Polymarket CEO Shayne Coplan urged staff to focus on growth over regulatory consequences as fraudsters attempted to steal at least $10 million from its U.S. platform, the Wall Street Journal reported.
Asked about the report, a Polymarket spokesperson told Benzinga: “Polymarket is rapidly growing and getting better every day. We are proud of our key leadership hires and continuous infrastructure upgrades and we have quickly scaled and remain focused on growing responsibly at the frontier of finance, tech, and culture.”
Kalshi, a Polymarket rival, is separately facing scrutiny over unusual trading in its Ethereum (CRYPTO: ETH) perpetual futures market.
Employees Raised Concerns as Fraud Surged
The Wall Street Journal reported that fraudsters used stolen debit cards to fund Polymarket U.S. accounts in February, place bets, and tried to withdraw the proceeds elsewhere.
At the height of the attack, payment processor Checkout.com rejected more than 80% of the Polymarket U.S. deposits it handled as fraudulent, compared with roughly 1% normally, according to the Journal.
Polymarket loosened a withdrawal safeguard despite employee warnings that the change could increase money-laundering risks, The Journal reported, citing sources. U.S. compliance chief Andrew Clifford resigned in April after sending executives a report detailing the fraud problems.
The Journal also reported that the CFTC is investigating Polymarket. The agency told The Block it could neither confirm nor deny an investigation.
Law firm Sullivan & Cromwell, which has ties to the Trump family, concluded that Polymarket complied with applicable regulations. Donald Trump Jr., President Trump’s eldest son, is on Polymarket’s advisory board.
Kalshi’s 174x Ratio Draws Scrutiny
Pseudonymous quant analyst and Stealth Neolab co-founder Beni flagged $539 million in 24-hour volume on Kalshi’s Ethereum perpetual futures, which never expire. Open interest, or positions still outstanding, was just $3.1 million.
Beni also identified repeated $5,500 trades that accounted for as much as 58% of Kalshi’s Ethereum perpetual volume across four separate days.
CoinDesk described the 174-to-1 ratio as a red flag for wash or fake trading because trading activity was unusually high while outstanding positions remained small.
Kalshi crypto lead IcoBeast pushed back on X, arguing that the fee structure should deter wash trading and that critics had mixed up Kalshi’s prediction-market activity with its perpetual-futures business.
Kalshi did not immediately respond to Benzinga’s request for comment.
Benzinga has an existing data collaboration agreement with Kalshi.
Wall Street Has Billions Riding on Prediction Markets
Intercontinental Exchange Inc. (NYSE:ICE) has invested $1.6 billion in Polymarket and struck a deal to distribute Polymarket’s prediction-market data to institutional investors. Polymarket was valued at $21 billion in a $1 billion funding round announced last month, with Donald Trump Jr.’s 1789 Capital leading the raise.
Robinhood Markets Inc. (NASDAQ:HOOD) generated $156 million from event contracts in the second quarter, more than the $129 million it made from equities trading or the $100 million from crypto.
Robinhood still routes some event contracts through Kalshi, making the exchange part of the infrastructure behind a rapidly growing business for the brokerage.
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