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Read Full BioTrump’s administration‘s more permissive stance towards prediction markets has been confirmed through two significant developments this week: The Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) have dropped their investigation into Polymarket. At the same time, PredictIt has secured a new, less restrictive agreement with the CFTC.
These moves underscore the rapidly evolving regulatory landscape. In May, the CFTC dropped its appeal of a federal judge’s ruling that allowed Kalshi to accept bets on US elections.
Meanwhile, during his June Senate confirmation hearing, Trump’s pick to lead the CFTC, Brian Quintenz, suggested that he wouldn’t stop the expansion of prediction markets. That includes sports event contracts.
DOJ and CFTC Drop Investigations into Polymarket
In a significant win for crypto-based prediction markets, Polymarket received notice from the DOJ and CFTC that they’ve dropped all inquiries into the company over potential violations involving US-based users.
The platform has been under scrutiny since its 2022 agreement with the CFTC, which prohibited it from accepting US customers. Polymarket made the assurances following the commission’s $1.4 million fine to Polymarket.
A few days after the 2024 presidential election, the FBI raided founder Shayne Coplan‘s residence in New York City. The agency seized his cellphone and other electronic devices. He was not arrested or charged.
Coplan blamed the Biden administration for the highly publicized raid, which sparked speculation in crypto circles and political media. Critics suggested the raid had political motivations, meant to punish the company, which predicted Trump would comfortably beat Harris.
Trump has not endorsed Polymarket. Still, he has referenced the platform’s polling-style predictions during his presidential campaign, highlighting his favorable odds.
The president also invited Coplan to his crypto summit in March. In that event, Trump said he’s ending the government’s war on crypto.
PredictIt Wins Key Regulatory Relief
In another major development, political prediction market PredictIt announced that it has entered into a revised agreement through a no-action letter with the CFTC, which will allow it to significantly expand its operations. The new terms include:
- Removal of the current 5,000-trader limit on contracts.
- The maximum individual position limit has increased to $3,500, up from $850.
- Expansion of markets.
Additionally, PredictIt’s governance will transition to a new non-profit entity, named the “Prediction Market Research Consortium.” Academic advisors from Princeton, Rutgers, and Wake Forest will guide the entity.
The change showcases PredictIt’s commitment to research. It also reinforces its role as a valuable tool for academia, the media, and the public.
The platform initially launched in 2014 as a research project by Victoria University of Wellington in New Zealand. As a research project, it was permitted to operate in the US under a no-action letter from the CFTC, subject to certain conditions.
In 2022, the CFTC withdrew the no-action letter and ordered PredictIt to shut down. However, the platform secured a temporary injunction by the Fifth Circuit Court of Appeals, which has allowed it to continue operating.
A Transforming Landscape for Prediction Markets
As Polymarket and Predict gain momentum, Kalshi, another prominent player in the sector, continues to face legal challenges.
Although the CFTC, which oversees prediction markets, withdrew its appeal against Kalshi regarding political markets, the platform is battling on several fronts regarding its sports event markets, which are the primary driver of Kalshi’s business.
Kalshi has won some legal battles. However, an ongoing case in Maryland could prove decisive for the future of sports event prediction markets. If Kalshi prevails, that could open the door for others such as PredictIt (and possibly Polymarket if it obtains US approval).
Additionally, if the courts determine that sports event contracts fall under federal jurisdiction, major sports betting operators like DraftKings and FanDuel, which are reportedly already preparing for potential entry, will likely move into the space.
