The decentralized prediction platform Polymarket is facing intense scrutiny from regulators and the public alike for its actions.
Over the past day, reports emerged that the US Commodity Futures Trading Commission (CFTC) has subpoenaed user data amid backlash over its controversial wildfire betting markets.
Controversial wildfire bets
Polymarket has been criticized for allowing bets on the devastating wildfires in California. As of press time, the site hosted eight active wildfire-related markets, which drew significant attention from users.
Although Polymarket promoted these markets as a means of providing real-time insights into major societal events, public reaction was largely critical.
Industry leaders decried the move as exploitative, with accusations of profiting from human suffering. Some social media users condemned the platform, arguing that such bets trivialize the loss of lives and property.
[Editor’s Note: Free-open prediction markets create some novel Libertarian discussions. Monetarily incentivizing a disaster such as this produces financial incentives for the fire to spread (or be put out.) Should any market grow sufficiently in size, there would be motivation for bettors to break the law to maximize gains. In reverse, it would be considerably more challenging for a bettor to stop the fires for profit single-handedly.
There’s even an argument that residents could theoretically hedge against personal losses by using the prediction markets as a form of partial insurance.]
Despite the backlash, the wildfire markets have attracted notable participation. Two markets have each generated close to $100,000 in trading volume, while others saw less engagement, with volumes below $50,000, respectively.
Polymarket has attempted to address concerns by including disclaimers, stating that the platform aims to provide accurate predictions to aid decision-making during impactful events.
CFTC subpoena
The controversy comes amid a broader investigation by the CFTC, which has reportedly subpoenaed Coinbase to disclose user data linked to Polymarket.
On Jan. 8, Eric Conner, a contributor to the Ethereum network, shared a screenshot of an email detailing the subpoena. The email revealed that the CFTC demands Coinbase disclose certain customer information.
Coinbase assured users they need not take any action, as the company intends to comply with the subpoena unless legally restrained. To halt the data disclosure, any such legal documents must reach Coinbase by the close of business on Jan. 15, 2025.
Meanwhile, crypto industry players have described the CFTC’s subpoena as a shift from its historic lenient approach to the crypto industry compared to the Gary Gensler-led US Securities and Exchange Commission (SEC).
Gabriel Shapiro, a pro-crypto lawyer, stated:
“The CFTC is very risky for crypto. Much more so, in theory, than the SEC.”
Regulatory scrutiny
These issues come as Polymarket faces increased scrutiny after it came into the limelight during the 2024 US elections when it became a prominent source of political predictions.
This visibility prompted intensified examination that led to an FBI raid at the residence of Polymarket CEO Shayne Coplan.
Reports suggested the investigation centered on potential violations of restrictions on US user participation. At the time, the CFTC announced investigations into foreign platforms offering exposure to US customers.
Meanwhile, Polymarket settled with the CFTC in 2022, agreeing to pay $1.4 million in fines for offering unregulated binary options. The platform committed to barring US users from its service as part of the agreements.
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