Polymarket major turnaround! Approved by U.S. regulators 5 months after being raided by the FBI.

The prediction market platform Polymarket announced that it has received regulatory approval from the Commodity Futures Trading Commission (CFTC) to operate an intermediary trading platform. This approval comes about five months after the CFTC and the U.S. Department of Justice concluded their investigation into whether Polymarket accepted trades from U.S. users, during which the FBI raided the home of founder Shayne Coplan and confiscated his electronic devices.

Dramatic Turn from FBI Raid to CFTC Approval

(Source: Polymarket)

The path to legalization for Polymarket has been dramatic. About five months ago, the FBI raided the home of founder Shayne Coplan as part of an investigation into whether the prediction market platform was accepting trades from U.S. users. Law enforcement seized Coplan's electronic devices, and this action caused a stir in the cryptocurrency and prediction market communities. At that time, the market widely believed that Polymarket could face severe regulatory penalties, or even be forced to shut down its operations in the U.S.

However, just five months later, the situation completely reversed. The CFTC not only ended the investigation but also granted Polymarket an operating license as an intermediary trading platform. This shift from enforcement raids to regulatory approval reflects the Trump administration's changing attitude towards cryptocurrencies and innovative financial technologies. During Trump's second term, U.S. regulators' stance on crypto assets and prediction markets clearly became more open, creating a policy window for the legalization of Polymarket.

Polymarket founder and CEO Shayne Coplan stated, “This approval allows us to operate with the maturity and transparency required by the U.S. regulatory framework.” This statement indicates that Polymarket may have had close communication with the Commodity Futures Trading Commission during the investigation period, adjusting its business model and compliance structure to meet U.S. regulatory requirements.

From a timing perspective, this approval comes at a time when the U.S. Senate is expected to soon vote on CFTC Chairman nominee Michael Selig. Selig is seen as a more crypto-friendly regulator towards digital assets and innovative financial products, and if his appointment is confirmed, it will further solidify the CFTC's open attitude towards prediction markets.

Prediction Market Officially Enters the Era of Compliance in the United States

The revised directive issued by the CFTC means that Polymarket must now “comply with all requirements applicable to federally regulated exchanges in the United States.” These requirements include, but are not limited to: strict KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures, trading surveillance and market manipulation prevention mechanisms, financial reporting and transparency requirements, and customer fund segregation and protection measures.

This comprehensive regulatory framework is both the compliance cost for Polymarket and its competitive advantage. As the first prediction market platform to receive approval from the Commodity Futures Trading Commission, Polymarket will enjoy a first-mover advantage, being able to legally solicit U.S. brokers and customers directly. This compliant status will also attract institutional investors and traditional financial institutions to participate in the prediction market, bringing greater liquidity and capital scale to the field.

The legalization of prediction markets in the United States has significant implications. Prediction markets allow users to trade on the outcomes of future events, including elections, economic data, sports events, and more. This mechanism not only provides a new investment and hedging tool but is also regarded by the academic community as an effective information aggregation mechanism. Research shows that the outcomes of prediction markets are often more accurate than traditional polls, as participants “vote” with real money, which more effectively incentivizes people to reveal true information.

Key Changes After Polymarket Compliance

Legally soliciting American customers: No longer need to service American users through VPNs or other gray area methods.

Integrate with Traditional Financial Systems: Can cooperate directly with American banks, payment processors, and intermediaries.

Institutional Funds Entering the Market: Regulatory identity allows hedge funds, family offices, and other institutions to participate.

Product Diversification: More prediction market categories and derivatives can be launched within the regulatory framework.

Policy Shift Amidst Turmoil in CFTC Leadership

This approval was issued under the leadership of Acting Chair Caroline Pham. Meanwhile, the U.S. Senate is expected to vote soon on the nomination of Securities and Exchange Commission (SEC) official Michael Selig to serve as the next chairman of the Commodity Futures Trading Commission (CFTC). Members of the Senate Agriculture Committee voted along party lines to approve Selig's nomination, showing support from the Republicans while the Democrats remained reserved.

If Selig is appointed, he will succeed Van as the official chairman of the CFTC. During his tenure at the SEC, Selig was seen as an official with a relatively open attitude towards crypto assets and innovative financial products. He has publicly stated that the United States needs to establish a clear regulatory framework for crypto assets, rather than simply suppressing them. This position aligns with the overall policy direction of the Trump administration, which aims to promote financial innovation through reasonable regulation rather than prohibition.

However, even if Selig's appointment is confirmed, there will still be four vacant commissioner positions at the CFTC. As of Tuesday, Trump has not announced any potential successors for the leadership of regulatory agencies. This personnel vacancy may affect the decision-making efficiency of the CFTC, but it also gives Selig greater space for policy shaping. In situations where commissioner positions are unfilled, the influence of the chairperson is often greater.

A market structure bill currently under consideration in Congress may also expand the Commodity Futures Trading Commission's authority over digital assets. If the bill passes, the CFTC will receive clearer authorization to regulate cryptocurrency derivatives and related markets, further solidifying its regulatory position in the digital asset space. This legislative trend complements the approval of Polymarket, together constructing the regulatory framework for digital assets and prediction markets in the United States.

Global Competition in Prediction Markets and Opportunities in the U.S. Market

Polymarket primarily served the international market before gaining approval in the United States. The platform gained fame during the 2024 U.S. presidential election for accurately predicting results, resulting in a sharp increase in trading volume and user numbers. However, due to regulatory restrictions, U.S. users can only indirectly participate through means such as VPNs, which limits the platform's growth potential.

Now that it has received approval from the CFTC, Polymarket will be able to legally serve the United States, the largest financial market in the world. The U.S. has a large base of retail and institutional investors, a mature financial infrastructure, and a deep investment culture. The legalization of Polymarket's operations in the U.S. is expected to bring it several times the current growth in users and trading volume.

However, compliance also means increased competition. With the legalization of prediction markets in the United States, traditional financial institutions and other crypto platforms may also enter this space. Traditional derivatives exchanges such as the Chicago Mercantile Exchange (CME) and Intercontinental Exchange (ICE) have strong regulatory relationships and customer bases, and if they decide to launch prediction market products, it will pose a challenge to Polymarket. In addition, large crypto exchanges like Coinbase and Kraken may also leverage their existing user bases to launch similar products.