Bipartisan senators demand CFTC investigation into Polymarket's marketing practices
Adam Schiff and John Curtis express worry over the CFTC's regulatory enforcement following a disturbing investigation into Polymarket's promotional tactics.
Two US senators from opposing political parties have requested that the Commodity Futures Trading Commission launch an investigation into Polymarket, a prediction market platform, following reports that the company compensated social media influencers to create videos showing fabricated betting activity.
Senator John Curtis, a Republican, and Senator Adam Schiff, a Democrat, submitted a correspondence to CFTC Chair Mike Selig on Thursday, expressing their apprehension that Polymarket "used deceptive marketing tactics to promote gambling-style products to US audiences."
"If accurate, these allegations are deeply troubling and demand immediate scrutiny from the Commodity Futures Trading Commission," they wrote.
The correspondence follows The Wall Street Journal's June 20 report revealing that Polymarket compensated influencers to record fraudulent trades on platforms that appeared similar to its own system, with numerous content creators failing to acknowledge their financial relationship with Polymarket.
According to The Journal's analysis of more than 1,100 videos, approximately 70% displayed fabricated wagers totaling close to $2 million.
Addressing the Journal's findings, a Polymarket spokesperson informed Cointelegraph at the beginning of this week that the company was "conducting a comprehensive audit of active promotional content to ensure it complies with our standards, as well as applicable regulatory and legal disclosure requirements."
The senators' correspondence preceded additional reporting by the Journal and CNBC on Friday indicating that the CFTC had opened an investigation into Polymarket.
According to CNBC's reporting, which cited an individual with knowledge of the matter, the CFTC has launched an ongoing and extensive investigation into Polymarket, though the specific date when the investigation commenced was not disclosed.
Polymarket chose not to provide commentary on the senators' letter or on the reported CFTC investigation.
The popularity of prediction markets has surged dramatically in recent times, generating billions of dollars in trading volume monthly, prompting Senators Curtis and Schiff to voice their apprehensions regarding the CFTC's capacity to properly oversee these platforms.
"The CFTC has repeatedly asserted regulatory authority over prediction markets and event contracts," the senators wrote. "Yet with content creators routinely portraying prediction markets as 'free money,' there is little basis for treating them differently from gambling."
"These contracts are not in the public interest and should not be treated as derivative products with hedging value," they added. "We remain concerned that the Commission is neither enforcing the law appropriately, nor is equipped to serve as a federal gambling regulator."
The CFTC has maintained that it possesses jurisdiction over prediction markets because these platforms are registered with the agency and function under federal commodities law.
The regulatory body has initiated lawsuits against nine US states that have pursued legal action against prediction markets, alleging that the platforms provide unlicensed sports betting through event contracts.
Senators Curtis and Schiff requested that Selig provide written answers to a series of questions by July 10, inquiring whether the CFTC was conducting an investigation into Polymarket, whether the reported promotional practices were lawful, and whether the agency possesses adequate resources to monitor prediction markets, among other concerns.