They are also becoming increasingly popular as a venue for wagering on sports. Because US prediction markets are regulated by the Commodity Futures Trading Commission, their proponents argue they sell financial products tied to the outcome of sporting events rather than sports bets, allowing them to skirt state-level bans on sports gambling. They’ve also been able to avoid certain US federal and state taxes applied to sports-wagering revenue.
In August, rival Kalshi began offering prediction-market bets through a partnership with Robinhood Markets. The electronic brokerage reported that more than 2 billion prediction contracts had traded in the third quarter.
Gaming stocks Caesars Entertainment and DraftKings both fell more than 5 per cent on Tuesday after the Polymarket deal was announced.
Legal jeopardy
Polymarket suffered a major setback in 2022, when it paid a $US1.4 million penalty to settle with the CFTC over allegations it was offering illegal trading. Without admitting or denying wrongdoing, the company agreed to block US-based users going forward.
But regulators suspected that Polymarket continued to host US users on the site, and in November, a week after Election Day, FBI agents raided Coplan’s home before dawn and seized electronic devices. The company called the move “obvious political retribution.”
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The Justice Department and CFTC dropped their investigations in July. That same month, Polymarket acquired CFTC-licensed exchange and clearinghouse QCEX for $US112 million, allowing it to resume US operations legally.
The company raised at least $US255 million before ICE’s investment, according to data tracked by Pitchbook. Investors include Peter Thiel and his Founders Fund, Ethereum founder Vitalik Buterin and investment firm Blockchain Capital.
Another notable backer is 1789 Capital, which invested in Polymarket before the 2024 election and again this year. As part of that deal, Donald Trump Jr, President Donald Trump’s son and a partner at 1789, joined the company as an adviser in August. He also advises Kalshi.
The company’s ties to Washington could deepen even further with the ICE investment. ICE’s CEO, Jeffrey Sprecher, is married to Kelly Loeffler, a former senator who is a member of Trump’s cabinet.
Looking at his bathroom app’s rise into a $US8 billion enterprise, Coplan said the past two years had been surreal.
“Going from a write-off to creating a category, watching our vision become a reality,” he posted on X. “If I learned one thing, it’s that bold ideas are everywhere, hidden in plain sight. It just takes someone crazy enough to spend their life willing it into existence. That’s entrepreneurship: willing things into existence.”
Bloomberg
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