In brief

  • Senators are looking for answers from CFTC Chairman Michael Selig about alleged deceptive marketing campaigns from Polymarket.
  • The lawmakers are "concerned" the regulator is not appropriately enforcing laws and is incapable of providing consumer protections.
  • The senators' letter adds to mounting scrutiny on prediction markets and previous allegations of insider trading.

A pair of senators are seeking answers from the Commodities Futures Trading Commission over a recent

Wall Street Journal
report, which alleged that Polymarket paid for the staging of $1.9 million in fake bets as part of a marketing campaign. 

In a letter addressed to CFTC Chairman Michael Selig, Senators Adam Schiff (D-CA) and John Curtis (R-UT) sought responses to six questions, including whether or not the CFTC is investigating the allegations and whether the regulator believes it has the authority and expertise to implement the same consumer protections as other regulators.

“The CFTC has repeatedly asserted regulatory authority over prediction markets and event contracts, including through its enforcement actions and its rules governing event contracts listed on CFTC-registered entities,” the senators wrote. 

“Yet with content creators routinely portraying prediction markets as ‘free money,’ there is little basis for treating them differently from gambling,” they added. 

Prediction market platforms like Polymarket have been under fire all year as the CFTC has asserted its regulatory authority over the burgeoning industry. Some states have alleged that the platforms are operating illegal gambling operations, while other issues have arisen related to insider trading allegations.

The latest report, which alleges creators entered trades into a fake version of Polymarket to drum up interest in the platform, only adds to the intense scrutiny. 

“This illustrates why the Commission should be skeptical of claims that sports, entertainment, and other betting-style contracts are materially different from gambling merely because they are offered through event contracts,” they wrote. 

“With promises of fast money, influencer marketing, social media virality, and a deliberate blurring of what is real and what is staged, it is unsurprising that Americans view purchasing event contracts on prediction markets as much closer to gambling than investing,” they added. 

The pair, who said they are “concerned” the CFTC is not appropriately enforcing the laws under its purview, requested a response to their questions by July 10. 

Of the report in question, a Polymarket representative told the

WSJ
it would do a comprehensive audit of its promotional materials.

On Friday, 

The Wall Street Journal
 reported that the CFTC is in the midst of an "ongoing, extensive investigation" into Polymarket—but it's unclear whether the inquiry is specifically focused on advertising claims.