Polymarket Investigations Dropped Amid Trump Administration Policy Shift

The U.S. Department of Justice and Commodity Futures Trading Commission (CFTC) have concluded their investigations into the crypto-based prediction market, Polymarket. The probe, which began in the final months of the Biden administration, was formally dropped earlier this month, according to a person familiar with the matter.

Polymarket had previously agreed to restrict access to U.S.-based users following a 2022 settlement with the CFTC. However, federal agencies were examining whether the platform had violated this agreement by allowing bets from U.S. residents through workarounds such as virtual private networks (VPNs).

The decision to end the investigations comes as the Trump administration pushes to ease restrictions on crypto-related activities and align policy with the interests of digital asset entrepreneurs and investors. This move coincides with Congress preparing 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 development with what some have dubbed “Crypto Week.”

Polymarket's rapid growth during the 2024 U.S. election season, when users placed bets on political outcomes using cryptocurrency via the decentralized platform, drew significant attention from 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 subsequent 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 focused on whether 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.

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.

Polymarket 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.