The Commodity Futures Trading Commission served Coinbase with a subpoena in relation to the booming prediction market Polymarket, a person familiar with the matter told Decrypt Thursday.
The regulator’s request sought “general customer information” in relation to Polymarket, the blockchain-based prediction platform that gained notoriety in the run-up to the November elections. A screenshot of an email sent by Coinbase to certain users regarding the request was shared on X (formerly Twitter) by Eric Conner, founder of the Ethereum information site ETHHub.
The message sent by Coinbase stated that the exchange “may be required to send information” to the CFTC, depending on legal procedures that could occur within the following week. Conner declined to comment to Decrypt on whether he’s used Polymarket’s platform before.
A person familiar with the matter confirmed to Decrypt that the CFTC served Coinbase with a subpoena in relation to Polymarket, and that the screenshot shared by Conner pertained to a legitimate request for user information that was made by the regulator.
Launched in 2020, Polymarket enables users to wager on the outcomes of various events, including topics ranging from sports to politics. Last year, a wave of speculation surrounding the U.S. presidential election thrust Polymarket into the cryptosphere’s limelight, earning its fair share of attention from outside the industry for predicting the reelection of Donald Trump.
The CFTC brought an enforcement against Polymarket in 2022, claiming the blockchain-based prediction platform failed to register its services with the regulator. Following a $1.4 million settlement with the CFTC, Polymarket officially became off-limits for U.S. citizens.
Not long after Trump’s victory, the FBI raided Polymarket CEO Shayne Coplan’s apartment in New York. A Polymarket spokesperson claimed the move was an act of “political retribution.” Bloomberg News later reported that the raid was related to an investigation conducted by the Department of Justice.
Polymarket did not immediately respond to a request for comment from Decrypt.
With Trump’s administration set to take control of the White House in less than two weeks, the scrutiny applied to crypto firms could change under his leadership. Still, the subpoena sent to Coinbase suggests that the CFTC is pressing forward with an investigation in the meantime.
The CFTC did not immediately respond to a request for comment from Decrypt.
Even though Polymarket’s political wagers attracted billions of dollars in bets, the platform continues to show signs of growth despite lower trading volumes. Polymarket’s monthly active users increased to 349,500 last month, outpacing November’s record of 293,700, according to a Dune dashboard.
A spokesperson for Coinbase told Decrypt that requests for information from a government are carefully reviewed by a team of trained experts. In some instances, the firm will object to producing information if a request is legally insufficient, or seek to narrow it down.
“However, in some cases we may be required by law to share necessary data lawfully sought after by the government,” the spokesperson said.
In 2022, former NSA contractor turned whistleblower Edward Snowden critiqued Coinbase for what he described as “toxic and embarrassing” levels of compliance. He cast shade broadly on exchanges that keep track of where users’ funds flow.
Though the U.S. presidential election provided Polymarket’s users with plenty of betting fodder, criminal and civil authorities began scrutinizing Polymarket months before the platform predicted Trump’s electoral victory, per Reuters.
Coplan told Decrypt last year that Polymarket was a more useful tool for assessing political outcomes than conventional polls. “The incoming administration looked heavily at Polymarket forecasts throughout the election cycle, which is incredible news,” he said.
The CFTC has raised concerns about the potential of political event contracts to undermine elections’ integrity. Last year, the regulator failed to prevent Kalshi, another prediction platform, from listing contracts for November’s election after a federal court’s ruling.
While authorities in the U.S. have scrutinized Polymarket, the platform has also faced inquiries overseas. In November, Polymarket voluntarily blocked users based in France after the country’s gaming regulator began examining the company’s operations and compliance with gambling regulations.
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Source: https://decrypt.co/300236/coinbase-cftc-subpoena-polymarket
