Polymarket nailed the 2024 election call—Then came the FBI

As polls closed Tuesday evening, live cable networks watched the vote tallies, but they were still too close to call. Meanwhile, Polymarket, the world’s largest prediction market, pegged Donald Trump’s chances of victory at 58%. By 11:43 p.m. ET—nearly six hours before the Associated Press called the election—Polymarket’s odds for Trump surged to 95%.

“I just got word that the Trump campaign HQ literally found out they were winning from Polymarket,” wrote Polymarket founder and CEO Shayne Coplan, on X early Wednesday morning. “History was made today.”

A week later, history of a different sort was underway.

Around 6 a.m. on Wednesday morning, the FBI arrived at the CEO’s Soho home with a warrant as part of an investigation into claims that the betting platform accepted trades from users based in the U.S., according to Bloomberg. Federal agents confiscated Coplan’s phone and electronic devices.

Coplan was not provided with a reason for the raid, and has not been arrested nor charged, according to the New York Post‘s reporting.

Hours after, on Wednesday afternoon, Coplan posted on X: “New phone, who dis?”

A History of Regulatory Scrutiny

Founded in 2020, Polymarket operates as a blockchain-based prediction market platform, allowing users to bet on real-world events using cryptocurrency. Bets are placed using the USDC stablecoin to speculate on the likelihood of event-based binary options, leveraging collective user opinions to forecast outcomes.

But the platform has frequently clashed with regulators. In 2022, the CFTC simultaneously filed and settled charges against the company, arguing that their event market contracts, composed of a pair of binary options, are considered “swaps” under the CFTC’s jurisdiction and can, therefore only be offered on a registered exchange that complied with CEA and CFTC regulations.

The order required Polymarket to pay a $1.4 million civil monetary penalty, wind down all markets displayed on the website that didn’t comply with regulations, and cease and desist from violating those regulations.

As part of the settlement, Polymarket was required to block U.S. users from accessing its platform. Despite these restrictions, many U.S. users reportedly continued accessing the site using VPNs, and easy workarounds were touted across online crypto communities.

This past October, a U.S. federal appeals court upheld a lower court’s order that allowed Kalshi, a derivatives trading platform, to list “event” contracts that allow Americans to bet on election outcomes. The Court held that the CFTC failed to demonstrate irreparable harm to itself or the public.

As a result, Polymarket announced it would resume operations in the U.S., citing changes in regulatory interpretation.

On election day, Polymarket, which is only available to international bettors, had the number two spot on Apple’s list of top free apps. It was only beat by Kalshi, the betting market legally open to U.S. citizens.

The Election & Market Manipulation

Though U.S. users were technically still barred from making bets on the Polymarket (after the CFTC 2022 settlement), nearly $3.7 billion was wagered on Polymarket in the 2024 presidential contest between Harris and Trump.

Concerns about manipulation have grown. In the month leading up to the election, four Polymarket accounts collectively pumped about $30 million of crypto into bets that Trump would win. Some view the bets as an influence campaign designed to fuel social-media buzz for the former president, according to the WSJ.

According to Miguel Morel, chief executive of Arkham Intelligence, “There’s strong reason to believe they are the same entity.” He told the WSJ that the four accounts are all funded by deposits from Kraken and behave similarly in terms of the frequency of betting and when they increase the size of their bets on Trump.

Another concern is wash trading, a form of market manipulation where shares are bought and sold, often simultaneously and repeatedly, to create a false impression of volume and activity.

According to two October separate investigations by blockchain firms Chaos Labs and Inca Digital, Chaos Labs found that wash trading constituted around one-third of trading volume on Polymarket’s presidential market, while Inca Digital found that a “significant portion of the volume” on the market could be attributed to potential wash trading, according to its report.

Another concern they found was that the purported trading volume on its presidential market, reported in U.S. dollars, does not match the on-chain data. Chaos Labs attributed this error to Polymarket conflating traded shares with U.S. dollars. For example, a “yes” share that is worth $0.01 is being mistakenly reported as $1 of volume by Polymarket, according to Fortune.

Barnard professor Rajiv Sethi, who co-authored a research paper analyzing market manipulation in prediction markets during the 2012 election, said that while the most straightforward explanation to the betting markets is a giant bettor who expects Trump to win, the possibility of manipulation can’t be ruled out.

“If I were trying to manipulate a market, this is exactly how I would do it,” Sethi told the WSJ.

On the other hand, a Polymarket spokesperson said this was “obvious political retribution” by the outgoing administration “for providing a market that correctly called the 2024 presidential election” in a statement to NBC News. Polymarket did not immediately respond to Fast Company’s request for comment.

“It’s discouraging that the current administration would seek a last-ditch effort to go after companies they deem to be associated with political opponents,” Coplan said on X. “Polymarket has provided value to 10’s of millions of people this election cycle, while causing harm to nobody.”