A federal financial agency has begun investigating Polymarket, reigniting longstanding questions about whether a leading prediction market company tied to Donald Trump Jr. is operating within the law.
The inquiry is a test of whether the Commodity Futures Trading Commission, a little-known but powerful regulator, will hold to account a company with connections to President Trump. A year ago, over the strong objections of its enforcement attorneys and under a different agency head, the C.F.T.C. killed a separate investigation into whether Polymarket was illegally serving U.S. customers.
Two people familiar with the new investigation, who spoke on condition of anonymity to discuss a confidential matter, said it began earlier this year and was extensive in scope. Few other details have been made public.
A Polymarket spokeswoman declined to comment on the inquiry, but said that the company was “committed to maintaining accurate, fair and transparent markets.”
The disclosure of the investigation comes as Michael S. Selig, who was sworn in as the C.F.T.C.’s chairman last December, is under growing pressure to show that the agency can police the exploding prediction market business. Republican and Democratic lawmakers have grilled Mr. Selig about whether the prediction markets are magnets for insider trading and a way of seeking ill-gotten gains.
Mr. Selig has vowed that the C.F.T.C. will chase down abuses on the platforms, which now rake in billions of dollars in trades a month. So far, though, only individual traders have been charged with wrongdoing.
Instead, the C.F.T.C. went out of its way last year to fulfill requests and applications from Polymarket and two other leading prediction market companies with ties to the Trump family’s business empire. In May, the president said it was critical that prediction markets thrive.
The C.F.T.C.’s latest inquiry, reported earlier by The Wall Street Journal, is its third into Polymarket in recent years. In 2022, the agency collected a $1.4 million fine from the company for operating in the United States without a license. The settlement banned the company from accepting U.S. customers.
In the last year of the Biden administration, the agency began investigating whether Polymarket was violating that ban. The Justice Department also launched a criminal probe. In a November 2024 raid, F.B.I. agents seized the electronic devices of Shayne Coplan, the firm’s founder and chief executive.
The C.F.T.C. began retreating from its investigation soon after Mr. Trump was sworn in and Caroline D. Pham was appointed as the agency’s acting chair in January 2025, according to multiple people familiar with the matter, who spoke on condition of anonymity to describe confidential discussions.
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As part of a campaign by Ms. Pham to narrow the agency’s enforcement work, defense attorneys for companies facing investigation were invited last spring to try and convince the C.F.T.C. to either drop the inquiries or settle potential cases against them.
Attorneys in the agency’s enforcement division concluded that the investigation against Polymarket should move forward, the people said. Nonetheless, they said, Ms. Pham issued a directive forbidding the enforcement division from trying to collect more evidence by issuing new subpoenas. She then ended the inquiry. Ms. Pham did not respond to a request for comment.
Last July, Polymarket announced that the C.F.T.C. and the Justice Department had dropped their investigations. That helped clear the way for Polymarket, through a subsidiary, to open a U.S. platform.
Last August, Polymarket announced that it had landed financial backing from 1789 Capital, an investment firm partly owned by Donald Trump Jr., who was named as an unpaid adviser. A spokesman for Mr. Trump, the president’s eldest son, has said he has no involvement with Polymarket’s dealings with federal regulators.
Last fall, Ms. Pham’s office intervened to ensure that the agency acted on a request from Polymarket to broaden the ways it could accept bets. Two senior officials who raised questions about that request were subsequently put on administrative leave and placed under internal investigation for reasons described only in vague terms.
Even though Polymarket has the C.F.T.C.’s blessing to operate in the United States, its new platform offers far fewer betting options than its international website, which is still supposed to wall off U.S. customers. Polymarket tells its customers that it bans the use of virtual private networks — devices that disguise the location of the user.
But evidence has continued to emerge that Polymarket customers use them anyway. And questions have persisted about the company’s controls against insider trading.
In April, federal prosecutors charged a member of the U.S. Special Forces with using confidential information to make more than $400,000 in betting on the top-secret operation to capture Nicolás Maduro, the president of Venezuela. The soldier had used a V.P.N. to place the bets, the indictment said.
In May, a Google software engineer was charged with illegally using confidential information to pocket nearly $1.2 million through Polymarket bets.
In a statement Friday, the company said that it strictly prohibits insider trading, and that it has made nearly 100 law enforcement referrals.
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