024 U.S. election season, when users placed bets on political outcomes using cryptocurrency via the decentralized platform. Its rising profile also drew the attention of law enforcement. In November, just a week after the elections, FBI agents raided the Manhattan apartment of Shayne Coplan, Polymarket’s 27-year-old founder and CEO. Coplan publicly criticized the raid as politically motivated, framing it as a parting shot from the Biden administration that was hostile to the crypto industry. On social media, he called the operation a “last-ditch effort” to target platforms seen as sympathetic to Trump and joked about federal agents seizing his phone, posting “new phone, who dis?” on his X account. The raid and the following scrutiny by federal prosecutors and the CFTC were widely seen within the crypto community as a continuation of what they viewed as overly aggressive enforcement actions under the previous administration. The investigation was centered around whether or not Polymarket had adequately restricted U.S. users from accessing its exchange after its 2022 settlement with the CFTC. The platform struck that agreement after it was accused of failing to register with the derivatives regulator, which views prediction contracts as swaps falling under its oversight. By November 2024, Polymarket had facilitated approximately $2.6B in trading volume, and that figure heightened regulators’ concerns. Regulatory reversal under Trump The abrupt end of the probes lends credence to the perception that the Trump administration may be less inclined to pursue crypto-related enforcement unless there is clear evidence of fraud or consumer harm. The closure of both federal investigations could open the door for Polymarket to make a legitimate return to the U.S. market. Legal analysts have speculated that the company may seek registration as a designated contract market with the CFTC or pursue a partnership or acquisition of an entity that already holds such a license. The company has also attracted new capital and partnerships. Backed by Peter Thiel’s Founders Fund, Polymarket has been amassing fresh funding to expand its operations. It also recently announced a high-profile partnership with Elon Musk’s X and Musk’s AI company, xAI, to offer event forecasts directly on the social media platform. At the same time, Trump has been assigning crypto-friendly figures to key regulatory posts. Brian Quintenz, a former CFTC commissioner and current executive at Andreessen Horowitz’s a16z crypto fund, is expected to take the helm at the CFTC. Quintenz previously served on the board of Kalshi, a competing prediction market regulated by the CFTC. Under Quintenz’s leadership, the agency is likely to adopt a more permissive stance toward prediction markets and other innovative financial instruments based on blockchain technology. That could lead to a regulatory path for companies like Polymarket that have, until now, operated in legal gray zones. Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot
