CFTC launches new probe into Polymarket over offshore user access

Why the CFTC is investigating Polymarket

The CFTC’s new probe centers on whether Polymarket violated a 2022 settlement agreement by allowing US users to access its offshore platform. In 2022, Polymarket paid a $1.4m penalty and agreed to block US users from its main market after the CFTC accused it of operating illegally in the US since its 2020 launch.

Investigators are reviewing Polymarket’s customer verification processes, including whether the platform effectively blocks tools like virtual private networks (VPNs) that can disguise a user’s location. The CFTC is also examining Polymarket’s US advertising and past compliance controls.

US platform and recent compliance changes

Polymarket launched a separate US platform in late 2025 after acquiring CFTC-licensed exchange QCEX for $112m in July 2025. The CFTC is reviewing this platform, including its customer onboarding processes and safeguards for users.

In response to regulatory scrutiny, Polymarket has overhauled its controls and explicitly banned VPNs and similar tools that obscure user locations. Despite these changes, the April 2026 charge against a US soldier, Gannon Ken Van Dyke, for using a VPN to make insider bets on Polymarket’s offshore platform has raised further questions about the effectiveness of these measures.

Funding and regulatory backdrop

Polymarket recently raised $1bn in a funding round led by 1789 Capital, valuing the company at $21bn. The round reflects strong investor confidence despite ongoing regulatory challenges.

The CFTC’s investigation follows earlier probes, including a 2024 Justice Department investigation and an FBI search of Polymarket CEO Shayne Coplan’s New York home in November 2024. Both agencies closed their investigations in July 2025 without finding wrongdoing, according to Coplan.

Broader challenges for prediction markets

Polymarket’s regulatory struggles mirror broader challenges faced by prediction markets globally. Earlier reporting by Lazyfounder highlighted how platforms like Polymarket and Kalshi grapple with the perception of being akin to gambling, despite their goal of crowdsourcing intelligence. This labeling complicates compliance and market expansion, particularly in jurisdictions like India, where Polymarket was blocked due to regulatory concerns over user activity and virtual asset use.

The CFTC’s renewed scrutiny underscores the difficulty of balancing innovation with financial regulations, especially for platforms operating in multiple jurisdictions with varying rules.

What this means

Lazyfounder analysis — our interpretation, not reported fact.

The CFTC’s renewed investigation into Polymarket signals heightened regulatory scrutiny of prediction markets, particularly around compliance with geographic restrictions and customer verification. For founders and operators in this space, the probe highlights the risks of relying on offshore platforms to bypass domestic regulations, even with nominal safeguards like VPN bans. The case also underscores the need for robust, adaptable compliance frameworks—especially for startups expanding into regulated markets like the US. Polymarket’s $21bn valuation and recent funding round demonstrate that investor appetite remains strong, but the outcome of this probe could set a precedent for how prediction markets operate and enforce user access globally.

Key takeaways

• Regulatory scrutiny of prediction markets is intensifying, particularly around user access and compliance with geographic restrictions.
• Founders in fintech and prediction markets must prioritize robust customer verification systems to avoid violations of settlement agreements or regulatory orders.
• The outcome of this probe could influence how prediction markets structure their platforms and enforce user access globally.
• Despite regulatory challenges, Polymarket’s $21bn valuation shows investor confidence remains high, but compliance risks could impact long-term growth.

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