REGULATION | CFTC Expands Polymarket Probe as Scrutiny Shifts from Advertising to Market Integrity

The U.S. Commodity Futures Trading Commission (CFTC) has expanded its investigation into crypto prediction market, Polymarket, to examine allegations of staged trades and fabricated winning bets widening regulatory scrutiny beyond previously reported concerns over undisclosed influencer marketing.

According to Bloomberg and CNBC, the regulator is reviewing whether promotional content depicting profitable trades misrepresented actual market activity. The expanded probe follows a bipartisan letter from U.S. Senators, Adam Schiff and John Curtis, urging the CFTC to investigate allegations that Polymarket used:

• simulated trading websites,
• staged transactions, and
• paid influencers

without adequate disclosure.

A Wall Street Journal investigation found that more than 1,100 promotional videos showed approximately $1.9 million worth of simulated wagers that were never placed on the live platform. In 118 of those videos, creators celebrated roughly $900,000 in purported winnings even though the equivalent positions on Polymarket would have collectively lost more than $166,000, according to the report.

The latest investigation marks another regulatory challenge for Polymarket which paid a $1.4 million civil penalty to the CFTC in 2022 over unregistered event-based contracts and has since faced renewed scrutiny over its operations and marketing practices. The agency has not publicly confirmed the scope of the current investigation while Polymarket has said it is reviewing its promotional practices.

The case also highlights a broader challenge facing prediction markets as they become increasingly influential in forecasting elections, geopolitics, and financial events.

Their credibility depends on transparent price discovery and genuine market participation. Allegations of staged trading, misleading promotions, and fabricated profits risk undermining confidence that market prices reflect collective information rather than manufactured sentiment.

The investigation comes as prediction markets are expanding rapidly into mainstream finance and attracting greater institutional interest. For regulators, the issue extends beyond advertising practices to whether these platforms can maintain market integrity as they evolve from niche crypto products into widely watched indicators of public expectations.

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