Original | Odaily Planet Daily (@OdailyChina)
Author | Wenser(@wenser2010 )
The deceptive marketing of Polymarket has finally attracted the attention of regulatory iron fists.
Recently, the U.S. Commodity Futures Trading Commission (CFTC) has launched an extensive investigation into the prediction market platform Polymarket, covering its business aspects including social media activities. Previously, U.S. Republican Senator John Curtis and Democratic Senator Adam Schiff jointly sent a letter to CFTC Chairman Mike Selig, urging an investigation into Polymarket's practices of paid false marketing by KOLs and the use of fraudulent marketing tactics to promote gambling-like products to U.S. audiences.
At a time when the World Cup is driving a surge in prediction market trading volume, this move may pour cold water on the development of this sector. More importantly, the CFTC's investigation into Polymarket reveals conflicts of interest between the U.S. federal and state governments, as well as between officials and capital. (Recommended reading: "WSJ: Fake Websites, Fake Trades, Real Promotion, The Traffic Scam of Polymarket").
End of the Prediction Market's Wild Marketing Era, Regulatory Policies May Enter Deep Waters
If the previous incidents of Polymarket using college students to post fake profit videos and paying KOLs to exaggerate prediction profits were the wild attempts of the prediction market's early expansion, then the formal investigation by the U.S. CFTC is clear evidence of the end of this wild growth period.
Prediction Market Platform Data Experiences Explosive Growth, Traditional Internet Giants Show Strong Interest
As we enter June 2026, with the official start of the World Cup, prediction markets have received unprecedented attention, and trading volume has soared accordingly.
Data from a16z crypto shows that prediction market trading volume has set new historical highs for the third consecutive week. The total market trading volume exceeded $144 billion last week, a significant increase from the approximately $50–60 billion at the beginning of the year, and the previous historical high of around $100 billion was just refreshed a week ago. From the platform side, their data has also seen substantial growth:
- Latest data shows that Kalshi's weekly nominal trading volume broke $100 billion for the first time.
- Polymarket officially stated that its annualized revenue has significantly exceeded $1 billion, a progress achieved just six weeks after its U.S. trading platform lifted the waitlist; data shows that daily trading volume on the U.S. platform has grown from around $50 million in mid-May to over $200 million on June 20th (based on Dune Analytics data).
- The prediction market platform business under Robinhood is growing rapidly, with annualized revenue reaching $500 million. In the Q2 quarter up to June 25th, Robinhood's active contract trading volume reached approximately 12.3 billion trades. Based on a standard fee of 1 cent per contract, the prediction market revenue for the quarter is estimated to be at least $123 million. Its recently launched Rothera prediction market platform achieved over 900 million trades in its first week, contributing to nearly 60% of Robinhood's growth in active contract trading volume.
Such impressive data has also attracted the attention of the U.S. stock market giant Meta. According to media reports, Meta CEO Mark Zuckerberg has urged the company to explore partnerships with prediction markets Polymarket and Kalshi. Meanwhile, Meta is developing a similar prediction market application called Arena.
All signs indicate that prediction markets have evolved from a niche sector a few years ago into a hot industry experiencing exponential expansion. In the face of this trend, regulatory bodies will certainly not stand idly by. The recent false marketing incident at Polymarket acts like a perfectly timed "soft knife," providing an opportunity for regulatory intervention. The author believes that subsequent regulators may gradually clarify the regulatory boundaries for prediction market platforms regarding marketing, event contract content, and trading fees, aiming to strengthen investor protection and clearly distinguish them from traditional gambling businesses.
Simultaneously, as the investigation deepens, the power struggle between federal regulatory agencies represented by the U.S. CFTC and state-level regulators is also coming to light.
When the U.S. CFTC Clashes with Nine U.S. States: The Battle for Prediction Market Regulatory Authority
Last Tuesday, the U.S. CFTC formally filed a lawsuit against the state of Kentucky, attempting to reassert the agency's jurisdiction over prediction market platforms.
In the complaint filed with the U.S. District Court for the Eastern District of Kentucky, the CFTC stated that Kentucky's attempt to shut down federally regulated designated contract markets interferes with the federal regulatory system established by Congress for the national swaps market. It claims "exclusive jurisdiction" over related event contracts and prediction market products.
Previously, the state of Kentucky sued platforms like Kalshi and Polymarket, accusing them of operating unlicensed illegal sports betting and gambling businesses within the state. As of June, over 12 U.S. states, including Kentucky and New York, have taken legal action against Polymarket and Kalshi, accusing them of operating illegal sports betting. Kentucky has become the ninth state sued by the CFTC in the prediction market regulatory dispute.
This action highlights the escalating conflict between federal derivatives regulation and state-level gambling regulation.
The main reasons behind the dispute are twofold:
- Firstly, there are the practical interests of state and local governments, such as taxes from the gambling industry. Previously, traditional sports betting brought significant tax revenue to various states (e.g., high-tax-rate online gambling). If prediction markets were to completely replace the gambling industry, potential annual tax losses for states could reach hundreds of millions of dollars (some say around $600 million).
- Secondly, there is the definition of the regulatory boundary between the gambling industry and the emerging prediction market industry. What the U.S. CFTC aims to uphold is categorizing "event contracts" as commodity derivatives, futures, or swaps, enforcing a federal law supremacy policy.
Ultimately, the specific outcome may depend on the interpretation and judgment of the Commodity Exchange Act (CEA) by state courts and even the U.S. Supreme Court.
Furthermore, the battle between exchanges and the U.S. CFTC has also ignited. The CFTC previously approved Kalshi's application for perpetual futures trading, which led to CME Group suing the former—
It is reported that CME Group has sued the U.S. Commodity Futures Trading Commission and its Chairman, Michael Selig, in the U.S. District Court for the District of Columbia. In response to the CFTC's approval on May 29th for prediction market platform Kalshi to launch perpetual futures contracts linked to the spot price of Bitcoin, among other actions, the CFTC treated "futures" with expiration dates as "swaps," violating U.S. Congressional directives and the Commodity Exchange Act, and requested the court to revoke the related perpetual futures actions. CME also claimed that Selig acted unilaterally without a full panel of five commissioners.
A CFTC spokesperson responded that CME is waging a "legal war" against the agency and the government's crypto policies, stating that "filing the lawsuit is extremely frivolous." (Almost writing "your case is initiated too recklessly" on their foreheads).
Of course, it's no wonder CME is so agitated, as the CFTC's move to open up crypto perpetual contract trading for Kalshi essentially allows prediction market platforms like Kalshi and crypto exchanges like Coinbase and Kraken to encroach upon CME's "trading territory." The driving force behind this may also have some connection to the Trump family.
The Trump Family's Prediction Market "Double Betting Method": Donald Trump Jr. Bets on Both Kalshi and Polymarket
Recently, Kalshi was revealed to be negotiating a new round of financing at a valuation of approximately $40 billion, with the deal potentially closing as early as Q3. After completing a $1 billion financing in May (with investors including Sequoia Capital, Andreessen Horowitz, Coatue, and Morgan Stanley), Kalshi's valuation rose from $12 billion to $22 billion, and now this number is about to double.
Kalshi CEO Tarek Mansour stated that the company is considering an IPO no earlier than late 2027 or 2028. Kalshi officially announced that as of April 2026, its annualized trading volume reached $178 billion, a 32-fold increase year-over-year.
Such impressive market data and high enthusiasm from the capital markets are hard to separate from Donald Trump Jr., one of the prominent figures of the Trump family.
It is understood that Donald Trump Jr. essentially "eats from both sides" in the prediction market sector:
On one hand, he served as a paid strategic advisor at Kalshi in early 2025 and received approximately $300,000 in company equity at that time. Kalshi's valuation was less than $2 billion then, and this investment alone has yielded over a 10x return;
On the other hand, he also serves as an advisor at Polymarket and made a strategic investment in the latter through his venture capital firm, 1789 Capital, where he is a partner.
Coupled with Trump's previous emphasis on the regulatory authority of federal departments over prediction markets, and his statement: "Kalshi and Polymarket will thrive under his leadership."
To some extent, the conflict of interest between capital and official regulatory agencies has been mitigated; and the Trump family is the "best lubricant" in this contradictory event.
Thus, a network of interests connecting U.S. federal regulatory agencies like the CFTC, U.S. state governments, and Trump family investment institutions is gradually taking shape.
As for the CFTC's investigation activities into Polymarket, they may just be a necessary step in regulating the prediction market industry.
The era of wild growth, the "Spring of Prediction Markets," is coming to an end, while the "Prosperous Summer" for the prediction market industry is slowly arriving.
